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1) In light of today’s announcement of a new Berlin factory and the soon-to-be-producing kilofactory in Shanghai, I thought it might be helpful to review $TSLA’s track record when it comes to cost leadership, in particular, labor efficiency.
2) The 2018 progress report provided to the state of CA under the CAEATFA program provides some employment details that allow us to analyze labor productivity by quarter throughout 2018. Thank you to @Plainsite for making this data publicly available. https://twitter.com/PlainSite/status/1192967294873268225
3) The standard measurement for auto industry labor is hours per vehicle (HPV). By this measure, the Model 3, once they got to volume production in 2H’18, was ~44 HPV. Model S/X, which are known to be basically hand-built, are at 150 HPV.
4) I’ve been out of the industry for a few years, but world class plants used to be well under 20 HPV and even the worst plants were below 25 HPV. The S/X #’s aren’t wholly surprising, but to see $TSLA this inefficient on the 3 is shocking. It’s simply not competitive.
5) I’ll also note this analysis assumes no overtime, which would make the metrics even worse. $TSLA does produce some in-house stampings and seats that may skew the #’s, but the impact wouldn’t be enough to get them much below a still laughable 40 HPV.
6) Also of note, the numbers provided to regulators don’t match what $TSLA communicated to investors in its Q4’18 investor letter. The HPV improvement was 2%, not 20%. Somewhere along the way, they misplaced a decimal.
7) A final observation relates to overall assembly labor costs. Exiting 2018, this represented only 5% of $TSLA’s automotive COGS. There’s room for improvement on the 3, but every 10% of add’l productivity adds only $10mm to profit–meaningless when profit can swing $500mm QoQ.
