By on November 1, 2017

Tesla Model 3

Tesla’s Model 3 production problems are well documented, including the recent firings/layoffs. Now we’re hearing that while Tesla has conceded it has production “bottlenecks” (and blamed some of the issues on suppliers failing to meet their deadlines), the company may also be shooting itself in the foot with mismanagement.

A TTAC reader with insider knowledge claims a design change to an aluminum frame component has idled production for nearly two weeks. In addition, an Indeed.com job posting from about 45 days ago sought temporary contract workers to program the robots on the assembly line.

That last bit is notable, as typically the hiring for that job would have wrapped up much sooner in advance of the production launch.

This isn’t to say Tesla’s apparent blaming of suppliers is untrue – it’s just possible that all of these things are true. It’s also not shocking, at least to me, that a small automaker would struggle with ramping up production on its first truly mass-produced vehicle. After all, the brand has also struggled with production on the lower-volume Model S and Model X.

Our reader declined to elaborate further on the problems, and Tesla has yet to reply to an emailed inquiry as of this writing.

Some of you will accuse us of Tesla-bashing, but it’s important to note that this is news in part because of the sky-high expectations for the Model 3 launch, and in part because of the company’s own promises – promises that likely won’t be met. Also note that I’ve spoken out recently about treating Tesla based on the facts, and not hype or hate.

We’ll update this post should we hear anything further.

Tesla has now said it will not reach its goal of a Model 3 production rate of 5,000 units per week until “late” in the first quarter of 2018. The company previously said it would achieve that goal by the end of this year.

[Image: Tesla]

Get the latest TTAC e-Newsletter!

Recommended

39 Comments on “Tesla Production Troubles May Be Continuing Due to Design Changes, Hiring Issues [UPDATED]...”


  • avatar
    sirwired

    Really, I think Tesla’s (entirely predictable) problems in meeting their lofty production goals are beside the point. They have a large-enough order book, incredibly patient and forgiving customers, cash, and ability to raise cash, to get production ramped up (albeit behind schedule.) They certainly deserve criticism for promising things they couldn’t deliver, but that doesn’t have a huge effect on their long-term viability.

    The real question is whether or not they can demonstrate that once this happens, they’ll actually be able to make money selling cars, especially after the subsidy spigot is cut off.

    I wouldn’t necessarily count them out; Amazon lost money for many years on big dreams, and now nobody questions their ability to make money off of all that capital they spent, nor on the profitability of their side-ventures.

    • 0 avatar
      hreardon

      It goes deeper than that, sirwired. It demonstrates a level of naivete they cannot afford. It’s like Steve Jobs’ vision of sand pouring into the Macintosh factory and finished Macs being shipped out at the other end. He had little appreciation for the intricacies and difficulties of manufacturing and this contributed to the delays and higher than originally desired price point of the finished product.

      While Tesla has *some* consumers who are patient (only time will tell how many really are), their bigger challenge will be what happens when the early adopter market is saturated and the mass market is left. The mass market is far less forgiving of the things that Tesla early adopters are willing to overlook or accept.

      Sure, they’ll work out the kinks, but they won’t get the same timeline afforded them that Microsoft did as it progressed from Windows 1.0 to Windows 95. Call me crazy, but I suspect consumer reactions to issues with their $35,000 automobile purchase will be slightly different from those who purchased a $210 copy of Windows back in the day.

      The 2018-2020 period will be crucial for Tesla as real competition enters the EV space, in volume. I think the bigger question will be: absent a major petroleum price shock, will there be consumers for all of the EVs that will hit the market in the next 24 months?

      • 0 avatar
        JMII

        Amazon makes money by selling server space and bandwidth. The store is apparently their side business which makes (percentage wise) almost nothing in comparison. Their business model appears to be not focused on profit but on dominating the market to the point where they have no competition. I just keep waiting for the other shoe to drop. The day when all prices on Amazon go up 10 fold, but there is no other place left on Earth (or Mars by then) to get milk, eggs and bread.

        If anything these delays will make the 3 even more desirable. Its a full on limited edition being hand built. People still want to OWN Telsa’s so the demand is clearly there. Not being able to met that demand will hurt their bottom line (cash flow) but its not stopping or at this point even hurting the brand. The question is how long can you stay in business with limited cash flow. Or is all of this just part of a bigger razor vs blades business model. IE: Telsa makes cars that force you to buy Superchargers from SolarCity to keep them “fueled” up?

        • 0 avatar
          SCE to AUX

          You can charge any EV – including a Tesla – on a universal J1772 Level 2 charger at home.

          Superchargers are high-speed DC chargers installed in public and private locations on Tesla’s dime, typically used for long-distance driving, and they are moving to a for-fee system in the future.

          Tesla gets a lot of press, but most EVs are not Teslas. I doubt they could dominate the charger market, although I’d advocate a universal DC charging system, akin to the unleaded fuel pump.

          • 0 avatar
            mcs

            My j1772 home charger is 50 amp capable. My Leaf can only supports up to 30 amps, but a Tesla can handle the full 50 amps.

            All of the quick chargers I now encounter are dual head CHAdeMO and CCS. It doesn’t seem like a big deal to support multiple standards.

            Speaking of unleaded fuel pumps, there’s now hope for the possibility of a viable Supercharger Network competitor. Shell is starting to add chargers to their stations in Europe. I’m sure we’ll see the same here in the US. Hopefully, they’ll be the 400kW capable chargers.

            https://www.theguardian.com/business/2017/oct/18/shell-to-open-electric-vehicle-charging-points-at-uk-petrol-stations

          • 0 avatar
            sgtjmack

            Yes, Tesla may be installing them, but they are not going to continue to supply the power. Electricity is not free, and soon will be seeing an increase in prices as demand increases. Sort of like a drug dealer giving you the first hit for free just to get you hooked…

          • 0 avatar
            mcs

            sgtjmack: I didn’t say Teslas Superchargers were free. In fact, they aren’t. You’re also missing the fact that Tesla is a solar cell and storage battery manufacturer, so they have the ability to mitigate power costs.

            Shell will charge, that’s for sure, and it will be at a profit. Not a problem since we don’t buy EVs to save money. We buy them because the performance is a step up from any ICE powered car.

      • 0 avatar
        sgtjmack

        Absolutely no need to worry about a fuel shortage or price hike on the near and not so near future. Prime example, when Houston was hit this summer and had to shut down production of petroleum products, Lousianna simply started up several of their petroleum plants and started pumping enough gas and diesel that the rise in gas prices was short lived.

        Add to that the fact that the President just allowed more exploration and drilling permits in the major oil reserves in the Gulf. So I don’t see any major issues with oil or gas production at try is time.

    • 0 avatar
      wsn

      @sirwired

      The best end game of Tesla, as an automobile company (let’s not talk about Elon’s plan to send people to Mars for now), is to be the next Toyota. I.e. the largest automobile company in the world when every car is electric.

      They are about 1% there in terms of production and yet their stock capitalisation acted as if they have succeeded already. And that’s very dangerous. If there is any change to the common perception of the company, stock price may fall and then the company won’t have enough money to burn and will go to bankruptcy right away.

    • 0 avatar
      Big Al from Oz

      Sirwired,
      Tesla or Elon Musk has a problem. Production and ever increasing debt. So far the last quarter he had to borrow $1.4 billion on top of another $1 billion from the previous quarter. And he’s far off the mark in recovering this.

      He also moved production resources from his other 2 vehicles to augment the 3.

      He has discharged his leading minds in autonomous driving. Removed key engineers and experince from the factort floor.

      No organisation would find it easy to recover from such a shake up.

      Elon has created a huge cultural shift withhin Tesla, using fear.

      This ain’t going to end well.

  • avatar
    indi500fan

    Based on today’s quarterly financial release, it appears “production hell” maybe translate into “cash flow hell” also.

    • 0 avatar
      sgtjmack

      Ah, we don’t need to complicate things with information like that. Nor the fact that many investors are weary and about to pull out since there hasn’t been any real profit made, nor is there any sign of real profit being made in the future.

      • 0 avatar
        mcs

        @sgtjmack: “Nor the fact that many investors are weary and about to pull out since there hasn’t been any real profit made”

        Where do you get that info? Granted, that should be a true statement, but I’m not sure it really is.

  • avatar
    SCE to AUX

    Tesla needs to appreciate that Model 3 buyers *are not* early adopters.

    Early adopters got EVs in 2012, like I did, but even in my case, my Leaf came from a company with lots of car-building experience, from a dealer 7 miles away. Other than battery degradation and a lousy nav system, I had no problems with it.

    At this point, I don’t want the true early adopter experience. What if your Model 3 breaks down 200 miles from the nearest service center, like this one did:

    https://insideevs.com/tesla-model-3-with-california-plates-spotted-outside-detroit-michigan-having-some-issues/

    No, I expect to get in my car and drive it, with every feature I paid for fully functional. I do not expect to sign a gag order which silences me should anything go wrong. I expect to be able to take a test drive before I buy.

    Not only are Model 3 buyers cross-shopping features, they’re cross-shopping companies.

    • 0 avatar
      sgtjmack

      Battery degradation isn’t a main issue with you? It is an electric car, and should be able to last at least 150k miles with out major issues like that. But that is one of the Achilles heals of the battery world…

      • 0 avatar
        mcs

        @sgtjmack: Battery degradation? I have 55k miles and no degradation. What about ICE degradation? Do ICE powered cars last 150k miles without a problem? They don’t. Why 150k anyway. Maybe you should actually do some research: https://techcrunch.com/2016/09/29/tales-from-a-tesla-model-s-at-200k-miles/

        Battery technology is improving at a fast rate. My battery has technology improvements over SCE’s battery and that’s why it’s going strong at a point when his had serious problems. Battery costs are coming down as well.

        Besides, I’ll take a planned battery replacement over the nickel-and-dime random failures that you experience with an ICE car. I have friends that go crazy with various sensor failures. Water pump, fuel pump, cooling system, transmissions that are too complex to repair. Yeah, I’ll take a battery replacement over that crap any day.

        • 0 avatar
          Joss

          +1 MCS you’re streets ahead of other folks who don’t yet grasp the reliability & maintenance simplicity of far fewer mechanical parts.

        • 0 avatar
          Art Vandelay

          The last couple cars I had went 150k without issue and one of those was a Hyundai. I had to replace the brake pads and buy a set of front rotors as well as some suspension work, but EVs still have those so id call that a wash. Yes I would have saved the 2 timing belts and water pumps, but that was an easy afternoon on both vehicles. I get that electrics are easy to maintain, but it isn’t 1974 anymore with respect to the ICE either and they typically go well over 100k without any issues.

  • avatar
    dont.fit.in.cars

    It’s true…the gentleman that programs my equipment has done projects for them as well as solving GM’s sub making axles problems.

  • avatar
    conundrum

    Moribund. That’s TTAC. And gradually slipping below the waves.

    Why write this article? Was anything new added, or was it just another grindingly boring rehash with, gasp, an insider giving away almost nothing?

    The Daily Kanban is so far ahead on this file and the real reasons for Model 3 production delays, that I truly wonder if anyone on staff here is awake, you know, keeping up with what’s being published. Yes, you can read about the company actually making the Tesla transfer line, and the continual design changes Tesla imposes, then blames the supplier for not meeting on time. What a dud company Tesla is! They can’t even acknowledge there is a way to develop vehicles prior to ordering tooling – for a reason. But to hell with that says Tesla – just like a petulant child that refuses to learn history and stand on the shoulders of those who’ve gone before, Tesla is like an octopus – it learns it all from scratch by itself since nobody anywhere has ever had the brainpower of St Elon Musk, and his band of non-technical depositors bow in prayer. Makes you want to spit.

    TTAC, meanwhile, still has staff who cannot get it through their thick heads how the Mazda SPCCI engine works (hint the S stands for Spark meaning spark plugs) published elsewhere weeks ago. I’ve mentioned it before, others have mentioned it. But no, it’s heads down and don’t bother me at TTAC City.

    In fact that seems to be the problem round here. It’s like the TV networks, one never acknowledges the name of a rival who made the scoop. Not done, might have them change channels and we CANNOT have that. No, we’ll ignore them and keep the sheeple uninformed, for business purposes, you understand.

    Baruth goes on rants about individual hack auto journos, all from his allegedly eerie high above the hoi polloi of regular dunces. Why, I believe he fancies himself as the doyen extant of motoring writers. But the site itself rarely acknowledges other outlets, especially if kudos are warranted.

    These last few weeks, well, I hop over the articles, tired worn themes, and the general air of lackadaisical rewrites with snide asides, whether true or not, purporting to show how brilliant the writer considers themselves. Nothing new ever gets featured here first. It’s a club and it’s moribund.

    For goodness sake wake up and get cracking. If keeping your readers informed means you acknowledge sources beyond WSJ and Reuters etc. and those the crack team here assembled manage to stumble on themselves, effectively zero, so be it. It won’t affect your manhood, and knowing a bit more rather than hypothesizing might actually get you lot asking the right questions in the first place.

    However, I’m not holding my breath. An armchair, pipe and slippers is just so comforting, it’s hard to bestir oneself beyond the whisky cabinet.

  • avatar
    CarnotCycle

    Tesla as ongoing financial concern has lived on its own hype via minting cash off stock price for some time. Tesla would have bounced checks quarters ago were it not for new stock issuance (printing money).

    Model S-era Tesla has not seen flat stock price through one of these liquidity-cycles of theirs. Will be interesting to see how/when they (inevitably) try to print more money given they are an equity machine financially, and will be for some time to come. Maybe more debt instead? Who knows, but Musk will need more cash to shovel into the furnace soon.

    I’ve suspected for some time Musk eventually financially weaponizes the very real value in SpaceX somehow for another cash pile if it comes to that for Tesla. Ironically, Musk has already done something exactly like that for Solar City, essentially by using Tesla equity. It will be Muskian corporate food chain when SpaceX is used like that for Tesla.

    • 0 avatar
      hamish42

      Mr. Musk is trying to be Henry Ford, Thomas Alva Edison, Alexander Graham Bell, Marconi and the Wright Brothers all at the same time. Things might be better if he disciplined himself to getting out cars and leave the rest for a little later after he’s up and running with Tesla.

  • avatar
    michal1980

    missed from TTAC is that Tesla is now backing away from a 10,000 a week model 3 goal. Which means 2 huge things.

    1) people will be waiting twice as long to get a car.
    2) Tax credits will apply to far fewer people, and more of them will apply to people buying the more expensive cars.

    • 0 avatar
      APaGttH

      3) Luxury, near luxury and mainstream competitors just got another six months to go-to-market.

      • 0 avatar
        hreardon

        Bingo, APaGttH. This has been my primary argument as well for quite some time.

        Musk’s other major fear: a financial hiccup or recession. If we hit a downturn (which, frankly, should be due anytime now if we’re going by history), then Musk’s cashflow from investors dries up and the rocky state of Tesla’s financials becomes their #1 problem.

  • avatar
    APaGttH

    TSLA posted a net loss of $619MM. I wrote yesterday would be in excess of $500MM. Nailed it. Only reason cash is up is because of the junk bonds they sold. They can’t keep burning $1 billion a quarter and if they don’t have their production issues solved by 2Q18, they are in big trouble.

    https://www.reuters.com/article/us-tesla-results/tesla-stock-falls-on-model-3-delays-biggest-ever-quarterly-loss-idUSKBN1D15TP

    • 0 avatar
      Big Al from Oz

      APaGttH,
      This is the problem confronting Tesla, debt. Mix this with a history of failure to meet goals, removing key personnel from Tesla, innovation and design, engineers and coal face minds will make it even harder for Elon to achieve.

      Then add the reduced morale due to poor human resource management, mixed with fear in the way that Tesla manages, I do believe Tesla is not going to be an Elon Musk entity for much longer.

      The real value in all of Elon Musks assets is nowhere near the paper value, which is based on the probability of Musk achieving his over reaching and overstating goals.

    • 0 avatar
      hreardon

      And as I mentioned earlier: if the market tumbles into a correction and/or the easy money disappears (interest rates increasing), then the sorry state of Tesla’s finances will be their downfall.

      It’s a race with huge risks, I get it. In many ways I applaud the chutzpah and ability to sell his vision and I don’t wish them to fail – I just think that the risks to their business are growing by the minute and Musk’s desire to reject all of the things that work (and the natural laws inherent to manufacturing) may well be their downfall.

  • avatar
    ryanwm80

    Did anyone else look at the job posted on Indeed? The pay rate is 200-250 for a 10-12 hour day. At best you’d make $25 per hr. Sure you could make more working OT, but then you don’t have a weekend. With that kind of pay rate in the Bay Area you’ll be lucky to live paycheck to paycheck. And some people say there’s a shortage of engineers? It doesn’t make sense for a person to take thousands of dollars in student debt if the companies aren’t going to pay decent.

    • 0 avatar
      Art Vandelay

      And this is why manufacturer s build in the South. That kind of money in Alabama or Georgia let’s you live really well. Heck half of that is a really good living.

  • avatar
    AtoB

    “Did anyone else look at the job posted on Indeed? The pay rate is 200-250 for a 10-12 hour day. At best you’d make $25 per hr. Sure you could make more working OT, but then you don’t have a weekend. With that kind of pay rate in the Bay Area you’ll be lucky to live paycheck to paycheck. And some people say there’s a shortage of engineers? It doesn’t make sense for a person to take thousands of dollars in student debt if the companies aren’t going to pay decent.”

    Thank you for pointing this out. The only employees who can make this work with be people willing to crowd together to make rent or entry level employees who still live with their parents.


Back to TopLeave a Reply

You must be logged in to post a comment.

Recent Comments

  • SC5door: Fiat build quality for $30K? Pass.
  • SC5door: Only way to get 201 HP is to require premium fuel for the 1.6T. Some Kona owner ran theirs only on premium...
  • Carlson Fan: This is good news. Hopefully it will help flood the market in a few years with used lease return...
  • Tele Vision: Gasoline and its fractions will be around for many years. Diesel makes nearly everything that cars drive...
  • NormSV650: Probably the most miles it will see for the rest of the decade….

New Car Research

Get a Free Dealer Quote

Staff

  • Contributors

  • Timothy Cain, Canada
  • Matthew Guy, Canada
  • Ronnie Schreiber, United States
  • Bozi Tatarevic, United States
  • Chris Tonn, United States
  • Corey Lewis, United States
  • Mark Baruth, United States
  • Moderators

  • Adam Tonge, United States
  • Corey Lewis, United States