But is Tesla ready for the mass-market long-range EV?
Sure, Tesla showed us a car. It’s designed and debuted at least part of it, though the interior is still to come.
For traditional automakers, at this point, they’d be effectively close to the finish line. The research and design (R&D) is the hard part. Sending the final design into production is the easier part (I am speaking very broadly, of course).
Tesla has the unenviable task of scaling up from a small carmaker into a major one.
That’s because carmakers like Toyota, for example, have been building cars for almost 80 years, and they have the production process honed to a fine art.
Tesla, on the other hand, is a relative newcomer. In fact, it’s produced around 200,000 cars since the company began making cars in 2008. Heck, it’s only produced around 80,000 Model S cars.
Now, however, Tesla has the unenviable task of scaling up from a small carmaker into a major one in two years time — and not just in terms of production.
In many ways, the upstart automaker operates like a tech company, rather than a traditional car company. This fact is best evidenced in its company-owned stores and Apple-like repair policies.
Teslas break down just like any other car, requiring a visit to the repair shop from time to time. Exactly how Tesla handles the repair process of its customers’ cars stands in stark contrast to other high-end carmakers.
A hypothetical example: Say a Model S has a failure in one of its electric motors. Once alerted by the owner, Tesla will tow it into one of its repair facilities. Rather than take a few days diagnosing the problem, Tesla instead replaces the motor with a new one and gets the car — and the customer — back out on the road as quickly as possible.
By comparison, a brand-new Mercedes-Benz suffering from engine troubles will be similarly towed into a repair facility. Instead of replacing the engine, Mercedes will have a repair technician spend hours or even days diagnosing the issue so that the problematic part or system can be replaced or repaired.
While the owner might be slightly put out by the inconvenience and have to drive a loaner car for a few days, Mercedes saves countless thousands of dollars replacing a failed sensor rather than an entire engine.
A photo posted by Nick Jaynes (@nickjaynes) on Mar 31, 2016 at 10:31pm PDT
Conversely, Tesla attacks the problem like Apple does with its Genius Bar. Give it a quick look; If it’s not immediately clear what’s wrong, give them a new one and get them out of the store.
There are likely several reasons why Tesla operates this way. First off, Elon Musk loves to operate differently than traditional carmakers. Secondly, it’s a way to keep your customers very happy who paid, $100,000 on average for a Model S. Lastly, it could be argued Tesla simply doesn’t have the manpower to diagnose every single problem on every single car.
It’s doubtful that same process could be applied to the Model 3, even with Tesla’s planned expansion: Musk has said he aims to double the number of Tesla stores and, presumably, service centers.
That’s a great start. However, as mentioned, Tesla has produced only about 200,000 cars to date. While it may have the square-footage by 2018 to handle the service needs of an additional 325,000 cars, will have the money to do so as well? Replacing electric motors and 17-inch touchscreen displays over and over on many, many cars is an expensive undertaking no matter how you slice it, and the margins on a $35,000 car are quite different from a $100,000 one.
Overengineering and production
Tesla delivered fewer cars in the first quarter of 2016 than it had anticipated. It cited company “hubris” has the reason why it failed to meet its own production target. More simply, the company overestimated its ability to produce the Model X: It couldn’t reliably make all the parts in-house that it intended, and parts suppliers fell through.
Specifically, Tesla blames adding “too much new technology to the Model X” as the root cause of production delays.
Of course, every car brand has production hiccups and slowdowns from time to time. Usually, though, it’s not because the company failed to understand the scope and logistics of building the car they designed.
There’s reason to hope for the Model 3, though. As far as we know, the Model 3 won’t have the hard-to-produce falcon-wing doors or the massively expensive panoramic windshield of the Model X. So the Model 3 should be easier to produce (ignoring the “spaceship”interior Musk has promised).
Tesla struggled to produce 2,400 Model X vehicles in the first quarter of 2016.
That said, Tesla struggled to produce 2,400 Model X vehicles in the first quarter of 2016. And that car, save the wacky additional extras, wasn’t an entirely new car like the Model 3 will be.
Since the Model X is based upon the Model S chassis, it could have been a relative no-brainer to build. I mean, carmakers love spinning off a chassis into another model because it makes producing them easy. That’s why there’s both a Fiat 500X and a Jeep Renegade — they’re the same car underneath.
Tesla is now charged with producing at least 325,000 Model 3s, which are supposed to enter production sometime in 2017.
If and when Tesla builds all the Model 3s, the customers will have to somehow charge their cars. That’s simple: They’ll just visit one of the company’s Superchargers (which should number about 7,000 by then), right? Yes, in theory.
Even now with around 200,000 Teslas on the road, a lot of owners are reporting long waits at Supercharger stations. Because of this, Tesla sent out a letter last year asking some of the more frequent Supercharger visitors to limit their usage.
If Tesla is able to build and produce all the pre-ordered Model 3s, it would represent more than a 100% increase in the number of Teslas and potential Supercharger users.
Musk promised at the Model 3 unveiling that Tesla would double the number of Supercharger stations by the end of 2017. Even with double the number of stations, will that be enough to charge the glut of new Model 3s on the road? It’s unclear.
Moreover, Musk is “totally cool” with opening up the Supercharger network to non-Tesla owners, which would further clog up the already sometimes overtaxed Supercharger stations, especially as competing “affordable” EVs like the Chevy Bolt start to arrive.
If you zoom back and look at these issues from afar, they’re actually enviable problems to have. Carmakers typically have to drum up enough interest in a car to pay for its R&D and production costs. Tesla has essentially the opposite issue; it has to figure out how to profitably produce one of the most anticipated cars in history.
What’s more, there’s no indication Tesla can’t pull it off. After all, Musk and his Tesla cohort have succeeded in doing what virtually everyone thought would be impossible: Make EVs cool and wildly desirable. Because of what it’s achieved in this space, every carmaker is playing catch-up.
It’s clear Tesla has the technical and visionary chops to pull off the Model 3. And, thanks to the pre-orders against which it can take out loans, it may even have the cash to pull it all together. But the Bolt and other EVs will take their best shot while those 325,000+ (potential) customers are waiting. Hopefully Tesla can move fast enough so their patience doesn’t run out.
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