Tesla today issued its Q1-2018 Vehicle Production and Deliveries report which contains some good news as well as tempered news for the Model 3 sedan.

On the good news end, the electric vehicle manufacturer reported its most productive quarter in the company’s history. A total of 34,494 vehicles were produced in the quarter representing a 40 percent increase from Q4 levels. Production output was reported to be 24,728 Model S and Model X vehicles and 9766 Model 3 vehicles. From our Supply Chain Matters lens, the report authors added too much narrative fluff indicating: “This is the fastest growth of any automotive company in the modern era.” Such statements are not helpful to the many concerned eyes that are currently focused on Tesla’s consistency of operational performance. Tesla Model 3

The latter Model 3 production output was the tempered news, in that it indicates that the Q1 goal for steady-state Model 3 production of 2500 vehicles per week was not attained. The report does indicate that in the past seven days, Tesla produced 2020 Model 3 vehicles, but here again, Tesla continues to exhibit an end-of-quarter operational hockey stick performance. Despite more superlatives, sustained Model 3 production output remains behind original and modified milestones.

In this week’s operational report, Tesla makes two additional points referencing Model 3 quality levels as the highest in the company’s history and customer reservation levels remaining stable in the quarter. These statements were likely added to directly address prior reports speculating that quality levels for the Model 3 were being compromised by large numbers of untrained temporary people being placed in assembly or quality inspection roles and that there was also a higher level of Model 3 customer reservation declines.

In its reporting of Tesla’s operational performance, business network CNBC indicated that on Monday, Tesla confirmed a report that indicated CEO Elon Musk has taken over Model 3 production from the company’s senior vice president of engineering, Doug Field. That implies a direct leadership change related to Model 3 production. As Supply Chain Matters opined in our previous blog commentary related to Tesla Model 3 production performance, we believe that CEO Musk should turn over Model 3 production leadership to a seasoned and proven industry operations executive, the sooner the better. Musk obviously has too many items to address in his various strategic roles in multiple companies. The building drumbeats call into question as to whether the company needs to lean on a more experienced and savvy operations executive who can provide day-to-day operation leadership and oversight.

Vehicle Deliveries

Q1 deliveries were reported as 29,980 total vehicles with all-important Model 3 deliveries noted as 8180 vehicles.  Vehicles noted as in-transit to customers at the end of the quarter remain in an increasing growth trend with over 6000 vehicles of all models reported in this category. The 4060 Model S and X in-transit vehicles represented a 68 percent increase over the in-transit number reported at the end of Q4 2017. That obviously continues to test the company’s distribution and customer fulfillment processes.

Reader Takeaway

As stated in our last update, the business stakes related to the Model 3 ramp-up are growing with each passing week. There are lessons here for high-tech manufacturing start-ups.

The Q2 2018 operational report does provide some optimism but does not exhibit a sense of steady operational cadence. Added superlatives and spin do not do justice to the obvious hard-working supply chain, production and supplier teams that are obviously in all-out mode to address day-to-day output performance ramp-up needs, including automation of production practices. Now remains the time for clear communication, a clear sense of praise for operational team performance amid continued daily and weekly challenges.

Bob Ferrari

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