Tesla has just started bulking up their parking lot of the Fremont factor with brand new Model Y’s. Earlier last year Elon Musk reviled their brand new SUV, Model Y. Tesla’s Model Y is based on the Model 3 and it has up to 300 miles of range. Along with the announcement of the car, Tesla predicted that Model Y deliveries would start in the fall of 2020.
The automaker has made progress much faster than they promised. Last month when presenting the earnings result Tesla, too many peoples surprise, announced that production has started in the Fremont factory in California.
Model Y Deliveries to Start Next Month
Tesla has amazed us all in declaring that the Model Y deliveries would start just one year after the unveiling of the car. Questions arose regarding why the production started and why Tesla did not start delivering the vehicle. We now have pictures of a parking lot close by the factory in California filled with newly produced Model Y’s. This is a parking lot used by Tesla before to prepare for deliveries.
This also lies in accordance with their announcement earlier this year that they have confirmed the Model Y deliveries to customers in the United States. 15th – 30th of March is the proclaimed delivery window promised by the automaker. This means that the deliveries probably will start in the second half of next month.
Tesla has a history of delivering their vehicles as soon as production starts. The logic behind this strategy is being able to bring down the warehousing cost. This means that Tesla does not generally like to sit on their inventory for too long.
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This seems to have changed slightly with the production of the Model Y. Starting production close to two months ahead of delivery will force Tesla to hold inventory for a longer time. This is also confirmed by the pictures showing the bulk of cars just outside of the factory.
From an economical standpoint pushing down warehousing costs makes complete sense. So why have Tesla changed up their strategy?
There are a few reasons why Tesla would do this and one possible option is what you might call ”Low Rate Initial Production”. This strategy allows the automaker to produce cars in smaller volumes, check if there are any flaws in the production and if so, make the necessary adjustments. When the car is up to mass production standards they can ramp up the production scale and deliver vehicles without faults.
But why did they not do this with the Model 3? The reason for this because when they produced the Model 3 they were in more need of cashflow. Now when producing the Model Y they do not need the immediate injections of cash which allows them to fix all the problems with the production.