Posted on October 26, 201
by Zachary Shahan
October 26, 2019 by Zachary Shahan
I remember Tesla's quarterly conference call a few years ago, in which then-Chief Financial Officer Deepak Ahjuja pointed out quite clearly worked for many years at another major automaker (Ford) and has never seen this or another automaker focus as obsessively or effectively on improving capital efficiency, as Tesla does.
Talk to Tesla Automobile President Jerome Guillen earlier this year at the Tesla Factory in Fremont, he discusses Tesla's several-minute focus on achieving near-continuous incremental improvements in the manufacturing process. Top executives at the company's unique seat factory have told CleanTechnica about their efforts to shave milliseconds from certain manufacturing processes as part of continuous efforts to achieve greater efficiency. Most recently, talking to the inside of Tesla, I was told that Jerome requires two production improvements per week from staff (at least, in years past, but probably still today). To close these examples (for now), Tesla CEO Elon Musk spoke last year about the "game of the hundredths" Tesla was hired to reduce production costs for each model 3 the company produces.
I think you're getting the picture. Capital efficiency is not the sexiest phrase in the world of production, but it must be one of the most important. The remarkable thing for Tesla supporters, as well as critics, is that the company seems to be constantly improving on this. Tesla's shareholder letter for the third quarter emphasized capital efficiency in several places, but unless you are looking for information on this topic or just keeping a close eye on the production of this lingo, it may not pop up. So, I thought I'd take some time, showing how much Tesla actually emphasizes this topic:
- "In addition, we have dramatically improved the pace of execution and capital efficiency of new production lines. Gigafactory Shanghai was built in 10 months and is ready for production while it was ~ 65% cheaper (capacity unit cap) for construction than our Model 3 production system in the USA . "
- " Installation of Model Y equipment is underway before next year's planned release. We are moving faster than originally planned, using the lessons learned and efficiency gained from our Gigafactory Shanghai plant. Capex per unit capacity is expected to be about 50% lower than our current Model 3 production system in the United States. "
- " While total volumes are expected to grow by approximately 50% in 2019, this year our focus was spending control and preparing for our next phase of growth. ”
- “… we went back to GAAP profitability in Q3 while generating positive free cash flow. This was possible by removing significant costs from our business . "
- " GAAP Automotive's gross margin improved from 393bp QoQ to 22.8% (improved by 366bp QoQ excluding regulatory credits). The margin was influenced in part by fundamental improvements in our operational efficiency, including higher absorption of fixed costs, reduced production and material costs, and continuous improvements in vehicle quality and in part by the Smart Summon related delay revenue recognition, currency and other non-recurring items.
Any other favorite examples of improving Tesla's capital efficiency?
If you want to buy a Tesla Model 3, Model S or Model X and want a 1000 miles free charge, feel free to use my reference code: https: // ts. la / zachary63404 – or use someone else if you have a friend or family member with Tesla. I will not cry. You can also use the code to get a discount on Tesla solar if you are interested.
Jerome – The Man, the Myth, The Tesla Super Engineer – Interview with # CleanTechnica
Our Interview with Tesla President Jerome Guillen, Part Deux
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