Tesla retools car factory for electric SUV build

A Tesla Model S outside the California factory. Dealing with Toyota engineers made for a troubled relationship with the Japanese car making giant. Photo / AP

Tesla Motors, the youngest US carmaker, has halted production at its sole assembly plant for the first time for a revamp the company said is necessary to speed Model S output and prepare it to make electric crossovers.

Work to reconfigure the production floor at the Fremont, California, facility began on Monday and vehicle assembly resumes on August 4 with a goal of boosting production by 25 per cent, Simon Sproule, a Tesla spokesman, said in an interview. Upgrades mainly involve modifications to the factory's body and general assembly lines and will cost about $100 million, he said.

"This represents the single biggest investment in the plant since we really started operations and enables us for higher volumes," Sproule said by phone on Monday. "It gets us ready to build X and to do it on the same line as the S."

Tesla CEO Elon Musk also leads rocket maker Space Exploration Technologies. Photo / AP

Chief Executive Officer Elon Musk, who also leads rocket maker Space Exploration Technologies, has said he wants Tesla to deliver at least 35,000 Model S sedans to global customers this year, a jump of about 56 per cent from 2013.

The Palo Alto, California-based company's expansion is led by the start of shipments to China and Britain in the second quarter, followed by deliveries to Hong Kong, Japan and Australia in the year's second half.

Tesla, which charges from $71,000 for its Model S in the US, was producing almost 700 units per week at the end of the first quarter with a goal of increasing that to 1,000 later this year, Musk said in a May 7 letter to investors.

Weekly production at the plant was approaching 800 units ahead of the current project, Sproule said. Musk in May had said the upgrades would idle plant production for about 10 days in July.

"I'm sure with the popularity of the vehicle and need for production and the fact that it's the sole production facility they are laser-focused on changing over and revamping it as quickly as they can," said Michael Robinet, a managing director at IHS Automotive in Southfield, Michigan.

Tesla Motors CEO Elon Musk.

Fremont, which also makes the car's lithium-ion battery pack and motor, needs to be modified to start building Model X sport-utility vehicles later this year, Sproule said. Pricing for the battery-powered light truck, which ships to customers early next year, hasn't been announced yet.

During the retooling period, assembly workers can take vacation time or come to the plant for maintenance and training shifts, Sproule said. Tesla is California's largest automotive employer with more than 6,000 people working at its plant, headquarters, design center, stores and service facilities.

Tesla's modifications this month affect the sole auto-assembly plant on the West Coast. The San Francisco Bay Area factory opened in the early 1960s as a General Motors plant and then operated for 25 years as a joint venture between GM and Toyota, a Tesla shareholder, until 2009.

When Toyota President Akio Toyoda arranged for Tesla to buy the plant for $42 million in 2010, he gave the facility a new life and helped Musk start Model S production in 2012.

Tesla Model S.

Tesla is revamping Fremont as it prepares to announce locations where it will start initial construction of a battery Gigafactory. The company has said it's studying sites in Arizona, California, Nevada, New Mexico and Texas for the plant that will cost as much as $5 billion to build and eventually employ as many as 6,500 people. Musk said the plant is needed to cut the cost of lithium-ion cells at least 30 per cent.

Sproule declined to say when the company will announce a decision on where it wants to build the factory.

Cheap batteries are essential to Tesla's goal of selling its Model 3 sedan by 2017, a smaller electric car with a base price about half that of Model S. The plant will also make battery packs for homes and businesses to store power from solar panels to reduce use of electricity from utilities.

"As they move forward and add more vehicles additional complexity will create more challenges," Robinet said. "Given what they had to do they've done a very good job. They are putting together very complex machines."

The company is to release second-quarter results, including revenue from initial sales in China and Brigain, on July 31 after the close of New York trading.

- Bloomberg