Consumer interest in the Tesla Model 3 is beyond what even the most optimistic of Tesla supporters could have envisioned. In just one week, Tesla managed to secure over 325,000 reservations from buyers all to eager to plunk down $1,000 for the right to buy a car that they may not realistically see until 2019 or 2020.
As Elon Musk indicated via a recent tweet, the volume of Model 3 preorders represents $14 billion in unrealized revenue, all accumulated in just a few days. Clearly, the question as to whether or not the public would show interest in a more affordable mass market EV from Tesla has been answered emphatically. But in the wake of Tesla’s Model 3 unveiling, a number of new questions have emerged.
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Touching on some of the issues Tesla will soon encounter as it attempts to bring the Model 3 to market, former Apple executive and insightful industry observer Jean-Louis Gassée recently laid out 3 broad questions Elon Musk and co. will need to answer.
Undoubtedly, the biggest question that Gassée and others have raised is whether or not Tesla can actually get a handle on production. Tesla may arguably be the most forward-thinking ca manufacturer on the planet, but in terms of production capacity, the company still has a long ways to go before it can catch up to traditional auto manufacturers.
Today, however, Tesla’s factory produces a relatively low volume of luxury cars. Tomorrow’s Model 3 production system will need to be meaningfully different in order to achieve the volume and cost reductions that the Model 3’s affordable price tag requires…and reducing production costs means an additional capital outlay. Last February, the company said it didn’t expect to need outside capital, but that was before the deluge of Model 3 orders. (Of course, the excitement for the new product could make it easy to raise money…)
It’s an enormous challenge, but if Musk manages to come up with a new, not merely tweaked, production process, Tesla might be on its way to fulfilling its leader’s prophecy of 500,000 cars a year by 2020…but we’d need to hear more about that process. So far, we have little or no information.
As Gassée astutely observes, “the design of the production process trumps product engineering prowess.”
This is a great point, especially because it’s all to easy to overlook some of the production troubles and product delays Tesla has had to deal with in the company’s relatively short history. Most recently, Tesla even placed the blame for its Q1 production shortfall on parts shortages stemming from its own arrogance while promising not to make the same mistake with the Model 3.
The root causes of the parts shortages were: Tesla’s hubris in adding far too much new technology to the Model X in version 1, insufficient supplier capability validation, and Tesla not having broad enough internal capability to manufacture the parts in-house. The parts in question were only half a dozen out of more than 8,000 unique parts, nonetheless missing even one part means a car cannot be delivered. Tesla is addressing all three root causes to ensure that these mistakes are not repeated with the Model 3 launch.
Interestingly enough, the incredible demand for the Model 3 prompted Musk to fire off a tweet indicating that they’ll have to rethink the entire production process.
On another note, Gassée also wonders if Tesla will be able to maintain the Model 3’s $35,000 entry-level pricepoint while not leaving too many features out. Make sure to hit the source link for the full rundown of Gassée’s analysis. Amidst all of the understandable hype and hoopla surrounding the Model 3’s recent unveiling, Gassée provides a more sober and realistic take on the Model 3.
