Tesla Fremont Factory Tour and Test Drives Impress Morgan Stanley

Morgan Stanley analyst Adam Jonas toured Tesla’s Fremont Factory on Tuesday, where he test-drove the Model 3, Model Y, and Model S Plaid, and also met with the company’s Investor Relations (IR) division (via @SawyerMerritt).

NEWS: Morgan Stanley analyst Adam Jonas toured the Tesla Fremont Factory on Tuesday March 15th, test drove the Model 3, Model Y and Model S Plaid and attended a meeting with IR.

Here are his key bullet points (thread):

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— Sawyer Merritt (@SawyerMerritt) March 16, 2022

The following are Jonas’ key takeaways from his tour of the Fremont factory:

1. The Tesla Fremont plant is ‘bustling’ to say the least.
2. Tesla is demonstrating strong pricing power. 
3. Raw material impacts is felt, but not at the rate of pricing increases. Raws aren’t keeping Tesla up at night right now. Chips are actually a bigger concern in real time. 
4. Capacity & Margins — Tesla reiterated to Jonas that it plans to be “comfortably above 50%” volume growth with or without Gigafactory Berlin and Gigafactory Austin going online.
5. Full self driving impact — Once Tesla releases an updated city-wide FSD, its margins will get a significant boost.

Jonas noted that the Fremont plant was never designed to produce the 450,000 units per year that Tesla pipes out of it, which is evident from the lack of space at the facility and how cramped and busy it is during all hours of operation. Before Tesla took the plant over from Toyota, it only eked out 300,000 units per year even at its peak.

Tesla is the first to admit that there are a plethora of logistical inefficiencies at its Fremont factory and that its design isn’t as compatible with Tesla’s workflow as the linear journey its vehicles take across the assembly line at its Shanghai Gigafactory, but the facility nonetheless makes up a huge chunk of Tesla’s global production capacity. In 2021, Tesla delivered close to one million vehicles across the globe.

Back in January, Jonas upgraded his Tesla price target to $1,300 USD per share from a previous target of $1,200. At the time of writing, Tesla stock is trading at $840.23 USD per share, up 4.78% in the day.