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Tesla’s Fremont Factory will produce 1,000 Model Ys each week, starting next year, said Baird analyst Ben Kallo

by Eva Fox December 12, 2019

Tesla’s Fremont Factory will produce 1,000 Model Ys each week, starting next year, said Baird analyst Ben Kallo

Baird analyst Ben Kallo recently took clients to Fremont, California, to tour Tesla’s primary manufacturing plant. The electric-vehicle pioneer often allows investors to poke around — supervised — inside its huge factory.

The Tesla plant in Fremont, California, is one of the most advanced automobile plants in the world, with a factory and office area of ​​nearly half a million square feet, and is located on a 150-acre site.

Image credit: Google Maps

Today, more than 10,000 employees work at Fremont. As one of California’s largest manufacturing companies, Tesla stimulated the state’s economy with $5.5 billion in sales and $4.1 billion in direct consumption in fiscal year 2017 alone. In the same year, Tesla also created 51,000 jobs in California, including employees working directly with Tesla and employees from various suppliers.

Tesla continues to supply more and more cars to customers around the world and is always striving to achieve the highest possible level of knowledge with every car they make in Fremont, where most of the car components are also made.

There is a lot going on in Tesla these days, and Baird’s visit was timely. Understanding what is happening in Fremont can help investors plan the company's cost path, as the Tesla product line and global manufacturing presence become more complex.

According to Ben Kallo of Baird, who recently toured the Tesla factory in Fremont, starting next year, Tesla's main plant will produce 1,000 Model Ys every week. Model Y is a very important car for Tesla.

Image source: Theedgemarkets

This is due to the fact that the Y model is a smaller SUV, which is a very important part of the automotive market. And important to investors, Callo believes Model Y will make Tesla (TSLA) more profitable.

The Model Y is by far the most important vehicle Tesla has planned so far.
Tesla has basically been depending on the sedans -- the Model S and Model 3 -- for the overwhelming majority of its sales. But US car buyers have been moving away from sedans at top speed -- and towards SUVs. "It's the body style of choice," said Michelle Krebs, senior analyst with Cox Automotive.


US sedan sales have fallen sharply, down 40% in just the last five years. Most of those sales have shifted to SUVs. But so far Tesla's only SUV is the Model X.

Elon Musk has suggested that the Model Y will have sales about 50% above those of the Model 3, maybe double. If he achieves that, the Model Y will have a chance to become the bestselling SUV of any kind — gas or electric — in the United States.


Image: CleanTechnica

It's also the segment of the market where established automakers are concentrating their electric vehicle offerings. So if Tesla is going to be able to respond to the growing lineup of electric cars from other manufacturers, it's going to need SUVs.

Krebs said even with the competition from other electric SUVs, the Model Y will be well positioned in the market due to Tesla's reputation. "The one thing no one can compete with Tesla on is the mystique of the brand," she said. "When we look at consumer perception of various brands, there is no one that comes close on brand strength. It's very aspirational." That's why the Model 3 has been able to buck the trend of moving away from sedans, she said. "They [customers] buy it not because they want a sedan, they buy it be because it's a Tesla they can afford," she said.

While Tesla has yet to give any details on Model Y pricing, it is expected to eventually be available for just under $40,000, far closer to the Model 3 than the Models S and X.




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