Tesla Reducing Production Hours for the Model S & Model X

resource from: Bloomberg News   

Robots assembling parts of the Model S at Tesla's Fremont, California assembly plant

Electric automaker Tesla is cutting production hours for the Model S sedan and Model X SUV, a move which raised concerns about falling demand for the company's most profitable models.

Tesla has significantly lowered daily production targets for both the Model S and Model X, according to Bloomberg, who spoke with current and former employees who asked not to be identified discussing plans that aren't public. A Tesla spokeswoman confirmed that the company had reduced production hours for both models.

"We recently announced that we are no longer taking orders for the 75 kWh version of Model S and X in order to streamline production and provide even more differentiation with Model 3" Tesla said in an emailed statement to Bloomberg News. "As a result of this change and because of improving efficiencies in our production lines, we have reduced Model S and X production hours accordingly."

Tesla said the decision was linked to Chief Executive Officer Elon Musk's announcing that the company would stop accepting orders for entry-level versions of the Model S and Model X starting Jan 14. The entry level versions were equipped with a lower-priced 75 kWh battery pack which offered 259 miles of range. The P100 Model S delivers up to 335 miles of range.

However, the Model S and X models equipped with the optional 100 kWh battery are considerable more expensive than the base version. The Model S P100D starts at $94,000 before any incentives. When ordering the car, a customer can add the optional advanced Autopilot autonomous driving feature for an additional $5,000 raising the price to $99,000.

There was at least a $15,000 difference between the 75D and longer-range 100D editions of the models at the time of Musk's tweeted announcement on Jan 9. The Model S 75D is no longer advertised on Tesla's website.

The Mid-Range Tesla Model 3 starts at $44,000 with a 259 mile range.

The move creates a greater price difference between the Mid-Range Model 3, which starts at $44,000 and the $94,000 Model S. The $35,000 base Model 3 long promised by Musk is still not available. Instead, Tesla decided to offer the more expensive Long-Range and Performance versions first to reservation holders.

Increasing the cost of the Model S might lure more buyers to the more-affordable Model 3.

Over 400,000 people put down deposits for the Model 3 when Tesla opened reservations in March 2016. Production of the mass-market car began in July 2017. Many reservation holders have been waiting since then for the $35,000 entry-level Model 3, which is still not available. According to Tesla's website, the entry level version will be available in 4 to 6 months.

Representatives for Tesla declined to comment beyond the statement, including about whether actual production rates of the Model S and Model X have been reduced. Meanwhile,  Tesla continues to ramp up production of the Model 3.

The automaker built 61,394 Model 3 sedans in the fourth quarter of 2018, more than it did in the entire year of 2017, along with a combined total of 25,161 Model S and Model Xs.

The announcement follows Musk's announcement last week that Tesla would cut 7 percent of its workforce as a cost cutting measure. The CEO said the layoffs were necessary because the company still makes vehicles that are far too expensive for most consumers and its profitability will come under pressure as deliveries of lower-priced Model 3's increase.

Tesla is also facing increasing competition from more established automakers that are set to introduce their first fully-electric models this year. Among the upcoming electric models are the Audi e-tron, Porsche Taycan, Chevy Bolt and Jaguar I-Pace SUV.

Tesla shares dropped 4.3 percent today in New York trading after earlier sinking as much as 5.8 percent to $281.69, the lowest intraday price since Oct. 23.

resource from: Bloomberg News

FutureCar Staff