Tesla idles California plant to boost production for new SUVs

The Tesla factory in Fremont, Calif. on June The Tesla factory in Fremont, Calif. on June 22, 2012. The electric carmaker is upgrading the plant to accommodate the production of its new SUV. Photo Credit: AP

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Tesla Motors Inc. halted production Monday at its California assembly plant as it added robots to accelerate production of electric sedans and prepared to build its Model X sport-utility vehicle.

Work to reconfigure the production floor at the facility in Fremont is expected to take about two weeks, when vehicle assembly will resume, with a goal of boosting production by 25 percent, said Tesla spokesman Simon Sproule. The $100 million upgrade will add 25 robots and modify the factory’s body and general assembly lines, he said.

“This represents the single biggest investment in the plant since we really started operations and enables us for higher volumes,” Sproule said by phone Monday. “It gets us ready to build X and to do it on the same line as the S.”

Chief executive Elon Musk, who also leads rocket maker Space Exploration Technologies Corp., has said he wants Tesla to deliver at least 35,000 Model S sedans to global customers this year, a jump of about 56 percent from 2013. The expansion is being led by shipments to China and the United Kingdom, which started in the second quarter, followed by deliveries to Hong Kong, Japan and Australia in the year’s second half.

Tesla, based in Palo Alto, California, charges from $71,000 for its Model S in the United States. The automaker was producing almost 700 units per week at the end of the first quarter with a goal of increasing that to 1,000 later this year, Musk said in a May 7 letter to investors.

Weekly production at the factory was approaching 800 units  before the start of the upgrade project, Sproule said.

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LASER-FOCUSED
“I’m sure with the popularity of the vehicle and need for production and the fact that it’s the sole production facility, they are laser-focused on changing over and revamping it as quickly as they can,” said Michael Robinet, a managing director at IHS Automotive in Southfield, Michigan.

The Fremont plant, which also makes the car’s lithium-ion battery pack and motor, needs to be modified to start building the Model X later this year, Sproule said. Pricing for the battery-powered light truck, which ships to customers early next year, hasn’t been announced yet.

During the retooling period, assembly workers can take vacation time or come to the plant for maintenance and training shifts, Sproule said. Tesla is California’s largest automotive employer with more than 6,000 people working at its plant, headquarters, design center, stores and service facilities.

CHEAP BATTERIES
The San Francisco Bay Area factory opened in the early 1960s as a General Motors plant and then operated for 25 years as a joint venture between GM and Toyota Motor Corp., a Tesla shareholder, until 2009.

When Toyota President Akio Toyoda arranged for Tesla to buy the plant for $42 million in 2010, he gave the facility a new life and helped Musk start Model S production in 2012.

Tesla is revamping Fremont as it prepares to announce locations where it will start initial construction of a battery Gigafactory. The company has said it’s studying sites in Arizona, California, Nevada, New Mexico and Texas for the plant that will cost as much as $5 billion to build and eventually employ as many as 6,500 people. Musk said the plant is needed to cut the cost of lithium-ion cells at least 30 percent.

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Sproule declined to say when the company will announce a decision on where it wants to build the factory.

MORE CHALLENGES
Cheap batteries are essential to Tesla’s goal of selling its Model 3 sedan, a smaller electric car with a base price about half that of Model S, by 2017. The plant will also make battery packs for homes and businesses to store power from solar panels to reduce use of electricity from utilities.

“As they move forward and add more vehicles, additional complexity will create more challenges,” Robinet said. “Given what they had to do, they’ve done a very good job. They are putting together very complex machines.”

Tesla is scheduled to release second-quarter results, including revenue from initial sales in China and the United Kingdom on July 31 after the close of trading in New York.

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