Tesla’s Struggle To Mass Produce Electric Cars – Forbes

Posted: Thursday, November 06, 2014

Improving its manufacturing process to meet demand continues to be a big challenge for Tesla Motors Tesla Motors, whose CEO Elon Musk wondered out loud on Wednesday whether being a perfectionist is costing the company’s growth.

Speaking to analysts to discuss Tesla’s third-quarter earnings, Musk emphasized repeatedly that the company has no problem attracting orders for its Model S. But increasing its factory capacity and honing its expertise to mass-produce the cars are big hurdles.

The company shut down its factory in Fremont, Calif., during July this year to improve its assembly line operation. But the difficulty of making sure all the pieces of factory equipment work well together delayed the company’s plan to reach a certain production rate. As a result, the company rolled out 2,000 fewer cars than expected during the third quarter.

Tesla plans to cut the number of options and powertrain combinations that customers could choose from in order to increase its production rate in 2015. Overall for 2014, the company expects to produce 35,000 cars and deliver 33,000, which would be a 50% jump from 2013 but a 5% to 7% dip below its own forecast.

“When we upgrade the factory, it’s like changing the wheels on the bus while going down the freeway,” Musk said on the call. “There are areas we need to do better, and maybe not being such a perfectionist on future products.”

It’s not clear what he meant by the trouble of being a perfectionist. But it’s not surprising that Tesla is struggling on the manufacturing front. Before it went public and launched Model S, the company drew a lot of attention for its beautiful car designs and technology innovation in a budding field. The big challenge back then was to raise enough money to complete its engineering development and setting up production to launch itself as a carmaker.

Tesla Fremont factory

As I pointed out over a year ago, manufacturing had became the major challenge for the company and is curbing its market reach and revenues. Tesla executives seem to be undergoing a big crash course in learning how to manage their suppliers, design and operate factory equipment, implement good quality control and troubleshoot problems promptly.

“People don’t appreciate how hard it is to manufacture something,” Musk said. “It’s very hard. There are 70,000 unique parts in a car, and Model S is a complicated car.”

Well, the general public might not give much thought to production challenges. But not those in the car industry or any industry where poor production scale and efficiency have doomed companies that couldn’t survive despite having developed innovative technology.

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