Tesla Idles California Plant to Retool for Electric SUVs

Tesla Motors Inc. (TSLA) halted production at its California assembly plant for the first time as it adds robots to accelerate production of electric sedans and prepares to build its Model X sport-utility vehicle.

Work to reconfigure the production floor at the facility in Fremont began yesterday and vehicle assembly will resume in two weeks, with a goal of boosting production by 25 percent, said Simon Sproule, a spokesman for the carmaker. 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 yesterday. “It gets us ready to build X and to do it on the same line as the S.”

Chief Executive Officer 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 U.K., which started in the second quarter, followed by deliveries to Hong Kong, Japan and Australia in the year’s second half.

Photographer: Noah Berger/Bloomberg

Telsa's assembly plant in Fremont, California. Close

Telsa's assembly plant in Fremont, California.

Close
Open
Photographer: Noah Berger/Bloomberg

Telsa's assembly plant in Fremont, California.

Tesla, based in Palo Alto, California, charges from $71,000 for its Model S in the U.S. 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 ahead of the current project, Sproule said. Musk said in May the upgrades would idle production for about 10 days in July.

‘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

Tesla’s modifications this month affect the sole auto-assembly plant on the U.S. West Coast. 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. (7203), 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.

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 U.K., on July 31 after the close of New York trading.

The automaker’s shares fell 0.4 percent to $219.58 today in New York. The stock has advanced 46 percent this year.

To contact the reporter on this story: Alan Ohnsman in Los Angeles at aohnsman@bloomberg.net

To contact the editors responsible for this story: Jamie Butters at jbutters@bloomberg.net Niamh Ring, Ben Livesey

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.