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Report Indicating Tesla Model 3 Pilot Build About to Begin

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After Founder and CEO Elon Musk declared last May an intent to revolutionize Tesla Motors production activities to coincide with the availability of the new dramatically lower cost Model 3, a report now indicates that the electric auto maker is planning to start pilot production this month at its Fremont California production facility.

The Reuters report syndicated by global business network CNBC, cites sources as indicating that Tesla has informed suppliers that test build of the new Model 3 sedans will initiate on February 20.  While the sources did not know of how many sedans were planned for this initial pilot build, it would likely be a small number to test the new assembly and test needs.

The February date happens to precede by two days, Tesla’s scheduled shareholders meeting. Speculation is that the initiation of test build would provide added optics for reservation customers as well as shareholders.

Upwards of 375,000 paid deposit reservations have been already made by prospective Tesla customers. Musk previously informed shareholders of plans to begin Model 3 volume production by July of this year but cautioned that the company could miss that date if suppliers do not meet deadlines.

According to the report, sources indicate that the Model 3 timeline is indeed considered to be extremely aggressive, especially since engineers are still making last-minute design changes to the vehicle. This has been a common pattern for Tesla, one in the mold of Apple under the leadership of Steve Jobs, where last-minute design changes drove suppliers and contract manufacturers crazy in periods of critical production volume ramp-up.  Tesla suffered some effects of this process with the prior Model X, whose revolutionary gull-wing doors and seating designs had to be re-visited because of volume production yield challenges.

At last year’s annual meeting of shareholders, Founder and CEO Elon Musk indicated that Tesla will “completely re-think the factory process.” Musk repeatedly raised the notions of “physics-first principles” and made the point that his team now realizes that where the greatest potential lies is in designing and building the factory.  He challenged Tesla engineering teams to the principles of “you build the machines that build the machine.” In other words, the context is in thinking that the factory is the product, and that you design a factory with similar principles as in designing an advanced computer with many interlinking operating needs. Further acknowledged was that the Model X design was over complicated, perhaps too much to accommodate production volume needs. Going forward with the development of the new Model 3, Musk indicated that a tighter integration loop among product design and manufacturing would be fostered.

This latest report raises the question of whether Musk can fulfill his promise for producing 500,000 cars annual by 2018. That currently represents 4-5 times 2016 production levels, which missed their annual goal as well.

From our lens, the other open question is whether Tesla’s unique new vehicle distribution and customer delivery model can also ramp-up to such levels. Increasingly, at the close of each quarter, Tesla reports thousands of vehicles still in-transit to awaiting customers.

Readers may well have their own views but it would seem to this blog that Tesla’s better efforts should be directed at taking the time to get all production and distribution processes highly synchronized in high volume dimensions across the entire supply chain. Rather than communicate whether suppliers can meet deadlines, communicate the readiness of the entire supply chain machine to meet production and distribution milestones.

The optics can come later.

Bob Ferrari

© Copyright 2017. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.

 

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