WRENCH IN THE WORKS
Tesla’s spotty output threatens quality controls
IS Tesla really producing as many cars as Elon Musk says it is? Aside from generating crazy headlines — tweeting last month, for example, that he plans to take the company private, then announcing two weeks later that he decided not to — Musk is also in the business of making very expensive electric cars.
Is Tesla meeting its production targets? A lot of serious investors — and one curious reporter — want to know.
I turned to RS Metrics, a company that regularly monitors companies — including Tesla — from the sky for institutional investors. That’s where the three photos of Tesla’s Fremont, Calif., assembly plant you see with this column came from.
The picture on the left is Tesla’s south logistics parking lot, where finished cars gather before getting shipped out to customers. It was taken a little over a month ago by a hired aircraft. The one marked Aug. 23 — with the far less full parking lot — was taken a week and a half ago. The third picture was taken just last Thursday and it shows the lot filling up again. Alex Diamond, vice president of RS Metrics, interpreted the pictures for me:
“The first image is from Aug. 2 when the lot was relatively full with 421 Model 3’s, 88 Model X’s, and 85 Model S’s,” said Diamond. “The second [photo] is from Aug. 23, when it was relatively empty with 112 Model 3, 33 Model X, and 22 Model S.
The third photo shows the lot filling up again, with 243 Model 3’s, 35 Model X’s, and 29 Model S’s in the south delivery lot.
The Model 3 is Tesla’s cheapest car and starts at $50,000. It’s the one followed most by the media because its price makes it the one more people are likely to buy. The Model S starts at $75,500 and the Model X at $80,000. What does it all mean? “This shows the choppy nature of Tesla’s production,” says Diamond. “I believe Tesla will meet its production guidance of 50,000 to 55,000 Model 3’s in third quarter of 2018, but it will not be a smooth ramp-up,” Diamond added.
“And so far, they have not achieved over 5,000 Model 3 produced per week at a sustainable rate. That has only occurred a couple of times in ‘bursts,’ which likely compromised the quality of each car produced,” Diamond said.
Diamond says Tesla’s factory is operating 24 hours a day, seven days a week, to produce enough cars to meet its production goals. “They need to produce and move 42 cars per hour to hit the 5,000 Model 3 and 2,000 Model S & X that they have touted in recent second-quarter 2018 investor releases,” he said.
“It still seems like a struggle for them, and the messy nature of the Fremont assembly plant reflects this,” with cardboard and waste everywhere that are starting fires and causing cars to be rejected, Diamond added. Parts for cars, says Diamond, are stuffed everywhere on the property.
“I think they are going to hit their third-quarter Model 3 guidance unless some sort of major event happens,” said Diamond. “They don’t even need to maintain 5,000 Model 3’s per week to do this; Only a little over 4,000 per week,” he added. So now you know about car production. What I want to know is: What crazy thing will Musk do next? I’m hoping for a tweet-off with President Trump. I think both of them could hold their own in that sort of contest.