Elon Musk rarely shies away from setting bold targets for Tesla, despite a mixed record for achieving them when promised. So it was in character when he announced the electric-car company’s first Chinese Gigafactory could be operational in about 11 months.
“We’re looking forward to hopefully having some initial production of the Model 3 towards the end of this year and achieving volume production next year,” Musk said at the Shanghai groundbreaking January 7.
He may be disappointed.
There’s no precedent for building a large, modern auto-assembly plant and starting its production in under a year, manufacturing experts say. In fact, even Tesla’s official goal of ramping up to 3,000 Model 3 electric sedans per week at some point in 2020 won’t be easy.
“Unless he’s mastered some approach that I’m not aware of to do everything in a more effective and efficient way, that lead time to build is going to be really challenging,” said Laurie Harbour, CEO of manufacturing consultant Harbour Results Inc. in Southfield, Michigan. “It definitely seems completely optimistic.”
Musk’s motivation to rapidly localize Tesla’s operations in China is as simple as legendary criminal Willie Sutton’s apocryphal maxim about banks: That’s where the money is. China is the world’s largest electric-vehicle market, where sales of rechargeable vehicles likely reached about 1 million units in 2018. That’s why Tesla’s capacity target for its Shanghai Gigafactory when fully ramped up is 500,000 vehicles annually.
Tesla begins delivering Model 3s to China in March, but its China sales are restrained by a 40% import duty on foreign-built autos (China last month moved to cut that to 15%). Along with the Model 3, the Shanghai plant is also to eventually produce Model Y electric crossovers that can be sold to Chinese customers with no added tariff.
But first Tesla has to build that plant.
It typically takes at least two years to get a large new auto factory ready to churn out vehicles, according to Brian Jones, COO of Lexington, Kentucky-based Gray, an engineering firm that’s built nearly 450 auto and parts plants in North America over the past five decades for companies including Toyota, Volkswagen, General Motors, Mercedes-Benz, Nissan and Volvo.
“From the first shovel in the ground to the first vehicle rolling off an assembly line, the fastest we’ve ever seen is 24 months, which is typically a project you see from one of the more mature, experienced manufacturers,” Jones says. “That schedule can go all the way up to 36 months.”
That includes building the factory structure itself, as well as infrastructure in and around the site, including utilities, roads and exit ramps in place.
Tesla secured the 210-acre site in Shanghai’s Lingang area last year for about $140 million, and Musk said the cost of the initial phase to get the facility up to 250,000 units of annual capacity would be about $2 billion. (Analysts estimate that getting the plant to Tesla’s half-million-unit capacity goal may total $5 billion.) The local Shanghai government is helping expedite the project in terms of permits and supporting infrastructure, and Tesla says lessons learned from Model 3 production at its Fremont, California, plant mean it can accelerate Chinese Gigafactory construction.
Still, Musk’s comments were at odds with those he made in a July statement issued by the Shanghai Municipal Government about the plant’s timetable. Once permits and other preparations were set, “it will take roughly two years until we start producing vehicles and then another two to three years before the factory is fully ramped up to produce around 500,000 vehicles per year for Chinese customers,” he said.
By October 2018, however, he’d begun describing the accelerated timetable. “We’re driving to have Model 3 production for the China market or the Greater China market active certainly next year. It will be happening next year,” he told analysts during Tesla’s third-quarter results call.
“Things work differently in China, so the North American experience (for building a new plant) may not translate exactly there,” said Kristin Dziczek, who studies industry, labor and economics as a vice president at the Center for Automotive Research in Ann Arbor, Michigan. Local government assistance will certainly help, “but this does seem really, really aggressive,” she said.
Reproducing the design and robots used for the Model 3 assembly line in California will speed things up, according to consultant Harbour.
Tesla also has to certify new suppliers in China, which is very time-consuming. Auto-assembly plants are “such a big system, and it’s such a gamble from launch of construction to starting to build (vehicles). Everything has to fall in line as planned in order for it to execute in that kind of timing. And to do it in 11 months, every star in the universe has to align for that to happen,” Harbour said.
Gray hasn’t built any of Tesla’s facilities nor has it built plants in China, but it is exploring consulting opportunities there, Jones said.
So could one of the top auto plant builders in the U.S. get a “greenfield” production site ready in under 12 months?
“We love a challenge, but that would be a stretch,” Jones said.
Airbnb Leads $160 Million Investment Into Hospitality Startup Lyric
Airbnb is the lead investor in a new $160 million funding round for hospitality startup Lyric. The $30 billion home-sharing platform was joined by a host of major players in real estate including new investors Tishman Speyer and RXR Realty, as well as existing investors FifthWall Ventures and Starwood CEO Barry Sternlicht.
The Series B financing is about 50% debt and brings Lyric’s total funds raised to $185 million. The San Francisco-based startup declined to discuss its valuation.
Lyric’s model is similar to the one WeWork popularized for shared offices. Lyric leases a full floor of an apartment building from the landlord, fills each unit with Instagram-friendly furnishings, and then rents them out like hotel rooms. The company makes money off the spread between what it pays in rent and what it charges travelers.
“The supply and demand of real estate used to move in a rigid cadence. It was like the old Henry Ford quote ‘you can have a car in any color you want as long as it is black,’” says Rob Speyer, CEO of developer Tishman Speyer. “To be competitive in 2019, real estate must offer flexibility to the customer, just like any other business.”
Lyrics average nightly rate is $220. Travelers can book one of 500 “suites” through the company’s site or on rental marketplaces like Airbnb. They can stay for as few as two nights or try to beat the record of 304. Every Lyric apartment includes a Casper mattress, Frette linens and toiletries from Malin + Goetz. Units feature local touches like Delta blues records in Chicago, Ed Panar photos in Pittsburgh and Cultivar Coffee in Dallas.
“We have seen how hospitality entrepreneurs like the team at Lyric can help deliver amazing experiences and help guests feel like they can belong anywhere in the world,” Greg Greeley, Airbnb’s president of homes, said in a release announcing the investment. Lyric plans to use the new funds to grow to 2,500 units in 12 months.
For real estate owners, having Lyric absorb units can help get a new rental building to full occupancy faster. Lyric says it pays market rate for the apartments it uses. CEO Andrew Kitchell argues access to guest suites can also be marketed as an amenity for traditional, long-term tenants. His company’s presence, Kitchell reasons, eliminates the need for a spare bedroom or keeps a sibling from sleeping on your couch.
“We believe having some percentage of our buildings as shared hospitality, if done right, would be a very valuable addition,” says Scott Rechler, CEO of RXR, which is developing 6,000 residential units. “Merchandising them with multiple products that can meet different customers’ needs will make the communities more vibrant.”
Of course, not everyone likes the idea of random travelers coming and going as they please. Niido, another Airbnb-backed startup, experienced pushback when it took over management of a Florida apartment building and promised to help residents rent our their spaces short term.
Kitchell, who has worked in real estate technology since 2009, cofounded Lyric in 2014 with president Joe Fraiman. In 2011, Fraiman founded Tastemaker, a interior design startup.
-Samantha Sharf; Forbes Staff
Controlling The Ledger: The World’s Largest Financial Firms Embrace Blockchain
Ask nearly any leading banker or financial executive to go on the record about blockchain, and you are liable to hear crickets. After all, it’s an industry built on trust and stability and crypto’s recent legacy of volatility and even fraud has tainted the topic.
It’s ironic because, behind the scenes, few industries are eagerly working on blockchain projects as feverishly as financial services firms are. Bank of America, for example, has filed nearly 60 blockchain patents. Yet it refused to speak to Forbes about its dive into distributed ledger tech. JPMorgan’s CEO Dimon famously threatened to fire any employee caught trading bitcoin. Today it is developing its own digital token.
The world’s largest, most centralized and most powerful institutions are now embracing the technology designed to unseat them because they realize that at its, core blockchain is just lines of code that simplify accounting and record keeping. For hundreds of years, bankers have exhibited mastery in ledger keeping and they have no intention of giving that up.
Our inaugural Blockchain 50 list is dominated by financial firms. From BNP Paribas and Citigroup to Nasdaq to Mastercard and Visa, the biggest names in global money are making strides in blockchain testing and adoption.
They’re using the technology to speed up settlement times and interbank payments, simplify processes that still rely on paper and fax machines, and improve security measures with the goal of both saving time and money now and creating new ways to make a profit in the future.
Fidelity, which now has 100 employees devoted to digital assets, has launched a digital asset custody service for institutional investors and is already building a trading platform for purchasing crypto. PNC bank is using Ripple’s blockchain software to process international payments.
Santander is already collecting revenue from One Pay FX, a blockchain-based foreign exchange service that is also built on Ripple technology. Dutch banking giant ING’s dedicated blockchain team that has launched 8 pilots since 2016, and alongside Credit Suisse completed the first legally enforceable securities swap on a blockchain last year.
Even banks that didn’t make our list, like the Royal Bank of Canada and Bank of America, are testing the waters. RBC has conducted 8 live pilots, and Bank of America has filed the most blockchain patents of any company in the industry.
Notably, these early first forays into the blockchain space have fostered something unexpected among these major competitors: collaboration, especially through industry efforts like Hyperledger and the Enterprise Ethereum Alliance. “I remember how different people from different institutions tried to start talking about the common work in this moment,” says BBVA’s Carlos Kuchkovsky, CTO of new digital business, of the early days of those groups. “That’s how we want to collaborate now, to create common new rails.”
Citibank has partnered with Barclays to launch a blockchain app store. ING and BNP Paribas are just two of several big banks that partnered to create komgo, a blockchain trade commodity network, and UBS has partnered with BNY Mellon, Deutsche Bank, and Santander to create a way to exchange digital cash.
Of course, these banks know that there is a long road ahead when it comes to integrating blockchain into their daily processes. Blockchain is not a catch-all solution, and there are sure to be new hurdles ahead, but some banks say they are already reaping the rewards. “You already have tangible benefits but this still is not the end state,” says ING’s program director of distributed ledger technology Mariana Gomez de la Villa of a recent ING pilot. “The ecosystem is growing.”
-Sarah Hansen; Forbes Staff
Re-constructing Johannesburg The City Of Opportunity
The inner city of Johannesburg is expected to turn into a giant construction site this year. An in-depth look at how the past is being revived and the future is being rendered.
The remnants of a once grotesque skyscraper erected in the midst of the country’s political demise towers over the Johannesburg skyline.
A bright-red illumination adorns the dusky sky and a view that stretches as far as the northern parts of South Africa’s Gauteng province.
Built in the 1970s, at a time when South Africa’s racial segregation policies stirred an uprising among the black youth fighting for a right to education, the cylindrical Ponte City Tower stood tall as a symbol of metamorphosis within the inner city.
In contemporary times, the neighborhood has lost luster.
Once home to the elite, in a previously white-only area designated for the minority under the Group Areas Act, the 173-meter, 54-storey tower overshadows one of South Africa’s most controversial neighborhoods in the inner city, Hillbrow.
With 461 apartments, the ‘point of the city’ transformed from one of the most desirable buildings to being among the most neglected.
As the political dispensation pre-democracy in South Africa was being criticized, investments dropped and its maintenance was neglected.
By 1990, the entire precinct had turned into a slum while the country anticipated a pot of gold at the end of the rainbow in the form of the 1994 elections.
With ease of travel after the elections, the urban sprawl began to develop as more citizens moved to Johannesburg in search of work opportunities.
Tahira Toffa, the Associate Director of Iyer Urban Design Studio, says building rights in the precinct allowed for developers to rise to limited heights.
As a result, Hillbrow developed into a dense area with high-rise buildings. As a result, there was greater focus on building upwards, and with that, discussions on how to maneuver the rights to the sky.
“Air rights are dependent on the zoning in certain areas. There are restrictions as to how high buildings can go in certain areas. When a development crosses a public road or space, air rights need to be paid,” she says.
Today, apartment 5101 in Ponte evokes a sense of nostalgia as breeze wafts in through an open window.
The renovated space owned by journalist Nickolaus Bauer and strategy consultant Mike Lupak pays homage to township culture with makeshift furniture.
“I came to do a story on Ponte in 2012. Essentially, I came to do a story on the bad things that you hear about [regarding] this building. If you grew up in Johannesburg in the 1980s, you heard nothing good about this building,” Bauer says as he points to the skyline.
Hailing from the western parts of Johannesburg, Bauer recalls seeing a red flashing light at the top of the building as a young boy.
“I asked my mom, ‘what is that building’ and she said to me, ‘son, if you are a failure in life, you will end up in that building’,” he says.
On arrival for the story, Bauer remembers leaving his watch in the car with his wallet.
As he entered the building, seeing tenants on their way to work and children playing in the passages instantly changed his perception.
“What we had here was an opportunity to come and live in the sky,” he says.
Ironically, a story on the ruthless living conditions in Ponte turned into a new home for the journalist.
Renting a 150sqm apartment in Ponte was a much cheaper option than the 36sqm apartment he had in gentrified Maboneng.
“So, I moved in. I didn’t leave with that story about drugs, gangs and prostitution, I left with a lease,” he adds.
Bar stools made out of empty beer crates stacked together adorn the once dilapidated apartment.
With a sharp eye for opportunities, Bauer decided to venture into business.
In 2012, he opened an arcade center to entertain the children in the area. He called it Dlala Nje (let’s play).
Children with needs ranging from afterschool activities to tutoring programs gradually emptied their pockets at his establishment but the costs of running the business were not getting covered.
A funding model to the youth programs came to light during a night out with friends in Maboneng.
“We went to a bar in Maboneng and told some people that we are living in Ponte,” Bauer says. Intrigued by the historical past, the spectators wanted an experience of the landmark.
The first tour was in November 2012 and seven years later, they have brought up to 10,000 people to experience Hillbrow.
“Immediately, people are skeptical about you leading people around and taking photos. You get asked, ‘what are you trying to do, are you trying to show people we are poor?’ We convinced people it was a good thing,” he says.
Bringing capital back and building skills in the community forged a relationship of trust and honesty between the two.
“It is a nice synergy. People want to get involved but they don’t necessarily know how. People come on a tour and they become alive to the fact that people that live in Hillbrow aren’t poor, black and evil. At the same time, the people that live in Hillbrow realize that the people with money coming to see how things operate in our city are not white, rich and evil,” he says.
With the Dlala Nje youth center and tours, Bauer hopes to change the perception of the marginalized area by creating opportunities for the youth and a gateway for future development in the precinct.
Bauer slides a large window shut as he looks into the distance contemplating his home.
“You can’t solve the problems by just bringing in capital. Capital needs to understand that their money is going to be wasted unless they get the buy-in from the people that live in the community.
“It is not just a simple investment of just turning a dark building. There needs to be a holistic approach to ensure that the area you find a dark building is not only transformed but the transformation of the entire area is also supported,” he says.
The solution is fixing the cause of the dark buildings and moving people will not change the persisting problem.
Just a few kilometers away from the towering Ponte, another building embodies neglect but a different future awaits it.
As part of the inner-city development initiative driven by the City of Joburg, the Vannin Court, described as Hillbrow’s Heritage Portal, will be developed into a safer and cost-effective residential building.
Unable to hold back a tear, City of Joburg Property Company CEO, Helen Botes, describes the journey of reconstructing the inner-city as an emotional one.
“It is bringing our people closer to the workplace. They save on transport costs. Giving them a better quality and the rental is in line with the social rentals defined by law.
“People living in the buildings will be provided temporary accommodation and once the building is constructed, if they can afford the rental.
“I think most of them can because they are [currently] paying some land lord ridiculous amounts of rental because most of the buildings are hijacked,” Botes says.
The City opened tenders to renovate 84 buildings where 13 of the properties are in the inner-city.
Vannin Court and Beaconsfield Court, both in Hillbrow, and a vacant land in Newtown are kick-starting the initiative with an official tender handover tour to each of the respective buildings.
The three properties amount to a total investment of R204 million ($14.2 million).
The cacophonous sirens caused by a mayoral convoy draws the attention of people in the area.
Locals gather to witness the spectacle.
As the celebrations of the awarded tender proceeds on the ground floor of Vannin Court, tenants in the discarded building watch from the balconies.
A police officer warns another to keep a close watch on the windows, “if anyone throws water, we are going in,” he says.
A police escort is required to enter the building.
Three policemen rush in to clear the dark lobby, and we are ushered in.
A staircase obscures the little light coming in through the foyer on this hot Thursday afternoon in January.
A child peeks through a gap between broken doors, as dim torches illuminate a path ascending the stairs.
Red and blue wires hang from what used to be a plug socket.
“If you look at the state of the city and the quality of the buildings and the amount of work we have to do and the resources that are required to rebuild the city, it is emotional to know that we allow our people to live in squalor and we need to use all our energy to push them to a different standard,” she says.
Dense areas such as downtown Johannesburg are not without their challenges.
Johannesburg Housing Company revenue manager, Karabelo Pooe, who has been developing properties for the past 11 years has focused on inner-city projects.
Growing up in Pretoria meant he traveled 40 kilometers to get to downtown Johannesburg for work opportunities.
Spending over an hour to travel using public transport, he vowed to create an easier way to navigate and reside in the city. “It aligns well with what I believe in, trying to change that considerably by creating and building affordable housing that is secure and of good standard so that we change the layout of Johannesburg and South Africa,” he says.
Investing in property in the inner-city can cost up to R20 million ($1.4 million) for a small project.
The amount spent on refurbishing and getting the property up to the right standards, can accumulate to R80 million ($5.5 million), depending on the development scale.
“Newtown is what it is because you do housing and housing becomes a catalyst. People need a full cycle. You need housing, lifestyle, entertainment and schools.
“From an economic perspective, the impact of it is not only instantaneous with the year that you are constructing but, as a result, by creating the housing opportunities people are living there. They spend their disposable income there,” Pooe says.
This particular plot is surrounded by various informal businesses ranging from car washers, food vendors and junk yards to a mall located within walking distance.
On our arrival, a concerned employee who works in the yard as a waiter at a food vendor approaches us.
“What happens to our jobs?” he asks.
Itumeleng Lekokile, who has been in living in Johannesburg for four months, relocated to the inner-city in search of employment from Dube, a township in Soweto, Johannesburg.
Afraid that he will soon lose his job, he deems the project as an obstacle, but stays optimistic that it will provide an opportunity in the end.
“It is going to cost us a lot. People who stay around here come here for fun, and that is closing down. Not only for me, individually, but I think the [other] residents too… It is a good thing but then again it is a bad thing. As an individual, I am going to lose my job and will have nowhere to stay, it will affect me,” he says.
Property development thus is a cycle that includes more than just the business operations as it has far-reaching social implications.
Before an existing property can undergo development, communication between the area councilor and tenants becomes a priority in order to avoid conflict.
“Through dialogue and good community skills, we were able to speak with to the people. There are alternatives in our portfolio with units that are R1,500 ($103) up to R6,000 ($415).
“So, for people that are employed, we are able to relocate them with ease. Once the building is complete, we give them first preference,” Pooe says.
The R250 million ($17 million) project in the Newtown precinct will allocate local labor to the tenants who are operating on the stand, thus sparing Lekokile his employment.
Architect and urban designer, Toffa, argues that although, development in the city offers opportunities for multitudes of people, public transport is one of the biggest drivers.
Development can be economically efficient as much as it is environmentally-sustainable.
She says, when done well, developments can contribute to the reduction of carbon emissions.
“We need to promote a culture of public transport so that people need to reduce using their cars so much, the Gautrain has changed people’s perceptions,” she says.
“One of the biggest challenges is parking and traffic in the inner city. Public transport makes sense and it reduces carbon footprint. There are other ways of improving the city and changing socio-economic aspects of the city but public transport really needs to be the biggest driver of that”, she adds.
Traffic Net Managing Director, Rob Byrne, who provides traffic reports for all types of media platforms, weighs in.
With traffic reporting experience for over 20 years, Byrne echoes Toffa’s sentiment.
“Where you got development that is linked to public transport infrastructure, it is always going to work better. You have seen what has happened in Sandton recently, a big company has opened a big head office and I don’t know how many extra hundreds of people they have put in, but it just saturates an already saturated area.
“The building and development really needs to be in line with transport options so you can give people that are coming into those newly-developed areas better access to not have to go in and create congestion,” he says.
For Byrne, developments of all kinds attract more people, which causes an influx of people moving towards the city, thus causing high levels of congestion.
“Congestion is everywhere. The numbers of cars growing a certain percentage a year, we have heard 7%, a few years down the track, you will get almost a quarter more traffic than you already had.
“Traffic is a big thing, it is not going to go away. Development linked to public transport is a much preferable way to go.”
Buildings create a ripple effect on people, the economy, and the environment, which is ultimately linked to health and wellbeing.
With an already dense population, Johannesburg and other economic hubs will need to focus on creating the developments of the future – and possibly more cities in the sky.
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