Photo: Tesla/edited by autoevolution
The automotive world is packed with rumors that never turn out to be true. Some are pretty obvious, such as startups that promise bold things without any proof to back up their claims. Some others are more complex, coming from companies that really could materialize them. Rumors about new Tesla factories and expansions are an excellent example of something plausible that makes no sense at all for the company’s current situation.
We hear here and there that the Model Y was the best-selling vehicle in several markets. The problem is that these stories fail to mention that demand dropped drastically for the company’s cars. The impressive sales numbers come primarily from people who had ordered the Model Y ages ago and received their units earlier than expected. That peak in sales did not come from more people buying: it came from those in line waiting for their turn.
In China, customers are protesting and even breaking some Tesla Service Centers because the EV maker started to offer massive discounts. The goal was to sell more vehicles in the largest car market in the world. Not long ago, Tesla would not need that to reach good sales numbers, but these EVs are no longer as attractive as they once were. Apart from cutting prices, Tesla even interrupted production to reduce its inventory.
If that was not enough, the company has two new factories struggling to reach their full capacities: Giga Grünheide and Giga Austin. It would only add up to have new factories if Tesla had something else to build in high volumes – and it doesn’t.
The Tesla Cybertruck should reach production by the end of 2023, way after Rivian, Ford, and GM have presented their electric pickup trucks – even Lordstown did it earlier. The Cybertruck should have started leaving assembly lines in 2021, which already makes it two years late. Now consider Chicken Tax, and how pickup trucks are mostly relevant in the U.S., Argentina, Thailand, and a few other countries. It is clear that any new factory with the Cybertruck in mind must be on American soil.
The rumors about a new plant in Mexico could work for the Cybertruck, but such a plant could not make a single product. Why would Tesla make the Model 3 or Model Y there when demand for these vehicles is dropping? For it to be a sensible decision, Tesla would have to expand to new markets. BYD is doing that, but it follows the traditional car sales model: it announces it will sell in a given country and invites entrepreneurs to invest in new dealerships to distribute these vehicles. It does not have to do everything by itself. Tesla does.
The direct sales model imposes the creation of new Tesla Service Centers to deliver and service the vehicles sold. In the EV maker’s case, it also demands installing Supercharging stations on the main roads in the country where it wants to sell its cars. That’s a massive investment that may not be justified by the number of vehicles Tesla expects to sell in each country. Companies following the dealership model do not have to worry about any of that.
Although the Model 3 was presented as a $35,000 EV in 2016, it now costs $46,990, or 34% more than the EV maker said it would charge for its entry-level EV. That makes the cheapest Tesla currently for sale a very expensive vehicle, even in developed countries. Finding the balance between profitability and investments will be a tough mission in new markets.
What Tesla needs is an entirely new product – and it is not the Roadster, which will cost a fortune and will have limited production numbers. The company said it would discuss its “generation 3 platform” at the 2023 Investor Day on March 1. What will this new architecture underpin? New versions for the Model 3 and Model Y? Cars in segments Tesla never explored? Without knowing more about that, new factories in Mexico or Indonesia would just create overcapacity – something most automakers have fought against for decades.
With that in mind, it would be natural to hear rumors of new Tesla vehicles before stories about new plants emerged. If they manufacture the cars the EV maker already produces elsewhere, they’re doomed. To make matters worse for the company, Tesla used to have a pretty positive image in countries where it was not present. That has changed drastically.
News about Tesla’s shoddy quality control travels way beyond the borders where its examples manifest: U.S., China, Germany, Norway… you name it. The company’s customers make sure to tell everyone how unhappy they are about servicing. Autopilot and Full Self-Driving ceased to be technological marvels to become liabilities, accused by traffic safety experts of being threats. Finally, any announcement about how safe Tesla vehicles are gets tainted by the possibility that the EV maker uses “one-off builds on specially provisioned computers” to do better in tests, as the white-hat hacker GreenTheOnly disclosed a while ago.
On top of that, the company is accused of allowing racism and sexual harassment cases to happen in its factories. It will lose a lot of money with Owen Diaz when the jury decides the damages it will have to pay him. The last time a jury did that, Tesla was ordered to pay $136.9 million. Tesla appealed and won the right to a new jury trial on the values. Still, it can prove to be just a temporary victory: nothing ensures the new jury will not define an even higher value, especially with all other lawsuits against the company. Tesla may lose a lot of money with them, too.
The losses may not be as harmful as the reputation damages the lawsuits are causing. There are people already refusing to buy from a company that deals so poorly with these matters. Elon Musk’s purchase of Twitter and his controversial tweets also do not help improve the company’s image, something press relations or marketing departments could try to improve if they existed.
This is the background for all rumors about new Tesla factories. Believing them without the EV maker solving its demand issues, reputation problems, and a poor and old lineup may only make a difference in stock valuation. Tesla investors even tried to sell the idea that Chinese protesters flocking to Service Centers were, in fact, trying to buy new EVs at a discount. Apparently, it helped Tesla shares stop dropping in value while the story was not clarified.
Tesla has a lot of homework to do if it wants to become a $1 trillion company again. Be sure about it: building new factories is not among the necessary steps to get there, even if the rumors eventually prove to be true. New plants only make sense with global expansion and new and attractive products. Nothing else will do the trick.
In China, customers are protesting and even breaking some Tesla Service Centers because the EV maker started to offer massive discounts. The goal was to sell more vehicles in the largest car market in the world. Not long ago, Tesla would not need that to reach good sales numbers, but these EVs are no longer as attractive as they once were. Apart from cutting prices, Tesla even interrupted production to reduce its inventory.
If that was not enough, the company has two new factories struggling to reach their full capacities: Giga Grünheide and Giga Austin. It would only add up to have new factories if Tesla had something else to build in high volumes – and it doesn’t.
The Tesla Cybertruck should reach production by the end of 2023, way after Rivian, Ford, and GM have presented their electric pickup trucks – even Lordstown did it earlier. The Cybertruck should have started leaving assembly lines in 2021, which already makes it two years late. Now consider Chicken Tax, and how pickup trucks are mostly relevant in the U.S., Argentina, Thailand, and a few other countries. It is clear that any new factory with the Cybertruck in mind must be on American soil.
The rumors about a new plant in Mexico could work for the Cybertruck, but such a plant could not make a single product. Why would Tesla make the Model 3 or Model Y there when demand for these vehicles is dropping? For it to be a sensible decision, Tesla would have to expand to new markets. BYD is doing that, but it follows the traditional car sales model: it announces it will sell in a given country and invites entrepreneurs to invest in new dealerships to distribute these vehicles. It does not have to do everything by itself. Tesla does.
The direct sales model imposes the creation of new Tesla Service Centers to deliver and service the vehicles sold. In the EV maker’s case, it also demands installing Supercharging stations on the main roads in the country where it wants to sell its cars. That’s a massive investment that may not be justified by the number of vehicles Tesla expects to sell in each country. Companies following the dealership model do not have to worry about any of that.
Although the Model 3 was presented as a $35,000 EV in 2016, it now costs $46,990, or 34% more than the EV maker said it would charge for its entry-level EV. That makes the cheapest Tesla currently for sale a very expensive vehicle, even in developed countries. Finding the balance between profitability and investments will be a tough mission in new markets.
What Tesla needs is an entirely new product – and it is not the Roadster, which will cost a fortune and will have limited production numbers. The company said it would discuss its “generation 3 platform” at the 2023 Investor Day on March 1. What will this new architecture underpin? New versions for the Model 3 and Model Y? Cars in segments Tesla never explored? Without knowing more about that, new factories in Mexico or Indonesia would just create overcapacity – something most automakers have fought against for decades.
With that in mind, it would be natural to hear rumors of new Tesla vehicles before stories about new plants emerged. If they manufacture the cars the EV maker already produces elsewhere, they’re doomed. To make matters worse for the company, Tesla used to have a pretty positive image in countries where it was not present. That has changed drastically.
News about Tesla’s shoddy quality control travels way beyond the borders where its examples manifest: U.S., China, Germany, Norway… you name it. The company’s customers make sure to tell everyone how unhappy they are about servicing. Autopilot and Full Self-Driving ceased to be technological marvels to become liabilities, accused by traffic safety experts of being threats. Finally, any announcement about how safe Tesla vehicles are gets tainted by the possibility that the EV maker uses “one-off builds on specially provisioned computers” to do better in tests, as the white-hat hacker GreenTheOnly disclosed a while ago.
On top of that, the company is accused of allowing racism and sexual harassment cases to happen in its factories. It will lose a lot of money with Owen Diaz when the jury decides the damages it will have to pay him. The last time a jury did that, Tesla was ordered to pay $136.9 million. Tesla appealed and won the right to a new jury trial on the values. Still, it can prove to be just a temporary victory: nothing ensures the new jury will not define an even higher value, especially with all other lawsuits against the company. Tesla may lose a lot of money with them, too.
The losses may not be as harmful as the reputation damages the lawsuits are causing. There are people already refusing to buy from a company that deals so poorly with these matters. Elon Musk’s purchase of Twitter and his controversial tweets also do not help improve the company’s image, something press relations or marketing departments could try to improve if they existed.
This is the background for all rumors about new Tesla factories. Believing them without the EV maker solving its demand issues, reputation problems, and a poor and old lineup may only make a difference in stock valuation. Tesla investors even tried to sell the idea that Chinese protesters flocking to Service Centers were, in fact, trying to buy new EVs at a discount. Apparently, it helped Tesla shares stop dropping in value while the story was not clarified.
Tesla has a lot of homework to do if it wants to become a $1 trillion company again. Be sure about it: building new factories is not among the necessary steps to get there, even if the rumors eventually prove to be true. New plants only make sense with global expansion and new and attractive products. Nothing else will do the trick.
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