LNG: TESLARATI

Footage recently taken of Tesla’s Gigafactory 3 in Shanghai’s Lingang Industrial Area has revealed that construction work in the site continues 24/7. The rapid work in Gigafactory 3 has enabled the project to progress quickly, with numerous posts and even roofing being constructed in some areas of the site.

Despite the darkness of the night, Gigafactory 3 was ablaze with activity, with heavy equipment operating on several areas of the 864,885-square meter lot. Numerous workers could be seen working on the first structure under construction, which is widely expected to be a general assembly building. Large trucks also traveled to and from the facility, seemingly transporting soil being excavated in areas of the Gigafactory 3 site.

The latest video (credit to 烏瓦 who shot the footage on March 25, 2019) from Tesla’s Gigafactory 3 highlights the speed and efficiency that is made possible when an ambitious timeline is taken seriously by a workforce that specializes in quick, surgically-precise buildouts. The upcoming battery and electric car factory is expected to be in operation later this year, and to make this possible; an expedited timeframe needs to be adopted. This is exactly what appears to be happening in the Gigafactory 3 site. At this point, there is no doubt that Gigafactory 3’s construction is hitting overdrive, and China’s formidable construction workforce is being mobilized fully.

Much of the progress in the Shanghai lot could be attributed to the capabilities and efficiencies of China’s construction workforce, which has a reputation for completing even large-scale projects in record time. Just recently, a surveyor from Gigafactory 3 reportedly noted that the facility in itself is being built like building blocks, which would allow Tesla’s construction partner, China Construction Third Engineering Bureau Co., Ltd. (a subsidiary of government-owned China Construction) to complete the project quickly. A worker from the site also mentioned previously that work in the upcoming factory is ongoing 24/7.

Earlier this month, Shanghai official Chen Mingbo noted that Gigafactory 3’s initial construction should be completed by May this year. Since that announcement, the Gigafactory 3 site has pretty much transformed from a marshy, muddy plot of land to a massive, partly paved place that is consistently abuzz with activity.

Gigafactory 3 is key to Tesla’s push into China. While the company appears to be moving a lot of Model 3 this quarter, the only variants of the electric sedan available in China today are the high-end versions such as the Long Range RWD, Long Range AWD, and Performance Model 3. Affordable versions of the Model 3, as well as the upcoming Model Y, will be produced in Gigafactory 3, which will allow Tesla to price the affordable, mass-market vehicles competitively against local offerings.  

Watch the construction of Gigafactory 3 continue well into the night in the video below.

A securities fraud lawsuit filed by shareholders against Tesla in 2017 claiming misleading comments previously made about Model 3 production readiness has been dismissed by U.S. District Judge Charles Breyer of the Northern District of California. This is the second time the shareholders’ lawsuit was dismissed, the first being last August in favor of an amended filing.

Judge Breyer’s decision cited that Tesla’s “repeated warnings about Model 3 production risks” including CEO Elon Musk’s references to “production hell” amounted to an ignorance of the facts by the plaintiffs claiming fraud.

The class-action lawsuit was filed by two investors, Kurt Friedman and Uppili Srinivasan, and alleged that the company, Musk, and two of its Chief Financial Officers intentionally misled shareholders about the progress of Model 3 production in 2017 when the all-electric car maker was “woefully unprepared” for the manufacturing demands. At that time, Tesla had a large backlog of orders and only delivered the first Model 3 cars in July 2017 while aiming for a 5,000 per week production rate by the end of the year.

Friedman and Srinivasan claimed Tesla made “false and misleading statements” about being able to produce 5,000 Model 3 vehicles weekly by the end of 2017, and that investors were negatively impacted by the market response to the missed goal. Class-action status was sought for shareholders who had purchased Tesla stock between May 3, 2016 and November 1, 2017.

Tesla, however, had already admitted to shareholders in October 2017 that the Model 3’s production ramp was behind schedule, causing $TSLA stock to plunge from $350 to about $300. The weekly goal of 5,000 Model 3’s produced was not actually met until June 2018, but Tesla was transparent about the process challenges in meeting that number, as decided by Judge Breyer in his dismissal.

The skirmish between Elon Musk and the Securities and Exchange Commission (SEC) continued on Monday, with the agency calling on NY Judge Alison Nathan to make a decision on the case without holding a hearing for the Tesla CEO. The SEC’s latest request comes on the heels of Musk’s response last Friday, when his legal team noted that the agency’s position is “wrong at virtually every level.”

The SEC argued in its recent request to the NY judge that there is no ambiguity to the terms of the settlement it reached with Musk last year. The agency accused the CEO of muddling the matter at hand due to his “selective omission of certain settlement communications” in his team’s filings last Friday, where Musk defended his actions.

With these factors in mind, the SEC noted that Judge Nathan should be able to decide whether Musk violated the terms of his settlement or not without holding a hearing. “There are no material issues of disputed fact,” the SEC wrote. The SEC added that it was willing to provide more written information on its settlement negotiations with the Tesla CEO if Judge Nathan needs additional information.

It should be noted that the SEC’s recent request was filed after Musk’s legal team submitted a response last Friday. Musk’s lawyers did not hold back in their criticism of the SEC, stating that “The key question is whether Musk complied with Tesla’s Policy, not whether the SEC is satisfied with Tesla’s Policy.”

Musk’s team argued that the SEC laywers misinterpreted the deal he struck with them last September, stating that “the SEC’s reply makes clear that its effort to hold Musk in contempt relies on a radical reinterpretation of the Order that would impose sweeping restrictions to which Musk never consented.” The lawyers also noted that the information listed on Musk’s tweet, which estimated that Tesla would produce around 500,000 vehicles in 2019, was already public information following the CEO’s similar estimates in the first quarter earnings call.

“Musk’s belief that his tweet did not require pre-approval was correct. Every hallmark of immateriality is present: the tweet restated previously-disclosed information, used generalized terms, was aspirational and optimistic, and caused no reaction in after-hours trading,” Musk’s legal team wrote.

The SEC and Elon Musk’s latest row resulted from a tweet posted by the CEO on February 19, when he noted that Tesla made no cars in 2011, but will make “around 500K” this year. Musk later explained his tweet in a follow-up post, stating that the 500,000 estimate was true for the annualized run rate for Tesla’s 2019 production. The SEC seized on the opportunity, stating that the tweet was a violation of Musk’s settlement last September since it contained material information to the company and its shareholders.

In its request to hold Musk in contempt of court, the SEC pointed out that the February 19 tweet was not reviewed by corporate authorities. Musk, for his part, has argued that the SEC is “over-reaching” in its reactions against him, considering that the information he presented was a reiteration of public information, and it did not affect Tesla stock at all.

Tesla stock (NASDAQ:TSLA) dropped to nearly 5-month lows on Monday, trading as low as $256.02 per share, the lowest since October 22, 2018. The drop in the electric car maker’s shares transpired amidst Wall St’s continued concerns over alleged Model 3 demand issues and Elon Musk’s recent initiative to raise the price of Tesla’s inventory vehicles by ~3%.

RBC analyst Joseph Spak recently cut his price target for Tesla shares by $35 to $210 each in a note published on Monday. Spak trimmed his Q1 2019 Model 3 delivery forecasts to 52,500. This number is 4,500 less than Spak’s previous estimates over what he cited as “meager demand” for the electric sedan. Apart from Spak, JMP Securities analyst Joseph Osha lowered his price target for Tesla by 3% to $394 per share. Osha cites the US market’s weakness and Tesla’s closing of its galleries as among the drivers behind his more conservative stance, though the analyst noted that JMP continues to believe in Tesla’s long-term narrative.

“As we have moved through the first part of 2019, it is becoming apparent that Tesla’s efforts to pull demand into 4Q before the federal tax credit expired worked well, perhaps better than the company had planned. Indeed, based on our analysis we are not sure that U.S. demand will return to 4Q18 levels at any point this year. It is worth reiterating that our investment stance on Tesla has always been based on the potential the company has to make competitive gains over time. The undeniably challenging environment that Tesla faces at the moment is not enough to impact our fundamental stance on the company and its prospects,” Osha wrote.

Concerns about the Model 3’s weakening demand might be overblown, especially considering that Tesla is currently focusing its push for the vehicle in territories outside the United States. This is a key point that seems to be neglected in recent mainstream analysis of the company’s strategy this quarter, as revealed in a recent piece on Model 3 demand from The New York Times. Citing new-car registrations compiled by the Dominion Cross-Sell Report, which concluded that new Tesla registrations “fell significantly” in the 23 US states covered in the report, the publication suggested that the numbers are a worrisome sign for the electric car maker.

While the NYT‘s hypothesis with Tesla’s lower registrations in the US should not be discounted, the company’s lower registration numbers could be explained by Tesla simply not delivering as many vehicles in the United States this quarter compared to Q4 2018. Since January, Tesla has been pushing the Model 3 to Europe and China, two markets that have been waiting for the electric sedan. This is a notable contrast to Tesla’s strategy in the fourth quarter, when all of its production and deliveries were focused in North America. Until Tesla reveals its delivery figures in Europe and China on its Q1 2019 production and delivery report, it seems too early to make assumptions about the sedan’s overall demand, or lack thereof.

To be clear, this doesn’t affect Tesla website order prices. Existing inventory prices are currently slightly lower than on website. This will bring them in line.

— Elon Musk (@elonmusk) March 24, 2019

Tesla is nearing the end of Q1 2019, and the company is putting all hands on deck. A recently shared email from Elon Musk has revealed that the CEO is urging the company’s employees to shift their focus on delivering cars to customers, regardless of their role. Musk was optimistic in his message, stating “This is the biggest wave in Tesla’s history, but it is primarily a function of our first delivery of mass manufactured cars on two continents simultaneously, and will not be repeated in subsequent quarters.” Musk has also announced that Tesla is increasing the price of inventory cars worldwide by ~3% on April 1. The changes would not be affecting the current prices of Tesla’s existing vehicles, and is only intended to bring the costs of inventory cars in line.

As of writing, Tesla shares are starting to recover, trading down 1.18% at $261.41 per share.

Disclosure: I have no ownership in shares of TSLA and have no plans to initiate any positions within 72 hours.

Drone footage captured this past weekend of Tesla’s expansive facility in Lathrop, CA has revealed that the yet-to-be-announced site is nearing completion.

The latest footage of Tesla’s Lathrop facility, which is widely speculated to be used as a parts distribution center, comes courtesy of Troopr1023, who previously conducted a drone flyby over the location last January. Based on videos taken this past weekend, the site’s truck-sized loading bays are practically complete. Glass windows are set up, and air conditioning units have been installed as well. It appears that the only work left to do on the site is to paint its facade and finish up its interior.

Apart from the progress of the Lathrop site’s construction, also noticeable in the recent flyby videos is the presence of what appeared to be several new car carrier trucks that were stationed at a lot near Louise Avenue. Together with the bright red trucks were a number of Tesla Model S, X, and Model 3. Quite interesting is the presence of what seemed to be Model S equipped with metal roofs, an option that has already been retired by Tesla.

Tesla is yet to reveal the nature and purpose of the Lathrop site, though job postings related in the area suggest that the 870,000 square foot facility will be used as a distribution center for electric car components. Among these available positions was for a Supervisor for Parts & Service Warehouse, whose job description seemed to be directly referencing the site. “Tesla is looking for a motivated and experienced Supervisor for our highly dynamic parts distribution center in Lathrop, CA,” the job listing read.

The establishment of a parts distribution center in Lathrop, CA will be critical to the company’s expansion of its service network and the continued ramp of the Model 3. With more and more vehicles on the road, it will be pertinent for Tesla to establish a system that will allow it to provide ample parts for repairs and maintenance of its ever-expanding fleet. The presence of a massive, dedicated site for parts distribution just 60 miles east of the Fremont factory will help the company in this sense.

Tesla has kept a notable presence in Lathrop for some time. Apart from the massive building, Tesla also owns a 500,000 square foot building that was previously used by Chrysler as a parts distribution center. Lots in the area are also used by Tesla as loading hubs for vehicles that are being delivered to other areas.

Watch the latest videos of Tesla’s Lathrop site below.