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More Production Problems for Tesla

Posted By Jeff Moad, November 06, 2014 at 3:49 PM, in Category: The Adaptive Organization

Electric car pacemaker Tesla Motors is apparently struggling with manufacturing challenges as it seeks to both ramp up production of its popular Model S while also rolling a new luxury electric SUV model.

In a letter to shareholders that accompanied announcement of its third-quarter financial results, Tesla said it is lowering its 2014 production target from 35,000 vehicles to 33,000 while also pushing back the initial delivery date of the new Model X SUV to the third quarter of next year.

In the letter to shareholders, Chairman and CEO Elon Musk said Tesla’s Model S production shortfall was caused by a longer-than-expected re-tooling period at its Fremont, CA, plant which was undertaken to allow production of the new Model X alongside the Model S sedan.

“The ramp to our target production rate took longer than expected due to system integration challenges, reducing our production by almost 2,000 vehicles,” Musk wrote.

Musk reassured shareholders that demand remains strong and that production problems will be overcome. “We expect our annual production will increase by over 50% in 2014, again in 2015 and probably for several years to follow,” Musk wrote.

To overcome integration problems, Tesla said it has elected to separate its Model S body center from its Model X body center, ensuring that the Model X ramp up will not affect Model S production.

Tesla said it also intends to boost production by reducing product complexity. “One of the significant actions we intend to take in order to reduce manufacturing complexity is to simplify our product offering by reducing the number of options and powertrain combinations. This will enhance our ability to scale production in 2015,” Musk wrote.

In the recent past, Musk has also lamented Tesla’s challenges with suppliers that have impacted production. Those problems may be continuing. In remarks to financial analysts this week, Musk added, “People don’t understand how hard it is to manufacture something. It is really hard. You have to get the whole supply chain marching to the same cadence.”

Famous for its determination to challenge many aspects of the conventional automotive business model, Tesla seems to be demonstrating that it is not immune from the challenges associated with increasing production while coping with growing product complexity.

Written by Jeff Moad

Jeff Moad is Research Director and Executive Editor with the Manufacturing Leadership Community. He also directs the Manufacturing Leadership Awards Program. Follow our LinkedIn Groups: Manufacturing Leadership Council and Manufacturing Leadership Summit


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