By on October 4, 2017

tesla factory fremont, Image: Tesla Motors

Yesterday, we mentioned how Tesla was behind schedule with its everyman Model 3 — delivering only 220 units to the half-million reservation holders since the start of production in late July. While we knew it would get off to a slow start, CEO Elon Musk previously assured the public that production would increase exponentially through the end of the year by way of a “production hell” trial by fire.

Musk claimed there should be “zero concern” about Tesla achieving a production rate of 10,000 cars a week before the end of next year. But many wondered if that was even possible. Despite Tesla making serious strides to increase production volume this year, we remained dubious that the proposed numbers were even feasible for a fledgeling automaker.

As it turns out, they weren’t — and the company knew it. 

In an application for sales tax exemption from the CAEATFA program filed early this year, the California Treasurer revealed that Tesla had production capacity of the Model 3 pegged at 226,563 units per year over a five-year span. But that wasn’t what was being promised by Musk or the rest of Tesla’s executives.

Brought to light by the Daily Kanbanthe filing shows quite a disparity between what the automaker told the California Treasurer and what it told its investors. The figure in the tax exemption document doesn’t meet Musk’s 10,000-unit week nor the company’s 5,000-per-week goal for the end of 2017.

Granted, 5,000 units is a nice round number to hang your hat on. So Musk can be forgiven for not explicitly stating the number will be closer to 4,356. But it’s misleading when you take into account the company’s 10,000 unit claim — even if you throw both the Model S and Model X’s expanded production volume into the mix.

At the very least, Tesla should be condemned for being mildly deceptive. It’s either low-balling the data being given to the California State Treasurer’s Office or puffing up product claims for its investors. Either way, it doesn’t look to be genuinely confident that it can hit Musk’s target volume of nearly 1 million vehicles in 2020.

Teething issues with the Model 3 aren’t the issue. We all knew the company has set extremely ambitious production goals for itself in a fairly short timeframe. Falling incredibly short of September’s target of 1,500 cars isn’t a big deal. But it might be worth considering that Tesla is telling two groups entirely different stories.

From the Daily Kanban:

“To understand just how misleading Musk’s statement was, some context and math is necessary. A previous [sales tax exemption] request, reported exclusively by Daily Kanban, revealed that Tesla is expanding annual production of its “Gen2” vehicles (Models S and X) to 195,000 units per year, or about twice current sales levels. Add that to the 226,563 average in the most recent [sales tax exemption] application and you get a total annual production rate of 421,563 units per year for Tesla’s entire product line. Divide that number by 52, and you get a weekly production rate of 8,106 vehicles per week.”

However, we’re still a long way from that becoming a reality. Tesla only delivered a total of 47,077 vehicles through the first half of 2017. Yet the company told the media prior to the January filing that it planned to build 500,000 vehicles in 2018 — a five-fold increase from its current production schedule.

We get that you have to play the hype game to compete in the car-building business. But Tesla might be playing a little too fast and loose when it comes to estimating its production volume.

[Image: Tesla Motors]

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47 Comments on “Truth in Numbers: Tesla Motors Kind of Lied to Us...”

  • avatar

    I never would have thought this would be the case…

    Bring in another deck of cards. And I can’t wait to hear any Solar City retorts!

  • avatar

    Musk has always made big promises, and then delivered late and short. It would be news if he *was* telling the truth about future volume and timing capabilities.

  • avatar

    Musk is the Edison of our time.

    History has also revealed that Edison was a lying, manipulative, dirt bag.

  • avatar

    I have always rooted for Tesla, even though at the moment I cant really see myself owning one. I like what they are trying to do, and what they’ve already accomplished is pretty amazing. That said, Ive seen 2 Tesla model X’s with temporary tags in the recent weeks(Harvey flood replacements Im sure), and the panel fitment is appallingly bad. The roof on both of them, did not line up with the rear window and was visibly wavy where it should be straight. There are serious quality issues going on, and unless they can fix that they will never be a mass producer of automobiles…

    • 0 avatar

      I parked next to a Model S 75D at work recently, and the fit of the moonroof when closed didn’t look that good, especially at the front. It looked to me like it would induce some wind noise on the highway.

    • 0 avatar

      You should drive or ride in one. I drove a model X, and while the power train was impressive, the squeeks and rattles were so bad, you would hammer it even if it was a Mitsubishi Mirage.

      • 0 avatar

        The S gets ratty fast, too. Even with just city/suburb commuting.

        In all honesty, it’s really the other way around: The big makes, especially the Germans and Japanese, have set the bar so ridiculously high wrt NVH even in older cars, that people’s tolerance for even the slightest squeak is greatly diminished.

        It’s analogous to why some complain about noise in a new Mazda 6.
        In both cases, Tesla S and Mazda 6, the cars themselves are perfectly fine. It’s just that the Camry and and A8/S class/LS makes a tomb seem noisy and ratty. But neither the S nor the 6 is bothersome to the point that those who prefer them for different reasons, even really notice their supposed shortcomings, compared to the warhorses they compete against. We’re not talking Soviet era Ladas, after all.

  • avatar

    Those folks with Model 3 deposits better start asking for their money back soon. Those who wait will find out there is nothing left but a box of smoke and mirrors.

  • avatar

    All I see is that Tesla revised its sales forecast from 422K units at the beginning of 2017 to 500K units in the middle of 2017.

    Newsflash, Daily Kanban, corporations revise their sales forecasts. This intentional misunderstanding says more about Ed Niedermeyer’s desperation for a scoop than anything.

    • 0 avatar

      I don’t think that’s quite right. As I read it, at some point in 2016 Musk told the media Tesla would produce 500,000 vehicles in 2018. In January 2017 he told the treasurer’s office it would be 421,563. I think. Neither this article nor Kanban’s lays the timeline out very clearly.

      I’m not sure if a 20% discrepancy in projections delivered months apart constitutes pants-on-fire or optimistic rounding, probably depends on how you feel about Musk and Tesla.

    • 0 avatar

      Tesla is a f’ing scam, that has been thus far propped up by carbon credits, massive debt, snake oil marketing, a cult of personality, incredibly creative non-GAAP accounting, and a non-stop cascade of lies and puffery.

      Tesla wil cease to exist soon, because every ponzi scheme must end.

  • avatar
    SCE to AUX

    There is a difference between capacity and volume.

    Everyone has doubts about the actual volume claims, but that isn’t the same as Fremont’s capacity.

  • avatar

    2018 – 2020 is do or die for Tesla. During this period you’re going to see Audi, Porsche, BMW and Mercedes introduce mass market EVs at the top end of the market – Tesla’s life blood.

    • 0 avatar
      SCE to AUX

      Agree on the timespan, disagree on the competition.

      Tesla’s lifeblood will be the Model 3. The Model 3 has been the goal since the company was founded in 2003, and its volume will dwarf the Model S and Model X, both of which will soon peak.

      Even now, Tesla has been trying to push impatient Model 3 reservation holders to buy Model S or X, in part to keep the fish on the hook, but also because much of the historical appeal of the Model S is that something cheaper *wasn’t* available.

      It’s always easier to introduce an expensive EV, but much more difficult to make a decent one that’s affordable. The biggest competitor for the 300-mile Model S is the 300-mile Model 3.

      In a few years, the sales-weighted price for a Tesla will plummet due to the abundance of Model 3s they’ll move, in comparison to their top end products.

      The high-end stuff from Porsche, Audi, BMW, and Mercedes may eat Tesla’s lunch on the Model S and X, but the Model 3’s competition will come from the likes of the Bolt, Leaf 2.0, and anybody else courageous enough to build a lower-priced EV.

      But back to your original statement: if the Model 3 flops or has serious issues, Tesla is in real trouble.

      • 0 avatar

        Everyone is making the assumption that the Model 3 will sell like hot cakes. But after seeing the videos from early deliveries on YouTube, I’m not so sure. It really seems like a half-baked car (not in a good way). It’s going to be competing against the C-Class and 3 series; both of which are excellent cars with luxurious interiors. Time will tell.

      • 0 avatar

        The issue is that the volume is going to come from the Model 3, but the profit is still going to be coming from the S and the X. There will probably come a point where Wall Street won’t play nice anymore. It really isn’t going to take much for this house of cards to come tumbling down.

        And as I have said many times, I don’t think the problem is going to be MAKING Model 3s, it is going to be selling and servicing them. No way on Earth is their organization ready to deal with 500K everyman cars. Many of the B&B think direct sales is some sort of wonder, but based on those I know who have bought or tried to buy a Tesla, they actually kind of suck to deal with. Hint – if there is no commission, there is also no incentive to work to get the deal done. The cars only sell themselves just so much.

        I have my popcorn at the ready.

        • 0 avatar

          As soon as the average stock trader takes a real hard look at the Tesla balance sheet, the stock price will plummet. They are losing $300 million a year, and the only reason they aren’t further in the red is because they got NUMMI for a song.

          While other car manufacturers figure out how to optimize electric power plants, Tesla is figuring out how to build a car. 2 years from now, Tesla will be awash in competition from established automakers. People won’t be so forgiving of their interiors and build quality then.

      • 0 avatar

        SCE – my argument is more that the premium brands will own the premium end of the market, where most of Tesla’s (non investor) cash comes from. The spy shots and early buzz around the $85k Porsche Mission-E is really good. As someone else mentioned: Tesla performance with the Porsche brand and service network will be a very powerful draw.

        The next stop for the Germans will be electrifying the CLA, A3, C-Class and 3-Series in the $35-$45 space. The Germans, especially Audi due to its scale, will be able to do this more profitably and more rapidly than Tesla. For all the missteps of Volkswagen these past few years, they’re all in on hybridization and full electric models.

        The question is not going to be: “can we build them?” the bigger question is gong to be “where are the buyers for all of these electric cars?”

        Tesla could get a big break if there’s a sudden spike in oil prices that is sustained. Outside of a a major international incident, that’s not likely to happen for quite some time.

        The more likely scenario is this: the mainstream automakers continue to make steady improvements in fuel economy, transition to hybrid drivetrains and federal and state subsidies start to decline. A combination of these factors will create a major hurdle to adoption of the fully electrified powertrain. History has shown that in the auto industry there is very little advantage and extremely high risk to “moonshot” projects. The goal isn’t to produce the 100 mpg drivetrain, the goal is to produce appreciable gains versus the existing competition: The F-150 only needs to get 3-7mpg better than the Silverado. Gunning for 10-15 would be great, but likely so costly as to negate any advantage, especially if fuel prices are low.

  • avatar

    I can hear it now…

    “At the end of the trading day, shares of TSLA jumped 14% on the news that Tesla knowingly mislead it’s shareholders in public statements regarding its production capacity and production ramp up schedule.”

  • avatar

    Given that Toyota, the best car builder in the world, were never able to get 400,000 annual units out of Fremont, it would indeed be too good to be true is Musk could do better using the same plant but with far less manufacturing experience, a more complicated product mix, a grumbling workforce, and tougher manufacturing emission standards. I would also say it is highly unlikely that S and X sales will be doubling given they are no longer fresh designs, the cheaper/newer Model 3 will likely cannibalize sales, EV competition is getting tougher every minute, and gasoline prices continue to be low. Build quality continues to be poor, profits non-existent, and yet so many seem to believe Elon and pull this off. Just like many of his rockets – this is all going to blow up in a spectacular manner.

  • avatar

    Musk is a lying sleaze bag. This isnt a surprise. His products are awful and his entire company is a house of cards. Love watching Tesla fail.

  • avatar

    Where is the SEC in all of this?

    • 0 avatar

      Tesla merely updated their sales forecast. Companies not named Tesla do this every day. They just don’t engender such impassioned responses.

      • 0 avatar

        Telling shareholders your production will be 10,000 cars per week while at the same time telling the California Treasurer a production number that’s not even half that sounds to me like fraud to puff up your stock price.

        • 0 avatar

          You are confusing Model 3 production with total production. Kanban’s allegation is that Tesla at one time publicly forecast 500K total production and also cited 422K in the tax filing.

  • avatar

    I have friends at the plant, and they feel pretty bad about it – they know they’re rushing cars out too quickly to build them right. Scary thing is, it’s been that way for months, well before Model 3 production started. They’ve felt overworked and morale has been low for at least a year.

    A few years ago they knew they had a problem and needed more robots, but they’ve been very slow in automating. They have gotten some, which has allowed them to build a second and now third model (plus some Superchargers) using the same employees, but that expansion has outpaced their manufacturing improvements. And they can’t really add more people – the employee parking lot has been beyond full since before the Model X. They’ve got valet parking and shuttles to try to help.

    It’s a house of cards trying to stay ahead of its debt. They could still pull it off though, as long as the customers have that early adopter mindset and are extra forgiving.

    • 0 avatar

      “They could still pull it off though, as long as the customers have that early adopter mindset and are extra forgiving.”

      As someone else noted, the bar has been set high by both existing automakers and the “Apple effect”. By that what I mean is that Apple has set the “table stakes”: if you’re going to release a smartphone, it *must* match the look, feel and performance of the iPhone, otherwise you shouldn’t even bother trying.

      Consumer expectations are now set at that bar.

      Are the majority of Model 3 buyers of the early adopter mindset willing to overlook the things that mass automakers perfected a decade ago? Perhaps – but that pool of “forgiving consumers” is probably a lot smaller than Tesla anticipates.

      Go talk to the service manager at any premium dealership dealing with buyers of the entry level “luxury” cars like the A3, CLA, etc.: they’re the biggest complainers because they feel that they’ve ‘made it’ into the 1% and they have a right to [email protected]@@@ about anything and everything.

  • avatar

    Any commentary outside of Tesla itself is pure conjecture, you know that. Granted, Musk does make claims as to how many and how soon he WANTS to get production rolling but even in this most recent case he also made a clear statement that he knew there would be problems in the ramp-up of Model 3 production. Still, the design of the vehicle and of the assembly line is meant for a maximum rate of roughly 5,000 cars per week while the Model S/X line is set up for something like 3,000 per week. Now, whether or not they reach those goals is another question but if you consider another quoted statement in the article, it seems Tesla has plans to open “traditional-style” dealerships next year for the S/X as that would be about the only way they’ll double sales of those models otherwise.

    Also, considering the supposed space savings made by their current assembly methods PLUS moving the parts line into a new, multi-level building on property could mean there’s enough room for a third assembly line which could supposedly double Model 3 capacity and eventually pick up on Model Y production once they catch up with the backlog of Model 3 buyers.

    Now, I’m not saying Tesla will actually reach those goals but what Musk has been offering up to now is what should be “possible” once the systems are installed and running at full speed, rather than what’s actually been happening with sales. He may be intentionally holding production of the S/X back somewhat simply because he’s not ready to build too much into sales-lot inventory until he has lots to put them into.

  • avatar

    Tesla has a whiff of too big to fail. The stock price combined with the missed production targets makes it seem like there’s a lot of big money invested in TSLA and they will not allow the stock to plummet no matter what.

    At least that’s how it appears.

  • avatar

    Elon Musk insisted that Tesla could launch the Model 3 without having to bother with making validation prototypes. Tesla was going to do things differently. Instead they’ve only been able to make a couple hundred cars in two months.

    On a large volume vehicle, GM might make that many validation prototypes in their pilot plant in Pontiac before Job 1 rolls down the line.

    It looks like the traditional auto industry indeed knows a thing or two about making new cars.

  • avatar

    Maybe the actual lie was about not making prototypes, and the couple hundred cars sold so far actually are the prototypes. That would explain the NDAs the buyers signed, too. Possibly they’ll have their cars replaced with mass-produced ones once they become available?

    Just guesswork, sure, but sounds realistic to me.

  • avatar

    > In an application for sales tax exemption from the CAEATFA program filed early this
    > year, the California Treasurer revealed that Tesla had production capacity of the
    > Model 3 pegged at 226,563 units per year over a five-year span.

    Am I allowed to ask if this is referring to production in *California*?

    Isn’t it possible that some of the planned production may happen at the Gigafactory in Nevada? Or somewhere else?

  • avatar

    If Musk sells all these cars, gas will be a quarter a gallon (plus tax of course) because of no demand. I may go out and by an old Chevy pickup with the 8.1 engine just to have one.

  • avatar

    WSJ had a front page article this week on EV in China. If you live in one of the larger cities and want plates, you are buying an EV. Government support is up to 50% of cost. Range up to 200 miles. Cost to consumers from $6k to $20k. Of course the least expensive sell the most. With reports of the Model 3 being less than fully baked, won’t people who want basic EV just buy the cheap ones? Is the Tesla brand worth more- just because it’s Tesla? Will Tesla open a plant in China to serve that market and ours, solving some labor issues as a bonus?

  • avatar

    Saw a wild model 3 in person here last weekend… It looks better that I would have thought, but the giant Ipad thing is still goofy. The guy said there are still some software bugs they need to work out but otherwise it’s a pretty good car. He does work for SpaceX though.

  • avatar

    I tried to care about this story, I really did, but I just don’t. This is a car company that came out of nowhere doing things nobody has done. Its just par for the course. Get over it, move on.

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