Tesla has always struggled to build cars. Now that the critical foundation is really hurting the business

  • Tesla has always struggled to meet auto industry standards for its manufacturing processes; CEO Elon Musk has called this "production hell."
  • Because the company spends so much time on something the rest of the automotive industry has almost perfected, it has less time to deal with the more complicated aspects of business. [19659002AfterwardsTeslaharvesthardennefeilenblitzetdrytredivisivingservice
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For years it was the biggest puzzle in the automotive industry. Tesla's share price, mindshare and media profile increased with vehicle sales, and although the company went from selling a few thousand cars to almost 250,000 in 201[ads1]8, it continues to bungle fundamentals about the industry. They came up with a name for it: "production hell."

For industrial veterans, this was confusing. Automakers had spent decades perfecting a "lean" production model, and when Tesla began to increase production seriously, the electric car manufacturer should have been ideally positioned to implement this system with a minimal learning curve.

the opposite happened. Last year, Tesla's actual California plant failed so thoroughly by fitting the Model 3 sedan that the company threw an extra line in its parking lot; Located under a large tent, it looked like something from the early days of car production.

I thought it was actually an innovative solution to an annoying problem, a quick, "good enough" patch, and that enabled Tesla to keep Model 3 on the track. But that didn't make it any less confusing.

Read more: How Tesla's cars stand out against the best of the competition from the world's best carmakers

In fact, for a large part of the last five years there has been a focus excessive attention to Tesla's nuts and bolts. I cannot exaggerate how utterly strange this is. In the traditional automotive industry, cars that are advertised for production only appear … a year later. Literally no one spends time obsessing over Ford's or GM's or Toyota's ability to actually build cars. Rather, they worry that Big Auto may overdo it and weaken too many cars and be forced to cut prices to move excess inventory.

The car manager can focus on the important things – not on making cars.

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Major car manufacturers take this section for granted.

The benefit that assumed competence gives to car drivers is considerable. They are free to run their businesses, free from worrying about bumpers and wheels being attached as planned. This is important, because the business is both dynamic and demanding with considerable advance planning and investment.

You cannot sit and wonder if your million dollar robot is welding the body panels properly or if the wiring harness number 7046 / 33B has been properly specified, ordered in the right quantities and has a valid installation protocol.

Tesla's CEO Elon Musk lurks at such trifles, and goes so far that he has sometimes put a sleeping bag in his factory. As a result, he lacks time to think through the other key strains of the business, ranging from service to finance (he lacks time anyway, given that he also runs SpaceX).

The problem has become even worse as Tesla's production and sales have increased. The brief form of the story is that although Tesla finds out the basics of production, it adds complexity to other parts of the business and shows no signs of taking a breather to consolidate; on the contrary, it is preparing to turn the switch on a new factory in China.

Tesla also has much more downstream problems than large, traditional car companies. The big guys design and design, manufacture and market vehicles; they also maintain financial arms to leverage the automotive industry to less capital-intensive financial profits. Tesla does all that (minus, strangely enough, the funding), but because Tesla doesn't use franchise dealers, it handles just as full sales and service, and it supports a widely spread fast-charging infrastructure, its Supercharger network (Ford, on the other hand, doesn't run gas stations).

Downstream is Tesla's biggest challenge

  Tesla store

A Tesla store.

This downstream setup has been severely tested as Tesla has grown, and it is often cracked. Tesla has fixed it on the go, I think largely because the company is in almost permanent fire alarm mode with everything that is not the all-consuming vehicle-mounting side of the business. Tesla has obtained a passport from its loyal owners, but that equity will be used at a future date.

Tesla would not have had to deal with this if it had made two important decisions early:

  • First, the company must have followed best practices for the automotive industry when it began building cars in five-digit numbers. Production would be far smoother now if it had. All this would have meant was to use some version of the Toyota Production System instead of designing an incomparable intricate vehicle in the Model X SUV and trying to automate too much of the Model 3's assembly.
  • Second, Tesla should have either partnered with or established a franchise dealer network or created their own. Golden fits the Silicon Valley lesson, but it would have been a better idea to emulate Honda, whose first dealership franchise was created in the 1960s (not too far from Tesla's current headquarters).

At this time, Tesla has been around for a year and a half. If these shortcomings were corrected, they would have been. So from here on out you can expect more of the same.

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