Photo: Tesla | Edited
Tesla's story started in Fremont, where it bought the former NUMMI car factory from GM and Toyota in May 2010. However, it was Giga Shanghai that cemented Tesla's dominance in the EV market, thanks to important production optimizations that changed the auto industry forever.
Tesla started building the first electric vehicles in Fremont in 2012 after buying the old NUMMI car factory from Toyota. Toyota was, at the time, the goddess of car manufacturing. Still, it didn't see fit to continue using the factory after GM withdrew from the partnership in 2009. The Fremont factory allowed Tesla to build the Model S and later Model X, but the EV maker noticed its shortcomings. Building electric vehicles differs from assembling ICE vehicles, something legacy carmakers still failed to grasp.
That's why Tesla reinvented the car manufacturing process, creating the "gigafactory" concept. Gigafactory Shanghai was the prototype of this concept. Giga Shanghai has a different layout than classic car manufacturing plants. Production line optimizations allowed Tesla to cut production costs for Model 3 and Model Y in half compared to Model S and Model X built in Fremont.
The most striking aspect of Giga Shanghai is its footprint, which is noticeably smaller than legacy car plants and even Tesla's Giga Texas. The auto industry specializes in assembly plants with an annual capacity of 300,000-400,000 vehicles, which is considered the optimal production capacity. Giga Shanghai opened with an initial annual capacity of 500,000 cars, with plans to double that. Currently, it's at a yearly capacity of 750,000 units, and 710,000 vehicles were produced here in 2022. That's more than half of Tesla's global production of 1.37 million vehicles.
Under the roof of Giga Shanghai, Tesla operates four major workshops: stamping, welding, painting, and general assembly. Besides those, there are assembly workshops for core components such as batteries and drive units and the Chinese R&D center. The factory layout is optimized for extreme efficiency, producing a car roughly every 45 seconds. The industry average is one every 60-70 seconds, with the fastest car plants making one vehicle every 50 seconds.
Using the "Warehouse on Wheels" logistic system is another crucial factor contributing to the overall efficiency. Tesla didn't build warehouses at Giga Shanghai. Instead, trucks transporting containers of parts and materials offload their cargo directly into the corresponding workshops. More than 2,000 logistic vehicles shuttle back and forth in the factory area every day, and everything is managed through a sophisticated electronic management system. The internal logistics distances are close to zero, as on-site personnel revealed to the Chinese news outlet 36 Krypton.
The final assembly line is the closest thing to how legacy auto builds vehicles. After the body-in-white is painted in the specialized workshop, the door panels are removed, and glass is installed on the door line. The body gets fitted with wiring harnesses and seats, and the car gets the drive units and axles. Finally, the doors are installed. Tesla indicated that its future unboxed-vehicle manufacturing process would further optimize this process, eliminating several steps, such as door disassembly after painting.
Giga Shanghai operates 24 hours a day without interruption, achieving a 30%+ gross margin. The manufacturing process at Giga Shanghai is so cost-effective that Tesla can ship the Model Y produced there to Canada. With all the logistics involved, it's still cheaper than shipping from Fremont or Austin. Giga Shanghai experience will go into Giga Austin and Giga Berlin operations, but none will achieve quite the same efficiency as the Chinese gigafactory.
That's why Tesla reinvented the car manufacturing process, creating the "gigafactory" concept. Gigafactory Shanghai was the prototype of this concept. Giga Shanghai has a different layout than classic car manufacturing plants. Production line optimizations allowed Tesla to cut production costs for Model 3 and Model Y in half compared to Model S and Model X built in Fremont.
The most striking aspect of Giga Shanghai is its footprint, which is noticeably smaller than legacy car plants and even Tesla's Giga Texas. The auto industry specializes in assembly plants with an annual capacity of 300,000-400,000 vehicles, which is considered the optimal production capacity. Giga Shanghai opened with an initial annual capacity of 500,000 cars, with plans to double that. Currently, it's at a yearly capacity of 750,000 units, and 710,000 vehicles were produced here in 2022. That's more than half of Tesla's global production of 1.37 million vehicles.
Under the roof of Giga Shanghai, Tesla operates four major workshops: stamping, welding, painting, and general assembly. Besides those, there are assembly workshops for core components such as batteries and drive units and the Chinese R&D center. The factory layout is optimized for extreme efficiency, producing a car roughly every 45 seconds. The industry average is one every 60-70 seconds, with the fastest car plants making one vehicle every 50 seconds.
The secret ingredient: No warehouses
One of the most critical factors contributing to this high efficiency is Tesla's high-integration model. Almost everything is produced on-site or supplied from a close distance, minimizing time in transit for everything from batteries to seats. The welding, painting, and final assembly workshops are divided into Phase I and Phase II, producing Model 3 and Model Y, respectively. There's only one stamping workshop because the rear underbody of the Model Y uses die-casting, reducing the number of stamped parts.Using the "Warehouse on Wheels" logistic system is another crucial factor contributing to the overall efficiency. Tesla didn't build warehouses at Giga Shanghai. Instead, trucks transporting containers of parts and materials offload their cargo directly into the corresponding workshops. More than 2,000 logistic vehicles shuttle back and forth in the factory area every day, and everything is managed through a sophisticated electronic management system. The internal logistics distances are close to zero, as on-site personnel revealed to the Chinese news outlet 36 Krypton.
The final assembly line is the closest thing to how legacy auto builds vehicles. After the body-in-white is painted in the specialized workshop, the door panels are removed, and glass is installed on the door line. The body gets fitted with wiring harnesses and seats, and the car gets the drive units and axles. Finally, the doors are installed. Tesla indicated that its future unboxed-vehicle manufacturing process would further optimize this process, eliminating several steps, such as door disassembly after painting.
Giga Shanghai operates 24 hours a day without interruption, achieving a 30%+ gross margin. The manufacturing process at Giga Shanghai is so cost-effective that Tesla can ship the Model Y produced there to Canada. With all the logistics involved, it's still cheaper than shipping from Fremont or Austin. Giga Shanghai experience will go into Giga Austin and Giga Berlin operations, but none will achieve quite the same efficiency as the Chinese gigafactory.
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