Elon Musk has some high expectations for the Tesla Model 3. He says the company has told suppliers to plan for “1,000 cars a week in July, 2,000 a week in August, and 4,000 a week in September.” Tesla plans to be making 5,000 cars a week by December and double that number by the end of next year. If so, the Model 3 will outsell both the BMW 3 Series and the Mercedes C Class in the US market. If the plan is to disrupt the traditional car companies, eating their lunch in the sales race is one sure way to do it.
How is Tesla planning to make all this happen? For one thing, it claims to have re-invented the manufacturing process. Musk says his engineers have looked at every aspect of production and optimized everything that happens from when the raw materials come in at one end until the finished cars roll off the line at the other.
A Ten Times Faster Factory
He claims his factory will be ten times faster than any other. The cars will whiz along so fast that no human being will be able to keep pace with them. The Tesla Model 3 production line will be the most automated in history, as machines will do virtually all the work. The optimization process is not confined just to automobiles, however. According to Musk, the innovations will revolutionize all manufacturing and increase the speed of production dramatically. He says he is recreating “the machine that builds the machine.”
Musk is famous for setting the bar impossibly high. Even his biggest supporters on Wall Street are skeptical he can build and sell that many cars in so short a time. Most manufacturers need 6 months to a year to test their new vehicles out in the real world before full production begins. One way Musk plans to shorten that timeline is to use his own employees as testers. They will receive the first cars produced. That way, any glitches and problems will be identified early and brought to the company’s attention when the employees come to work the next day.
Leveraging Customers
Musk is an expert at getting others to do his work for him. The company frequently enlists so called beta testers to try out new software upgrades before they are released officially. Every Tesla ever built since October, 2015 sends driving data back to the factory over the air, which has allowed Tesla to accumulate the largest library of real world road data in history.
All that data is analyzed by company engineers to improve the autonomous driving features of Tesla automobiles. Other companies are desperate to obtain digital driving maps but they have only a small fleet of test vehicles on the road. Their regular production cars are incapable of proving critical data to the factories because they are not connected to the cloud the way Teslas are. Musk says regulators will require a 20 billion miles worth of data before they approve autonomous cars. Tesla is already nearly a quarter of the way toward that goal. That’s a huge advantage for Tesla.
Hurdles Remain
So will the Model 3 sweep away all its competitors and leave them floundering in its wake? Maybe, but it still has some hurdles in its path. For one, Tesla is only allowed to sell direct to US customers in 26 states. That leaves a large part of the country and some big states like Michigan and Texas where customers must jump through hoops to test drive, order cars online, and take delivery in another state. Not quite as convenient as dropping by the local car dealer just down the road.
Tesla does not pay for advertising. Instead, Musk whips his followers into a frenzy by skillful use of tweets. That has worked well for early adopters, but the Model 3 is meant to be a car for mainstream buyers, some of whom may not even own a smartphone or have any idea what Twitter is. (I know. Hard to believe some folks are so clueless.) Tesla may not be able to maintain its “no advertising” policy if it seeks to become a mass marketer instead of a niche player.
Model 3 As Taxi
Musk has been dropping hints this week that the Model 3 will not be a luxury car like the Model S (although some say the Model S could be more luxurious). “Nothing majorly new that a consumer would notice. Lots of new tech in the design and production process though.” It will have only one display screen because, “The more autonomous a car is, the less dash info you need. How often do you look at the instrument panel when being driven in a taxi?” Musk said in a subsequent Tweet.
And that is the first sour note in the Model 3 symphony. One one hand, Tesla is targeting 3 Series and C Class customers. On the other hand, it is comparing the Model 3 to driving a taxi. Will people be willing to spend an (estimated) average of $42,000 for a vehicle that is just a glorified taxi? Are 400,000 people a year going to shell out that much money for a car that can be used as part of a money making scheme? Musk says self driving cars will soon be as common as self service elevators — and about as much fun to operate.
Is the world ready for that paradigm shift? Musk clearly thinks so and that may be the one hurdle the Model 3 can’t conquer.
Source: Bloomberg
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