“Definitely going to need to rethink production planning,” tweeted Elon Musk when he learned of the explosive demand for his latest creation. Seldom has such a short sentence been so freighted with risk, opportunity…and a whole lot of hard work.
Ramping up annual production by a factor of ten will be a major challenge, one that veteran automotive pundits describe as nearly impossible. But it’s a challenge that Elon Musk says fits into his Grand Plan, which was always foreseen as an iterative learning process. The knowledge that Tesla gained from producing the Roadster enabled it to make the Model S a superior vehicle at a lower price. Lessons learned from building Models S and X will be applied to the process of producing Model 3.
Designed for manufacturability
Some of those lessons have less to do with the car itself than with the manufacturing process. As Musk explained during Tesla’s Q1 2016 earnings call, Model 3 is specifically designed to be easy to make.
Tesla must have learned some lessons the hard way with Model X, as production bottlenecks delayed the launch again and again. Musk concedes that Model X includes “bells and whistles” that weren’t really necessary for version 1 of the vehicle.
“With Model 3, we’re being incredibly rigorous about insuring that we don’t have anything that isn’t really necessary to make a compelling version 1 of the car,” said Musk. “We also have a much tighter feedback loop between design engineering, manufacturing engineering and production, so no element of Model 3 can be approved unless manufacturing has said that this is easy to manufacture, and that the risk associated with manufacturing it is low.”
“We believe that there is more potential for innovation in manufacturing then there is in the design of the car, by a long shot,” he said.
A new focus on manufacturing
“From an engineering standpoint, we are already almost complete with the design of Model 3,” said Musk. The company is now “hell-bent” on becoming the world’s best automotive manufacturer.
“Thus far, I think we have done a good job on design and tech on our products, the Model S and the Model X. We are generally regarded by critics as having technologically the best cars in the world,” Musk said. “The key thing we need to achieve in the future is to also be the leader in manufacturing.”
To get there, Tesla continues to add to its lineup of automotive production execs “with each passing week.”
“Our ability to recruit top manufacturing talent to the most compelling product on earth is very strong,” said Musk. “We find the response to be extremely good when we call people up. So based on the rate at which we’re adding world-class manufacturing expertise and some of the things that I know we’re going to announce in the future, I feel highly confident that the Model 3 is going to be well executed as a program.”
Past is not prologue
It’s natural for analysts to look at Tesla’s history of missing deadlines and predict similar behavior in the future. However, Musk claims that Tesla’s previous production programs are not relevant to the Model 3. “That would be the mistake of assuming that anything to do with the X production has bearing on Model 3. They are very different programs with completely different approaches.”
“If you were to extrapolate from the Roadster experience, you would be completely wrong about the Model S outcome, and many people were,” he added.
Tesla is also accelerating construction of the Gigafactory to meet the increased demand for batteries. Cell production there will begin at the end of 2016, as planned. Will there be enough capacity to meet the demand for Model 3, while still supplying cells for the Tesla Energy line of stationary storage products?
“We have a lot more capacity at that site than the initial 35 and 15 GWh [annual targets] that we discussed,” said JB Straubel. “That’s part of why we’ve made sure that we have extra land around the site, so we can continue to expand. We won’t need to rob from Tesla Energy plans in order to meet the Model 3 schedule. We definitely have a way to solve both.”