Elon Musk is today’s Henry Ford and that’s bad

Silicon Valley’s hot hand in everything, from smartphones to software, seems to have blinded Tesla to the difficulty of manufacturing

The idea that Silicon Valley could reinvent the auto sector the way Apple reinvented mobile phones is an appealing one, and by some metrics Tesla has done just that. The Silicon Valley automaker’s distinctive product features — blistering performance, long-range batteries and slick touchscreen interfaces — have beguiled legions of fans and investors, giving the impression that the future of the auto industry had suddenly arrived.

But recent reports call that glowing future into question. After 15 years, it’s increasingly clear that Tesla has nothing to offer in the area that, as the tech analyst Horace Dediu puts it, is where “almost all meaningful innovation occurs”: The production system.

Tesla has always been plagued by poor manufacturing quality and missed production deadlines. Now CNBC’s Lora Kolodny has the scoop on Tesla operations tasked with “reworking” and “remanufacturing” poor quality cars and parts, illustrating a deeper problem than the poor quality itself. By reworking vehicles after they come off the line at its Fremont, California, assembly plant at a dedicated remanufacturing facility in nearby Lathrop — and even reportedly in its service centres — Tesla is taking automotive manufacturing back to the dark ages.

This was once standard practice for Detroit’s automakers. Driven by logic derived from Henry Ford’s manufacturing system, United States automakers kept production cranking to maximise efficiencies of scale, then repaired defective cars after they rolled off the line. Though many factors contributed to the decline of the Big Three in the 1970s and 1980s, the inefficiency and apathy entrenched in company culture by this approach to quality was one of the most important.

In contrast, Toyota’s cars may not have had the dramatic, chrome-draped designs or V8 performance of American competitors, but the legendary Toyota Production System (also known as TPS, or “lean”) did away with rework, and its dependable, high-quality cars eviscerated Detroit’s market share. By systematically eliminating all forms of waste — “muda” — from its manufacturing, Toyota found that both capital efficiency and quality benefited enormously from building cars right the first time. For example, Toyota created the “andon” system, installing a cord above every workstation. All employees were empowered to pull it whenever they spotted a defect, bringing the entire factory to a stop while a root cause analysis traced the defect to its source.

Fostering indifference

This practice reflects the systematic approach of the TPS philosophy: Better to stop production until the root cause of the defect has been fixed than foster indifference by telling workers that defects will be fixed later by someone else.

Tesla seems either uninterested in or oblivious to the historical lesson here.

On last quarter’s earnings call, chief executive Elon Musk told analysts that Tesla doesn’t see TPS as a model for his company, even as he reiterated his goal of “productising” Tesla’s factories.

As reports of quality problems with the new Model 3 continue to roll in, Tesla is beefing up its service operation to repair the problems that evaded even its rework operation. As is usual for the company, the launch of a new car is being accompanied by an expansion of the mobile service teams that drive to customer homes to perform repairs. This service, now up to 230 vehicles, helps pump up customer satisfaction data through its personalised service, but it also shows how uninterested the company is in getting things right the first time.

If Tesla aimed only to build a premium niche brand, giant touchscreens, YouTube-able acceleration and “falconwing” doors would be enough. But as Tesla pursues lower retail prices and higher volumes, its ambivalent attitude towards the principles of mass production of modern cars seems increasingly likely to sabotage its powerful brand. Because TPS emphasises the fundamental role of culture in high-quality manufacturing, and because culture takes so long to change, Tesla could be facing the kind of multidecade effort that it took to bring Detroit up to competitive quality standards.

Silicon Valley’s decades-long hot hand in everything — from smartphones to software — seems to have blinded Tesla to the importance and difficulty of the process of manufacturing, just as Detroit’s cultural and consumer power coming out of the roaring 1950s and 1960s had blinded it to the threat posed by the stodgy manufacturing excellence of Toyoya. Edward Niedermeyer, an auto-industry analyst, is the co-founder of Daily Kanban.

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