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Tesla's Fremont Factory: 1 Million Cars Per Year in 2020?

Musk said that Tesla may be able to build 1 million vehicles per year using just its Fremont facility and the Gigafactory, a massive battery plant under construction near Reno.

By David R. Baker, San Francisco Chronicle

Tesla Motors plans to shake up its manufacturing team and radically expand production at its Fremont factory, with CEO Elon Musk predicting Wednesday that the company could build 1 million cars in 2020.

That’s double the number of vehicles Tesla previously forecast to build that year, and it represents a major acceleration of the upstart automaker’s plans.

Tesla is scrambling to meet demand for its Model 3 electric car, with more than 325,000 people placing advance orders since the company began taking reservations in April. At the same time, Tesla wants to avoid repeating some of the production problems that slowed the rollout of its last vehicle, the Model X SUV.

Although Model X deliveries began in late September, Tesla managed to build just over 3,000 of the falcon-winged cars by the end of the first quarter. Consumer Reports dinged the Model X for quality problems, and Tesla had to recall the vehicle to fix faulty back-row seats.

Musk said Wednesday on a conference call with Wall Street analysts that the company would soon announce new additions to its manufacturing management. Greg Reichow, Tesla’s vice president of production, will aid with the transition, Musk said. Bloomberg News reported earlier Wednesday that both Reichow and Josh Ensign, vice president of manufacturing, would leave the company.

“I really want to send a message out there to the best manufacturing people in the world, ‘We want you to come join our company,’” Musk said, while thanking Reichow for his work. “Tesla is going to be hell-bent on becoming the best manufacturer on Earth. Thus far, I think we’ve done a good job on design and technology for our products. ... The key thing we need to achieve in the future is to also be the leader in manufacturing.”

Musk added that he has placed his own desk at the end of the production line, with a well-used sleeping bag stashed nearby.

All of Tesla’s cars are currently built at the company’s Fremont factory. Musk repeated Wednesday that Tesla will need additional factories in order to significantly ramp up production, perhaps opening facilities in Europe and Asia.

“We’re going to need more than one plant in North America just to satisfy North American demand,” Musk said.

However, Musk said that Tesla may be able to build 1 million vehicles per year using just its Fremont facility and the Gigafactory, a massive battery plant under construction near Reno.

When the Fremont plant was owned by a joint venture between Toyota and General Motors, its production peaked at 428,632 cars in a single year. So far, Tesla’s use of the rebuilt facility hasn’t come close to that number. By the end of this year’s first quarter, Tesla had delivered 121,820 cars in its entire history.

Tesla has blamed the Model X’s slow start on the car’s complexity, as well as problems with parts suppliers. Musk said Wednesday that the company has designed the upcoming Model 3 to be easier to manufacture. And Tesla has given its suppliers a firm deadline of July 1, 2017, to have the Model 3’s parts available in volume, even though full-scale production won’t start until later that year.

“It’s a date that we need to hold ourselves to and our suppliers to,” Musk said. “It’s like college term papers. There are always late term papers, but you still have to have a deadline.”

Tesla plans to build between 100,000 and 200,000 Model 3 sedans in the second half of next year, he said.

How much Tesla’s manufacturing ambitions will cost remains an open question.

Musk and other Tesla executives on Wednesday declined to estimate the full cost of the company’s accelerated production plans. But in a letter to shareholders, Tesla predicted that its capital expenditures this year will be 50 percent higher than its previous forecast of $1.5 billion. The company on Wednesday reported a first-quarter loss of $282.3 million ($2.13 per share), compared with a loss of $154.2 million ($1.22) in the same period last year.

©2016 the San Francisco Chronicle Distributed by Tribune Content Agency, LLC.