Tesla Fremont factory prepping for model Y production, model S update

Elon Musk, co-founder and CEO of Tesla Inc., speaks during a revealing event for the Tesla Model Y crossover electric vehicle in Hawthorne, California, USA, Friday 15th. March 2019.

Patrick T. Fallon | Bloomberg | Getty Images

Tesla raises its automotive factory in Fremont, California, to make room for the production of the Model Y crossover SUV, as well as an update of the Model S with a more minimalist interior design and longer battery voltage according to several current and former employees.

These measures can increase the cost again for Tesla, just as CEO Elon Musk has promised to review every 1[ads1]0th of outgoing expenses personally. But the start of the model Y production in 2019 will allow Tesla to tap into the growing SUV segment faster than later, while a model S update will help maintain or increase its share in the falling luxury sedans market.

The company has barely started placing orders for new equipment to produce model Y, employees said. And while Musk has suggested that Tesla would probably do the crossover SUV in Fremont, Tesla has not officially announced that preparations at the factory had begun.

Making use of model Y production in Fremont will require Tesla to combine model S and model X production in one line, according to the insides. These lines on the car plant take up a considerable amount of floor space today, at least partly because S and X are made of many parts. Model X is particularly complicated to build – its features include the fallow door that opens, rather than the deriving Musk to resemble a "Faberge egg".

In addition to model Y, Tesla is planning a complete model S update, which employees say will probably include an interior with the minimalist look of newer model 3, the same drives and seats used in the higher model 3, and one battery that delivers 400 miles of

Tesla did not respond to several comments requests.

Tesla recently canceled factory tours because of "upgrades" being made at the factory, according to Musk, who did not say exactly what these upgrades meant.

At the same time, production has already reduced today's S and X models. In the first quarter of 2019, Tesla launched part of its Model S and X production personnel and cut hours for those left behind, as CNBC previously reported. Today, Tesla only produces S and X during the day shift in Fremont. There is no weekend or night production of these cars today, according to current and former employees.

Last week, Tesla reduced Model S prices by $ 3,000 and Model X by $ 2,000, rolling out a free supercharging incentive to lure customers, causing some analysts to question whether demand is softer for these older, more expensive models. This follows a set of upgrades in April that improved the driving range and charging speed of both cars.

On investor talks recently, Tesla ruled that it would deliver 90,000 to 100,000 cars in the second quarter of 2019, and at least 360,000 in 2019. It has not said how many of these would be model S, X and Model 3 vehicles or finally Model Ys.

Tesla shares fell more than 10% last week on investors' concerns over the demand, profitability and impact of trade disruptions between the US and China on the company. They recovered a little after an e-mail leaked where Musk promised Tesla was on target to meet its goals in the second quarter.

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