Tesla says it moves too fast for suppliers used to traditional auto development cycles

Tesla auotpilot

Over the past couple of decades, major automakers have built an ecosystem in which components of their cars are built by suppliers large and small around the world. This system has served them well, but it has several drawbacks that are becoming more apparent as cars become electric, autonomous and connected (Ian Wright eloquently described the problem in a 2014 article).

Tesla, which thinks in terms of Silicon Valley time, rather than Detroit’s 20th-century product cycles, has often run up against the limits of the outsourcing model – tardy suppliers were surely to blame for much of the delay launching Model X. Tesla isn’t afraid to buck conventional wisdom, and bring production of key components in-house.

As Model 3 production ramps up, Musk thinks the company’s degree of vertical integration is likely to increase. “I think it’s important for us to have the ability to produce almost any part on the car at will, because it alleviates risk with suppliers,” said Musk on the recent Q1 earnings call. “If 2% of suppliers aren’t ready, we can’t make the car. Having the ability to…make that 2% internally massively reduces risk associated with the production ramp.”

“Once we get to a steady state, and…a supplier can do a very efficient job of making that part, we have no problem  transitioning it from insource to outsource,” said Musk. “Our goal is not to insource for the sake of insourcing, but rather to insource if we think it has a meaningful improvement on schedule or cost or quality.”

“For a lot of supply chains, they are impedance-matched to the timeframe of the big OEMs, and Tesla just moves a lot faster. If they’re impedance-matched to a typical six-year development cycle, and we’re on a two- or three-year development cycle, it just doesn’t connect properly. Some suppliers can handle that, and some can’t.”


Source: Tesla

  • http://www.efest.ca Robert (Electricman) Weekley

    Tesla is a Sprinter, in a Marathon Runners World!
    If they are still in business after exceeding practically every nay-sayers expectations, you would think that some would figure things out – that they are not doing this for a hobby, and they have more commitment than most of their supposed competition in their goals to ‘Accelerate the Advent of Sustainable Transportation’ – as defined by Elon Musk and team!

    It might be time for a whole new category of small, but fast moving players to come to the automotive world as Tesla’s Suppliers – not just one per part to be outsourced, but a bunch of them per part, so that adjustments can be made on a per small supplier basis, with out affecting a number of suppliers at the same time!

    Imagine if 10 smaller suppliers were each producing components at a rate they could sustain, and the combined benefits was with the 10 suppliers, there was enough supply to support Tesla’s Demand!

    So Basically, I am thinking Tesla Might need to consider the Small Shop idea, finding a lot of small shops that are quality oriented, but of which each one on its own could not keep up, but with multiples of them, the effect would be that Tesla was not constrained for supply!

    100,000 Garages is an environment something like that already!

    Got an idea? Get it made.
    100kGarages connects you with Fabbers who can turn your thoughts into things.

    Recent Talks with multiple other Battery Suppliers shows that Even Though Panasonic is starting to go Big on their Gigafactory Investments, Tesla is anticipating needing even more supply chain options and diversity to protect from shortfalls and delays, such as what they experienced in the Model X! They are seeking alternatives to traps by base suppliers, it seems.

    • Robert Cattle

      From the uk…….I still have not appreciated if these mass 3 series lithium EV,s or others are to be nuclear powered or fossil fuelled.
      Efficiency of life and rebuilding old batteries, fuel source etc. Etc… Leaves me with questions, perhaps someone can point me to the complete cycle with numbers, comparing the gas vehicle with the EV a La Tesla?
      Again, I must put down my biography of Nicola Tesla , putting westlinghouse in the place of Panasonic and trying to see the 2016 Edison ?
      I hope 2043 is not a repeat of 1943 New York
      Sprinters running marathons does not compute?

      Rob of York UK.

  • Jürgen Kaiser

    Development time is decreasing rapidly because of the use of model based, integrated engineering processes, methods and tools. At the IAA 2017 in Frankfurt CHERY showed the EXEED TX, built on the EXEED-platform which has been developed based on vehicle reference models. Time and effort for the development of the E/E-system can now be cut by half, using engineering task automation. The digitalisation of the development of the electronic systems already took place. The whole story can be found on http://www.3E-motion.com.