Tesla seems to have serious problems with the production of its new car, the Model 3. At the moment, Tesla is promising more than it is able to deiver, delivery dates arrive and the cars are not leaving the factory at the rate that I expected.
Tesla barely delivered about 30 units to selected employees in July. Since then, in the third quarter of the year, it has only been able to manufacture 260 Model 3s, they should have produced 1,500. There are Ferrari models that are produced in larger series. Now having a Model 3 is more exclusive than a Ferrari 488, because it has been producing them at a good pace since 2015.
Bottlenecks in production
They have been subcontracting some of their production in Europe to Magna, an Austrian manufacturer that manufactures for other brands such as Mercedes, BMW or Jaguar. It also has an agreement to open a factory in China, from which to supply this market. Anyone would say that it is not going well.
But in fact, on the part of Elon Musk there is talk of bottlenecks in production and also of hell in production. In practice, the reality is that a small part of what should have been manufactured is being manufactured.
Let’s look at the photo of Model 3 that accompanies this entry. Especially highlights that windshield that extends and joins with the rear window. There is practically no car in the world that has it, among other reasons because it is extremely complicated to manufacture, I would not be surprised if that stretch was a production problem.
However, if Tesla’s plan was to learn from the more expensive models to manufacture the “mass consumption” model, one wonders where the Know-How is. Because if it has leaked that a supplier has seen its order cut by 40% since December, there are serious doubts that Tesla will be able to manufacture the 20,000 monthly that was promised. Are unused components accumulating in the Freemont factory, perhaps?
Producing half a million vehicles a year in a factory is not easy. That’s the figure they produce in their Tennessee factory where they manufacture a dozen vehicles and it’s considered one of the best in the world.
In addition Tesla does not have a conventional production. For example, the Model X seats are manufactured by them, regardless of the suppliers. It is also awakening hundreds of workers after the evaluations while the managers are leaving the company. Are you sure everything is fine? And that Know-How obtained from the Model S?
Autonomous driving? What is that?
One of the ideas of the Model 3 is that it was equipped with autonomous driving, something that Elon Musk had promised by mid-2017 at the latest. We are in the final stretch of the year, and buyers are being offered $8,000 for the hardware in their vehicles, but there is still no software to move it.
Of course, consumers on the other hand, begin to feel disappointed by having paid for a functionality that hasn’t arrived, and may never come.
Meanwhile, other manufacturers, such as Cadillac already offer similar functionalities. And those who do not have it, are working on it, or may even choose to partner with Waymo (of Alphabet, the holding company that Google owns). There are even those who believe that although Tesla started the race for the electric car earlier, there are already advanced European manufacturers, mainly Renault and the Renault-Nissan alliance, which are the ones that get more patents and that already have affordable electric cars in the dealership, without long waiting lists.
In light of the latest news, one wonders if Tesla is winning the future, or is simply promising something that it can’t quite deliver, while burning cash. It is true that it has been a great revulsion in the automotive industry, including mobility in general, but as a listed company, it has to present results quarterly.
And investors may continue to support Tesla, but in their native market, reality is stubborn, car buyers prefer SUVs and Pick Ups, where manufacturers today truly make money. If 84,000 model S and Model X were sold last year, Ford has sold 658,636 F-Series in the first nine months of this year.
If the production of the Model 3 that is essential for the survival of the company does not start at the desired pace, it is very likely that the manufacturer of Palo Alto need more money from investors to move forward.
I wonder if investors will dump more money into a visionary that increasingly seems dispersed between his companies: Tesla, SpaceX, the Hyperloop. Time will tell.