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Shanghai Construction Group to build first phase of Tesla's Shanghai plant: media
March 7, 2019 6:00 am|Comments (0)

FILE PHOTO: The land of Tesla Gigafactory at a groundbreaking ceremony of Tesla Shanghai Gigafactory in Shanghai, China January 7, 2019. REUTERS/Aly Song/File Photo

SHANGHAI (Reuters) – State-owned Shanghai Construction Group (SCG) will build the first phase of U.S. electric carmaker Tesla’s factory in Shanghai, a news portal reported on Thursday.

Xu Jiandong, a vice-president at SCG, was quoted by Shanghai Observer as saying that the company would fully cooperate with Tesla to achieve its objectives.

The Shanghai Observer is operated by the Jiefang Daily newspaper, which is in turn run by China’s ruling Communist Party’s Shanghai committee.

Reuters reported in December that several firms, including SCG, were taking part in the bidding.

A Shanghai city government official said on Wednesday that they expect Tesla’s vehicle assembly facility to be completed in May this year.

Reporting by Brenda Goh; Editing by Shreejay Sinha

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Exclusive: Tesla's delivery team gutted in recent job cuts – sources
February 9, 2019 12:52 am|Comments (0)

SAN FRANCISCO (Reuters) – When Tesla Inc announced last month a second round of job cuts to rein in costs, one crucial department was particularly badly hit. The automaker more than halved the division that delivers its electric vehicles to North American customers, two of the laid-off workers said.

FILE PHOTO: A Tesla logo is seen at a groundbreaking ceremony of Tesla Shanghai Gigafactory in Shanghai, China January 7, 2019. REUTERS/Aly Song/File Photo

Some 150 employees out of a team of about 230 were let go in January at the Las Vegas facility that gets tens of thousands of Model 3s into the hands of U.S. and Canadian buyers, they said, in a sign the company expected the pace of deliveries to significantly slow in the near term.

The cuts, which have not been previously reported, could fuel investor worries that demand for the Model 3 in the United States has tailed off after a large tax break for consumers expired last year and the car remains too expensive for most consumers.

Tesla has said its focus this quarter is on supplying cars to customers waiting in China and Europe.

“There are not enough deliveries,” one of the former employees told Reuters. “You don’t need a team because there are not that many cars coming through.”

Delivery of the Model 3 was the company’s key priority in the latter half of 2018, as Tesla tried to supply all buyers wanting the full benefit of the $ 7,500 U.S. tax credit before it was cut in half at year’s end.

The Model 3 is crucial to Tesla’s plans for long-term profitability. The company aims to post a profit in each quarter this year, based on the expectation that it will sell more Model 3s and continue to cut costs.

Tesla declined to comment on the job reductions in the delivery team. The company still has an undisclosed number of delivery personnel attached to other locations.

‘EVERY BEING ON THE PLANET’

Even before the paring back of the delivery team, investors questioned the level of demand for the Model 3 remaining after Tesla’s all-out push to supply buyers ahead of the tax credit cut.

“Given the need for revenue to cover costs and generate cash, the financial community should be focused on the level of demand for Tesla vehicles – in particular the Model 3,” wrote Barclays analyst Brian Johnson in January.

The two former delivery workers said the 2018 sales push has left Tesla’s reservations list plucked clean of North American buyers willing to pay current prices of over $ 40,000 to get their hands on a Model 3.

Chief Executive Elon Musk initially said in 2016 the car would start at $ 35,000 – which sparked a rush of reservations – but Tesla has yet to actually sell any cars at that price, despite two price cuts already this year.

“We sold through just about every car we had on the ground and we called almost every being on the planet who had ever expressed desire to own a Tesla to let them know the tax credit was expiring,” said the other ex-employee.

Tesla workers around the company were reassigned to pitch in, that source said.

“They said, ‘Your job is off the table now, we have to get these cars delivered. Because if we don’t get these cars delivered, you don’t have a job tomorrow,’” the former employee said.

HALF A MILLION BUYERS

At the Model 3 launch in July 2017, Musk said over half a million buyers had put down deposits on the new car. That helped send Tesla shares up almost 15 percent over the following six weeks.

The company delivered 145,610 Model 3s in 2018, but all of them at prices far above $ 35,000. Musk said last week a $ 35,000 version that could be sold profitably was perhaps six months away. Even with two price cuts this year, the lowest price tag on a Model 3 is now $ 42,900.

Musk maintains that Model 3 demand is “insanely high,” but his company has not released any figures to demonstrate that.

Asked about the reservations list last week by analysts, outgoing Chief Financial Officer Deepak Ahuja declined to disclose how many people remained, calling it “not relevant.”

Musk has said Tesla has multiple ways of stoking demand, if it chose to, such as offering leases or boosting marketing efforts.

The Model 3s now rolling out of Tesla’s Fremont, California, factory are going to Chinese and European buyers, Tesla says.

The two laid-off employees said delivery targets for North America – made up of mostly U.S. buyers – this quarter would be 55 percent to 60 percent of what they were in the last quarter of 2018.

If Tesla does not cut prices soon, it risks losing potential customers – and ones already on its reservation list – to a slew of German and Asian competitors whose electric vehicles will hit the U.S. market this year. Each of the new entrant’s first 200,000 buyers will be eligible for a full federal subsidy.

Having met that number already, the U.S. tax credit for Tesla buyers drops in half to $ 3,750 for the first six months of 2019, then falls by half again in the second six months.

Musk said last month his “rough guess” was that Tesla would begin building the $ 35,000 Model 3 in mid-2019.

One of the sources said that could recharge U.S. demand: “If there was a Model 3 for $ 35,000 that was still a really good car, that blows away the competition, I could see demand going through the roof.”

Reporting by Alexandria Sage in San Francisco; Editing by Greg Mitchell and Bill Rigby

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Tesla's Musk smokes marijuana on comedy podcast
September 7, 2018 12:00 pm|Comments (0)

(Reuters) – Tesla’s Elon Musk provoked another twitter storm on Friday by briefly smoking marijuana on a live web show with comedian Joe Rogan.

Elon Musk in Bel Air, Los Angeles, California, U.S. May 17, 2018. REUTERS/Lucy Nicholson

The forty-seven year old billionaire spent two and a half hours on a podcast late Thursday discussing everything from artificial intelligence and its impact on humankind to flame throwers and social media.

Taking a puff from a joint – which Rogan said was a blend of tobacco and marijuana and legal in California – Musk said he “almost never” smoked.

“I’m not a regular smoker of weed,” Musk said. “I don’t actually notice any effect…I don’t find that it is very good for productivity.”

Tesla was not immediately available for comment.

Musk stunned investors a month back with tweets saying he had funding to take the company private for $ 420 per share. He then backed off from his plan saying Tesla was better off as a public company.

He followed it up with fresh attacks on British cave diver Vernon Unsworth. Buzzfeed News reported earlier in the week that Musk, in an email to the news site, called Unsworth a “child rapist.”

Neither Tesla nor Musk have commented on the Buzzfeed report.

Musk apologized to Unsworth in July for similar insults he made on Twitter following the rescue of a dozen Thai schoolboys and their football coach from a cave in Thailand.

The billionaire’s behavior has raised concerns about his leadership and several Wall Street analysts have called for the company to appoint a strong No. 2 to prop up Tesla’s operations and standing with investors.

His followers on Twitter went into a frenzy following the podcast. Several followers questioned if it was against the company’s policy, while others mocked the CEO’s initial $ 420 bid, a number that has become code for marijuana.

“Elon getting high on weed and whiskey is the first reason to go long on $ TSLA in a while. He needs to relax a bit,” a tweet bit.ly/2M5PdAo by user @jkmcnk said.

Another user tweeted bit.ly/2MT7aY4: “This guy is completely off the rails.”

Shares of Tesla fell 1.3 percent in trading before the bell. They have fallen about 18 percent since Musk’s tweet on taking the company private on Aug. 7.

Reporting by Nivedita Balu and Ismail Shakil in Bengaluru; Writing by Sweta Singh

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How Is Musk Going To Pay For Tesla's Chinese Gigafactory?
July 10, 2018 6:43 pm|Comments (0)

A boy sits in a Tesla car during a visit to a Tesla showroom in Beijing on July 4, 2018.WANG ZHAO/AFP/Getty Images

Fresh off hitting an elusive production target for the Model 3 electric sedan – and a weekend offer to help rescue the young soccer players trapped in a Thai cave – Tesla CEO Elon Musk popped up in Shanghai to unveil plans for his long-held goal of a massive Chinese plant. What wasn’t mentioned was how Tesla will cover the facility’s multi-billion dollar price tag.

Dubbed Gigafactory 3 the project envisioned for the Shanghai Lingang industrial zone will be able to build 500,000 electric Teslas a year, as well as all the batteries and motors they’ll need, according to a city government statement provided by Tesla. The plant, which Shanghai said would be the largest foreign-backed industrial project in its history, could also cost as much as $ 5 billion, according to Robert W. Baird & Co. equity analyst Ben Kallo.

“That’s a good starting point,” Kallo said in a Bloomberg interview. “The biggest question right now for investors, bulls and bears alike, is how are they going to pay for it?”

Never one to think small, billionaire Musk is adding the project as Tesla continues to smooth out and accelerate Model 3 production after its tortured 12-month rollout. The company is already on the hook to continue funding its original Sparks, Nevada, battery Gigafactory, also a $ 5 billion undertaking, endless modifications to its main Fremont, California, plant, development costs for the Model Y crossover, a new Roadster sports car, its heavily promoted Tesla Semi and maybe a pickup truck. Oh, and if those capital costs weren’t enough, it’s also funding a self-driving technology initiative being done entirely in-house.

“As Laozi said in the Tao Te Ching, long journeys begin with small steps,” Barclays equity analyst Brian Johnson, wrote in a research note. “And to Tesla’s credit, today’s announcement is that small step – but we also note that there will a long journey ahead (with needs for funding, plant location and construction, battery partners and supply chains) before locally made vehicles reach Chinese streets.”

A formally attired Elon Musk, back row, center right, attends a ceremony in Shanghai to announce plans for a Tesla Gigafactory that’s to open there in a few years.Shanghai Municipal People’s Government via Tesla

Financial details of the project weren’t mentioned at a press conference in Shanghai today, and a Tesla company spokesman declined to provide a cost estimate. The facility will be wholly owned and operated in Lingang by Tesla, and conduct R&D and local sales operations as well as manufacturing, according to a statement.

“It will be a state-of-the-art vehicle factory and a role model for sustainability,” Musk said in a statement. “We hope it will be completed very soon,” without elaborating.

Establishing a production foothold in China is essential for Tesla to grow in that market and avoid its painful tariffs on imported vehicles that would otherwise make Model 3 and other Tesla vehicles unaffordable for all but a few local buyers. Chinese government support for electric vehicles has made that market one that’s too big to ignore, particularly for a company that wants to dominate global EV sales.

“Tesla’s investment will further cement China’s position as the undisputed global center for EV production,” Michael Dunne, a longtime China watcher and CEO consultancy ZoZo Go, told Forbes. Potential financial support for the factory could come from Chinese internet search powerhouse Tencent, which bought a 5% stake in Tesla in 2017, or perhaps from the Shanghai government itself, Dunne suggested.

Given the complexity of setting up a major Chinese manufacturing hub, Gigafactory 3 may not ready to go until the early 2020s, Barclays’ Johnson said, which could be a problem.

“While Tesla no doubt can enjoy some brand cachet in China as a tech innovator, which at least ensures a niche position, in the meantime local OEMs, European and US automakers are readying themselves for a speedy uptake of BEVs in China,” he said. Volkswagen, General Motors and BYD have already laid out plans for large-scale battery electric vehicle sales in China, and new players including Byton, XPeng are also readying luxury models that would potentially compete for the premium buyers Tesla targets.

Undoubtedly, Tesla will have to raise further capital to pay for the plant, Kallo told Bloomberg. Like Dunne, he also thinks a potential partner will step in to help defray some of the investment expenses, much as Tesla battery partner Panasonic at the Nevada Gigafactory.

“I’m not saying Panasonic will be the partner but you’ll see someone step in there,” he said. “We’ll hear more about that in the months ahead.”

The target for a Chinese plant to have a half million units of production capacity matches Tesla’s goal for Fremont, which it hasn’t yet attained even with the burst of Model 3 production at the end of June. First-half production at the plant that also builds Model S sedans and Model X SUVs was 87,833 units. After numerous delays, Tesla said this month it was finally building that car, nominally priced from $ 35,000, at a rate of 5,000 units per week. Musk aspires to take that level higher, but the company hopes sustained production at that volume will allow it to generate sufficient cash to fund its growing list of initiatives and, for the first time, some form of profitability.

Musk has vowed that Tesla will be in the black in this year’s third and fourth quarters, a tall order since it’s only had two, non-consecutive profitable quarters since its 2010 IPO. If the company actually achieves that, raising money for the Chinese plant should be easier.

“The access to the equity markets is there if they have growth opportunities,” Kallo said. “The important thing is the second of the year to actually show a return on this invested cap they’ve been putting in for the Model 3. Then investors will get comfortable with that and will be willing to finance other growth opportunities.”

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Panasonic to consider more investment in Tesla's Gigafactory if asked: executive
July 2, 2018 6:28 am|Comments (0)

OSAKA (Reuters) – Panasonic Corp would consider further investment in Tesla Inc’s so-called Gigafactory if requested by the U.S. electric vehicle maker, an executive at the Japanese conglomerate said on Monday.

FILE PHOTO: The Tesla logo is seen at the entrance to Tesla Motors’ new showroom in Manhattan’s Meatpacking District in New York City, U.S., December 14, 2017. REUTERS/Brendan McDermid/File Photo

The investment would come on top of the $ 1.6 billion Panasonic is contributing to the automotive battery plant, which it jointly operates with Tesla in the U.S. state of Nevada.

“We would of course consider additional investment if we are requested to do so,” Yoshio Ito, chief of Panasonic’s automotive business, said at a media roundtable, responding to a question about the possibility of further investment, given the chance.

Panasonic’s initial investment in the Gigafactory is almost complete, and the Japanese electronics maker has not made any decisions on whether to pledge further funds, Ito said.

The comments come after Tesla hit its target of producing 5,000 Model 3 electric sedans on Sunday morning, several hours after the midnight goal set by Chief Executive Elon Musk, two workers at the factory told Reuters.

Production of the Model 3, which began last July, has been plagued by a number of issues, including over-reliance on automation creating bottlenecks in battery production.

Meanwhile, the U.S. firm has been burning through cash as it tools up its assembly line and works on projects such as its Model Y crossover sport utility vehicle.

Its free cash flow – a metric of financial health – widened to negative $ 1 billion in its latest reporting quarter from negative $ 277 million three months prior, excluding costs of systems for its solar business.

Musk has said Tesla it will not need to seek cash in 2018 but Wall Street analysts anticipate a capital raise this year.

Panasonic is the exclusive battery cell supplier for Tesla’s current production models, making them in Japan as well as at the $ 5 billion Gigafactory.

Ito said last week at Panasonic’s general shareholders meeting that a pickup in production of the Model 3 has resulted in occasional battery cell shortages.

Reporting by Makiko Yamazaki; Additional reporting by Sayantani Ghosh; Editing by Christopher Cushing

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Elon Musk Calms Down, and More From Tesla's Shareholder Meeting
June 6, 2018 6:00 am|Comments (0)

When Elon Musk was a kid, he had so much trouble managing his time, that his younger brother Kimbal would lie to him about the bus schedule. Elon would show up a few minutes after the supposed arrival—and have just enough time to hop aboard. A few decades on, the whole world knows about Elon’s habit of blowing deadlines. And he admits it can be a problem.

“This is something I’m trying to get better at,” he said from the stage of Silicon Valley’s Computer History Museum on Tuesday afternoon, at Tesla’s annual shareholders meeting. “I’m trying to recalibrate these estimates.”

A few days after a Twitter rage fest aimed at the media, a month after refusing to answer questions about Tesla’s financial state during an investors’ call, and two months after getting in a public spat with the feds investigating a deadly crash in one of his cars, Musk’s attitude when he appeared before his fellow shareholders was conciliatory. He even seemed emotional at times. “We build our cares with love,” he said, with a slight quaver in his voice. And he noted how brutal the auto industry can be, especially to newcomers. “It’s insanely hard just staying alive.”

For an hour and a half, Musk patiently fielded questions on just about every part of Tesla’s sprawling business. He said the Model 3 production rate will hit the long-promised 5,000 cars a week rate later this month, predicted an enormous increase in battery production, announced upgrades to the Autopilot semi-autonomous system, and even appeased PETA. If you missed the meeting, here are the key takeaways.

Elon Retains the Reins

The official business of the meeting included voting on the reelection of venture capitalist Antonio Gracias, Elon’s bus-catching brother Kimbal, and 21st Century Fox CEO James Murdoch to Tesla’s board of directors. (Only a third of the nine board members come up for election at a time—it’s like the US Senate that way.) Last month, activist investor the CtW Group urged Tesla shareholders to replace the trio with people who had automotive and manufacturing expertise. Another investor, Jing Zhao, filed a proposal to strip Musk of his position as Tesla’s chairman, which he has held since 2004 (he took the CEO job in 2008). But the shareholders stuck with Musk, reelecting the board members and nixing the leadership change by an overwhelming majority. (Tesla will file the exact vote count with the SEC in the next few days.)

The loss didn’t surprise CtW executive director Dieter Waizenegger, who argues control of Tesla is too concentrated in people tied to Musk. “This opinion is shared by a significant number of shareholders of Tesla,” he says. “We expect the final vote tally to reveal that.” Even if he’s right, Musk remains fully in charge.

More Model 3

Musk’s acknowledgement of his timeline trouble didn’t stop him from announcing that, by the end of the month, Tesla will be building 5,000 Model 3 sedans every week, which should be enough to start turning a profit on the car. The uptick is thanks to Tesla’s rebalancing of the workload between humans and robots in its factory in Fremont, California, where the company is adding a third Model 3 production line. It is also planning to open a factory in China, to go with its plants in Fremont and the Netherlands.

Meanwhile, Tesla is gradually expanding options for Model 3 owners, who so far have been limited to the version with an upgraded battery and premium interior, which starts at $ 56,000. By the end of this year, Musk hopes to start production of the version closer to the car’s $ 35,000 base price, with the smaller battery pack. Also coming soon: right hand drive.

New Products

Even as it struggles to build the Model 3, Tesla is planning on three new vehicles: the Semi truck, the revived Roadster, and the still mysterious Model Y. Musk told shareholders he’s hoping to start production of all three in the first half of 2020, though he has yet to specify where he’ll do that, or how. He’ll unveil the Model Y in March (it will be “something super special”), and expects the truck and the sports car to deliver better specs than the already very impressive numbers he announced last fall. Oh, and he’ll never build an electric motorcycle.

Autopilot Advances

Without getting into details, Musk said Tesla is making steady progress to improve its Autopilot feature, and is now working on adding the ability to change lanes and handle highway on- and off-ramps (Musk noted he was testing new software around 1 am this morning). For drivers who aren’t sure they want to spend $ 5,000 on the feature, Tesla will soon start offering free trials. Musk also reaffirmed his distaste for lidar, the laser shooting sensor most autonomous vehicle developers say is key to building a safe, capable robo-car.

SuperChargers

Tesla now runs nearly 10,000 Supercharger stations around the world, the stations where its drivers (and no one else) can plug in and charge a depleted battery to about 80 percent in 30 minutes. And Musk is working to keep improving charge times, saying a three- or four-fold improvement is possible. (That’s only true for relatively new cars, he added, disappointing the 2012 Model S owner who asked him about it.)

Going Vegan

Unlike many automakers, Tesla has been offering leather-free versions of its cars for years, appealing to its vegan and vegetarian fans. But it’s still using some leather in its steering wheels, and a People for the Ethical Treatment of Animals (PETA) rep took the mic to press Musk on it. He explained Tesla can make leather-free steering wheels, but the work has to be done it its design studio, making it something of a pain. But he promised it’ll be easier once the Model Y comes around. Now he’s just gotta hit that 2020 goal.


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Wall Street Breakfast: Eyes On Tesla's Shareholder Meeting
June 5, 2018 6:01 pm|Comments (0)

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Tesla's electric motor shift to spur demand for rare earth neodymium
March 12, 2018 6:04 pm|Comments (0)

LONDON (Reuters) – Tesla’s shift to a magnetic motor using neodymium in its Model 3 Long Range car adds to pressure on already strained supplies of a rare earth metal that had for years been shunned because of an export ban by top producer China.

FILE PHOTO: A Tesla Model 3 is seen in a showroom in Los Angeles, California U.S. January 12, 2018. REUTERS/Lucy Nicholson/File Photo

Efforts by governments around the world to cut noxious emissions produced by fossil fuel-powered cars is driving demand for electric vehicles and the metals used to make them, such as lithium and cobalt which are key ingredients for batteries.

Now the spotlight is on neodymium. Several auto makers already use permanent magnet motors that rely on the metal because they are generally lighter, stronger and more efficient than induction motors that are based on copper coils.

But it is the switch to neodymium by Tesla, an auto maker that has staked its future solely on the electric vehicle, that is showing the way the industry is moving and the direction of demand for the rare earth metal.

Research group imarc estimates the market for the neodymium-iron-boron magnet used in the motors is now worth more than $ 11.3 billion, with demand for the magnets rising at a compound annual growth rate of 8.5 percent between 2010 and 2017.(For a graphic of Neodymium market balance click reut.rs/2FD6bUb)

“Some electric car motors use the permanent magnet technology, probably the most famous is the Tesla Model 3 Long Range. All the other Tesla models — Model X and Model 3 standard — use induction motors,” said David Merriman, a senior analyst at metals consultancy Roskill.

Global demand of 31,700 tonnes for neodymium last year already outstripped supply by 3,300 tonnes, he said. Demand was expected to climb to 34,200 tonnes this year and 38,800 tonnes in 2018, leaving larger deficits.

“Tesla’s decision to switch to permanent magnets has completely changed the dynamics of the market,” said a source at a fund manager that specializes in metals.

The price of neodymium is now about $ 70 a kg, well below the $ 500 hit after China held back shipments to Japan in 2010 during a row over disputed islands but it is still 40 percent higher than at the start of 2017.

(For a graphic of neodymium prices click reut.rs/2DlOHtE)

China, which resumed neodymium exports in 2015, imposed strict export quotas across a range of rare earth metal in 2010, saying it wanted to curtail pollution and preserve resources.

COSTLY PROCESS

“People seem to have forgotten China’s export ban. It could happen again. China is really the main producer, no one else has invested as much in rare earths,” a rare earth trader said.

Despite their name, rare earths are found in many places around the world, but the process of extraction is difficult and expensive, as it requires separating multiple different metals from a single deposit. This is unlike the much simpler process, for example, of recovering copper from ore.(For a graphic of Rare Earth Producers click reut.rs/2Fu5HnE)

China has invested heavily in the rare earth metals process but its crackdown on mining, smelting and other polluting industries is forecast to slow supply. It already helped push the neodymium price to a two-year high of $ 96 in September.

“Rare earth production is as bad as you can get in terms of environmental damage,” the trader said. “China used its dominant position before, what’s to stop it doing so again?”

Such supply concerns are encouraging automakers to search for ways of cutting down neodymium use. Toyota Motor Corp (7203.T) said last month it had found a way to cut use of the metal in electric motors by about a fifth.

The Japanese firm said it had developed a magnet which replaced some of the neodymium with more abundant and cheaper rare earths — lanthanum and cerium. Toyota aims to use the magnets in electric vehicle motors within the next 10 years.

Other manufacturers of electric vehicles that use permanent magnets include BMW BMWG, Nissan (7201.T) and Geely (0175.HK).

Several companies produce rare earth metals outside China, including London-listed Rainbow Rare Earths (RBWR.L), Canada-listed Namibia Rare Earths (NRE.V) and Australia’s Spectrum Rare Earths (SPX.AX).

But, for now, auto makers making permanent magnet motors remain heavily reliant on China, which according to Roskill accounted for 85 percent of global output of rare earth oxide estimated at 161,700 tonnes in 2017.

Morgan Stanley analysts estimate electric vehicles will total 50,000 units in 2020 or 2.3 percent of the total, rising to 400,000 in 2025 or 17.4 percent, and 975,000 in 2030 or 40.9 percent.

Reporting by Pratima Desai; Editing by Veronica Brown and Edmund Blair

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