Is A Paint Shop Stopping Tesla Producing 500,000 Cars A Year?

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Tesla has been having an interesting run of tardily. A surge in Q3 deliveries and product numbers take driven stock price gains in recent days equally investors meet the visitor every bit making good on Elon Musk's promise to deliver half a meg cars in 2022. 1 quarter of increased deliveries is patently worth over $1bn these days, still since Elon has said more money will be needed, they need to take some skillful results.

All may not be equally it seems though. Certainly the high level picture seems reasonable. Need is loftier, Tesla (NASDAQ:TSLA) is ramping up production to meet both client and investor demand, the trouble is, Tesla is a tech company trying to brand it in an old economy industry. Disruption is of course the nature of the tech game and nosotros've seen it fourth dimension and again, but at that place'south a reason that Google is not a depository financial institution, despite how lucrative it tin can be. Old economy stalwarts typically operate in a more than rigid regulatory regime than tech companies and Tesla may be virtually to observe out that its options are limited by the old globe.

Tesla (NASDAQ:TSLA) Pushes, Erstwhile Guard Pushes Back...

Tesla is certainly a threat to the car industry. A threat which is being taken increasingly seriously. Major automobile manufacturers the world over have hybrid and electric vehicles in the market place and more coming, the question is whether Tesla can ramp up quickly plenty to become a dominant thespian on the world stage. Large manufacturers already have a lot of factories in global locations, retooling is in many ways easier than building a new facility of form. Tesla has a starting time mover reward in a lot of ways, simply is it possible that Musk didn't call back through all the angles in his bid to have on the major global manufacturers?

Mercedes CEO Dieter Zetsche has made a bold claim that they will be the number ane premium electrical vehicle maker past 2025 with 10 electric models on sale. Is this overconfidence? Or a sign of the ramp up capability of a global histrion with big manufacturing capabilities? Time will tell.

Pigment Shop Woes?

A few months back, Elon Musk announced his very aggressive program of producing one-half a million electric vehicles by 2022. According to a very thorough report past DailyKanban, the visitor is facing a large legal hurdle which will stop it from achieving that particular milestone. And what is it that stands in the way of Elon Musk's master plan? A paint store.

The company's primary factory is located in California, specifically the San Francisco Bay Surface area, which happens to exist a very densely populated region with extremely strict environmental regulations. This ways that any plans of expansion will have to cater to not only the physical and financial challenges of expansion but those of a regulatory nature as well. This is also probably why the Toyota and GM based JV handed over the manufacturing plant to Tesla, considering information technology would have been very difficult to expand it without facing the aforementioned challenges.

Interestingly, the biggest challenge the visitor currently faces stems from its paint shop. Most of the manufacturing process isn't and then hard on emissions but machine surfacing creates a very high number of emissions in the course of Precursor Organic Compounds (POC) or Volatile Organic Compounds (VOC) which are created equally byproducts of the painting procedure. These pollutants are usually limited (at a federal level) to 6lbs per gallon or nearly of the places in the U.s. only California has actress state level regulations which actually impose a much stricter limit: at just iii.5 lbs per gallon. For a company that plans to brand 500,000 cars in a year, this isn't very skillful news.

Regulatory Headaches Inbound

The touch of these regulations means that Tesla is limited to producing a maximum of 25 vehicles per hour for its first year. Past simple math, this means that fifty-fifty if the pigment store runs 24/vii you are only looking at an annual product of 219,000 cars. And co-ordinate to the inquiry conducted by Daily Kanban there is no way to bypass the ruby record involved hither. With the strict regulations in place, Tesla will not be able to produce 500,000 cars a year anytime in the nearly future. Unless of form, they start outsourcing the painting aspects of it to a third political party. Autonomously from that, yous are looking at a (much more realistic) effigy of 200,000 cars produced per year – which is nevertheless about 4 times greater than the current 50,000 (although given Q3 deliveries of about 25,000, this does seem to be improving).

Ane thing is for sure though, if Elon Musk's Tesla Model 3 is going to exist the mainstream success that he envisions it to be and so this is something that will take to be taken care of eventually. According to the aforementioned source, the visitor has non filed for any excess permits that might let it to be slightly flexible with the regulation. Of course, there is also the possibility that the visitor will simply head into the murky waters of non-compliance if the fine is small plenty and monetary in nature, but that seems unlikely at best.

The Futurity?

The merely two real options that Elon Musk has is to either open up up a new plant somewhere outside of the punishing regulations that the EPA has imposed, or, outsource the bottleneck to a 3rd party. Considering it is something as inconsequential as a paintjob and does not contain any significant core competency elements to it, I don't see any reason why this could non happen if Tesla wanted to, however it would probable take a striking on margin if it were to do this. For that to be true however, we will have to assume that this is the only bottleneck at play here and if this report is anything to go by, information technology is far as well early to brand that claim.

Equally for the stock, certainly it feels jumpy. Volatility is a chip on the high side compared to the established auto makers, only on the low side for a tech startup which in many ways is what they are. Musk isn't a huge fan of Wall Street despite the fact that some of his biggest fans hail from there. I wouldn't put it by him to take a trick or two up his sleeve only on electric current thinking, the stock feels high, particularly if there is no piece of cake way to get effectually the environmental reg limitations facing the company.

Source: Daily Kanban Investigation.

Source: https://wccftech.com/paint-shop-standing-tesla-producing-500000-cars-year/

Posted by: brumfieldgince1938.blogspot.com

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