December 7, 2017
Jeremy Arnold, business analyst, Quora
How good is Tesla at manufacturing vs. other automakers?
As things stand today, Tesla is pretty far behind. But that’s because they’re still a minnow with little scale or experience. The three largest automakers (General Motors, Volkswagen and Toyota) each produce a little over 10 million cars a year. Tesla will ship around 100,000 vehicles in 2017—i.e., a comparative production of about 1%.
Of course, this gap is about to close. Tesla is just now getting into the mid-priced sedan market with their Model 3, which they’re hoping to make at a pace of 10,000 per week by the end of 2018. (They’ve already pre-sold 455,000 of them, so they’re feeling significant pressure to up their production dramatically.)
Quality and efficiency should improve with experience, but early reviews of the few hundred Model 3s shipped thus far suggest they have a ways to go. For all the talk about their “factories of the future,” Tesla is subject to the same constraints and vulnerabilities as any other niche manufacturers. Early products are going to be expensive and not always well made.
Even with time, it isn’t obvious that they’re going to become “better” in any universal sense. They’re placing more focus on automation than most traditional automakers, true—but for all the marketing hyperbole, their playbook is less revolutionary and more an aggressive optimization of the norm (combined with higher risk-tolerance).
Their secret sauce basically boils down to:
- Keeping the number of models to an absolute minimum (fewer lines to optimize).
- Keeping the number of parts and design elements to an absolute minimum (fewer things to bottleneck).
- Producing as many of the parts internally as possible (e.g., building the Gigafactory for battery production).
- Skipping some normal aspects of quality assurance (like soft-tooling, the forgoing of which for the Model 3 saved them five to eight months).
- Avoiding unionization so workers can be replaced with less hassle (also pushing said workers to the brink with hyper-ambitious quotas).
- Automating as many things as can be automated (expensive up front, but efficient down the line thanks to the preceding points).
So they’re not quite a disruption to the industry so much as a niche manufacturer fully exploiting the upsides of their position. It’s likely that this path will end with them producing cars at an industry-leading margin, but that’s more a function of narrow focus than manufacturing brilliance.
Musk was able to disrupt the space industry by employing radical strategies in a low-competition market. Making cars is far more of a solved science. There’s no equivalent innovation in the automotive world to reusable rockets. Sure, aspects like the Supercharger network (with drive-through battery swapping) are ingenious—but the actual manufacturing is happening in an old GM facility that’s not all that more innovative than current GM facilities elsewhere. That anyone believes otherwise is a testament to Tesla’s marketing magic.
This question originally appeared on Quora—the place to gain and share knowledge, empowering people to learn from others and better understand the world. You can follow Quora on Twitter, Facebook, and Google+. More questions: Tesla: Why doesn’t Tesla use dealerships to sell their vehicles? Automotive Industry: Which car manufacturers have been embracing electric and hybrid cars instead of petrol cars? Manufacturing: Why are manufacturing costs higher in India, compared to China?
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