WILL TESLA MAKE GOOD ON ITS MODEL 3 GOAL?
Musk promised 5,000 cars per week by end of June — if short, criticism is inevitable, especially in light of Tesla’s recent layoffs
If you haven’t looked at your calendar, take a glance. June is almost over, and we are about to find out if Tesla has met its self-appointed deadline.
Tesla CEO Elon Musk promised production levels for the Model 3 would reach 5,000 per week by the end of June. Soon we will know if he has to eat crow and explain why and how his company failed to roll that many Model 3s out the door.
Tesla’s second quarter ends this week, and while the company won’t deliver for another month its full results for the period, we will get a hint when Tesla announces figures on vehicle deliveries after the weekend.
Musk hasn’t backed down from his pronouncements that Tesla will hit the 5,000-per-week target; in fact he recently doubled down by touting the need for the company to build a tent the size of two football fields to sustain its manufacturing operation.
But let’s face it: We’ve been here before.
Musk originally said Tesla would be producing 5,000 Model 3s weekly
“Knowing how automated manufacturing works, it seems like a real long shot that this will work. But tech visionaries often shoot for the moon and you can’t count their ideas out, even if they seem impossible, until we see the final results.”
— Tim Bajarin, president of tech consulting firm Creative Strategies
by the end of 2017. But Tesla delivered only 800 during the last week of the year. So Musk dropped the target to 2,500 a week by the end of the first quarter, then missed with 2,020 for the week before its April 3 production report.
Still, there is that giant tent that popped up earlier in June on Tesla’s campus in Fremont.
“Needed another general assembly line to reach 5k/week Model 3 production,” Musk tweeted. “A new building was impossible, so we built a giant tent in 2 weeks. Tesla team kfa!! Gah, love them so much.” Musk also tweeted that when it came to building that tent, “They also poured the concrete & built the whole assembly line using scrap we had in warehouses.”
But will all that love and a big new production tent end with a promise kept?
“Knowing how automated manufacturing works, it seems like a real long shot that this will work,” said Tim Bajarin, president of tech consulting firm Creative Strategies. “But tech visionaries often shoot for the moon and you can’t count their ideas out, even if they seem impossible, until we see the final results.”
If Tesla and Musk fail, criticism is inevitable, especially in light of Tesla’s recent layoffs. In midJune, Musk tweeted that the company would cut 9 percent of its workforce as part of a restructuring to help Tesla “become profitable.” But he also emphasized that Tesla’s workforce still would be greater than at the start of 2018 and production would not be affected.
“Scalability is challenging,” said Tammy Madsen, professor of strategic management at Santa Clara University. “A critical starting point is demonstrating that they can achieve their 5,000-per-week goal with the Model 3.”
Gene Munster, director at Loup Ventures, said that three days spent observing Tesla’s tent, and the semitrucks ostensibly loaded with Model 3 cars leaving the facility, suggest “there is an outside chance that the company hits that production
goal.” Munster estimates that Tesla is currently producing about 4,300 Model 3s a week, which he called “a win” for the company, as that figure represents a doubling of production since the first quarter of this year.
But there’s no consensus surrounding that number. Bloomberg set up a Tesla Model 3 Tracker, which as of Friday morning pegged the weekly output at closer to 3,400.
Also, while Tesla’s big tent indicates how far the company will go to address
its production needs, questions remain about the quality of what is actually coming out of the facility.
“Public comments about the tent suggest that they’ve improvised an additional or replacement assembly line outdoors,” said Frank Gillette, an analyst with Forrester Research. “That’s basically crazy behavior by any conventional understanding of manufacturing success. I’m very concerned about what the build quality would be.”
Bajarin called Tesla’s rapidly built tent “an interesting
experiment” that could have a big payoff. “If Tesla in some way makes this work, it could allow them to expand manufacturing capabilities much faster in order to meet demand,” he said.
However, Bajarin also cautioned that Tesla’s big tent doesn’t necessarily provide a guaranteed solution. “To reach 5,000 a week would mean that all facilities would need to be working flawlessly without any form of interruption,” he said.
SCU’s Madsen said that
Tesla seems to be taking “a clean-slate approach” to manufacturing that may allow the company to build the Model 3 faster going forward. But at what cost?
“Will a production line built on scrap produce high-quality vehicles? Will the products be consistent in functionality, quality and reliability?” Madsen asked. “Much uncertainty remains regarding whether a bricolage approach will work.”