In his quest to create a future built on sustainable energy, Tesla Motors Chief Executive Elon Musk has ticked off a long list of initiatives his company plans to pursue next: everything from electric buses and semi-trucks to driverless car-sharing networks and solar energy production.
The most important part of his strategy, to figure out how to make this 54-year-old assembly plant in Fremont, Calif., run as smoothly and efficiently as its electric cars do, in high volumes and profitably, the rest of Musk’s master plan is just a pipe dream.
In a conference call Wednesday with investors to discuss yet another money-losing quarter, Musk clung to the fact that in the last few weeks of June, Tesla finally overcame production problems that have dogged the company through the first half of the year.
The current production line is humming, stabilizing at about 2,000 vehicles a week. That would put the factory on track to make 84,000 vehicles by the end of this year.
Stoked by some 370,000 deposits for the Model 3, Tesla pulled the car forward by two years with an ambitious – some say outlandish – effort to boost production 10 times by 2018.
So far, Tesla’s execution has fallen short. Its first three cars — the Roadster, the Model S sedan and the Model X SUV — were late to market, more expensive than promised and failed to meet sales projections. The river of cash has yet to materialize as well. Since 2008, Tesla has generated about $2 billion in free cash flow (including about $500 million in zero-emission vehicle credits sold to other automakers), but spent some $6.2 billion on R&D and capital expenditures. Luckily, Wall Street seems happy to fill the gap. Indeed, after raising $1.7 billion in May, Musk acknowledged recently that Tesla will probably go back to the markets again.
Ramping to 500,000 vehicles annually from last year’s 50,000 by 2018 would be a remarkable feat for the newbie manufacturer.
But to achieve its target of 500,000 vehicles a year, Tesla needs to build one car every 55 seconds, on par with the most efficient factories run by Toyota Motors, Ford and General Motors GM. Tesla plans to “crush the conventional wisdom that you can only proceed with step-change improvements,” according to Tesla chief financial officer Jason Wheeler.
In his expanded “master plan,” Musk suggested Tesla should be able to achieve a five- to 10-fold improvement in productivity within six or seven years, and said today’s best auto factories are operating at “the speed of a tortoise.”
In Wednesday’s call with investors, Musk described the future Model 3 line as an “alien dreadnought,” much of the assembly work now done by humans would instead be done by high-speed robots.
A visit to Tesla’s Fremont factory is already a dazzling spectacle of technological innovation. More than 1,000 dancing robots swivel and lift aluminum parts into place, welding, riveting and gluing them together until the skeleton of a car takes shape. A giant conveyor then lifts and carries the bodies away to the paint shop, where they get a series of chemical baths and spray treatments using the latest eco-friendly techniques. Later, huge robots with names like Wolverine, Iceman, Angel, Beast, and Cyclops (Musk’s favorite Marvel Comics’ X-Men superheroes) lift and carry the unfinished cars through the rest of the assembly process.
Tesla prides itself on its scrappy, can-do culture to attack manufacturing problems. The company got a steal, for instance, on a $50 million hydraulic stamping press, paying just $4 million to a bankrupt auto supplier. The challenge was moving the seven-story hunk of machinery from Detroit to California. The press manufacturer said it would take a year and cost $35 million to tear it apart, transport it and reassemble it. Tesla engineers came up with a much cheaper and faster plan: they cut seven inches off the bottom so the pieces would fit through train tunnels on its way across the country.
Tesla also simplified the car’s design by reducing the number of overall parts and ensuring components could be assembled as modules that snap together easily. The power inverter (which feeds electricity from the battery to the motor), for example, will have 25% fewer parts than the Model S and X. Overall, the Model 3 will have 8,000 parts, compared with 20,000 for a traditional entry-level car.
The challenge now is time. Musk says suppliers must be ready to go by July 2017, for a planned production launch by the end of 2017. But Tesla hasn’t even begun to install the machinery to build the Model 3. Customers who paid $1,000 to reserve a Model 3 won’t wait forever.