Risky Assembly Line Strategy Is The Bet For Tesla’s Big Model 3

On the way to surpassing Ford Motor Co’s market value, many risks with the technology in his company’s cars was taken by Tesla Inc Chief Executive Elon Musk. Now in the factory that makes them, Musk is pushing boundaries.

Once they deliver doors that fit, body panels with the right shape and dashboards that don’t have gaps or seams, vehicles with relatively cheap, prototype tools are designed to be scrapped by most automakers who test a new model’s production line by building such vehicles.

However, Musk told investors last month that as it races to launch its Model 3 sedan by a self-imposed volume production deadline of September, Tesla s skipping that preliminary step and ordering permanent, more expensive equipment.

Tesla has been helped to upend the traditional auto industry by high-risk tolerance and willingness to forego long-held industry norms as underscored by Musk’s decision. While no other rival is putting this much faith in the production strategy succeeding, Tesla is not the first automaker to try to accelerate production on the factory floor.

To help Tesla deliver five times its current annual sales volume, a key target in the automaker’s efforts to stop burning cash, Musk expects the Model 3 rollout.

“He’s pushing the envelope to see how much time and cost he can take out of the process,” said Ron Harbour, a manufacturing consultant at Oliver Wyman.

As it makes the leap from niche producer to mass producer in far less time than rivals, shares at the company have soared 39 percent since January and therefore investors are already counting on Tesla’s factory floor success.

However, there are caution signs. Industry experts say that if it doesn’t work, the production equipment designed to produce millions of cars is expensive to fix or replace. The potential cost of recalls or warranty repairs are raised as the Model 3 is designed to sell in numbers as high as 500,000 vehicles a year, and as Tesla has encountered quality problems on its existing low-volume cars.

“It’s an experiment, certainly,” said Consumer Reports’ Jake Fisher, who has done extensive testing of Tesla’s previous Models S and X. Tesla could possibly fix errors quicker, speeding up the process, “or it could be they have unsuspected problems they’ll have a hard time dealing with.”

During an investor call last month with an invited group of investors, Musk discussed the decision to skip what he referred to as “beta” production testing. Details were published on Reddit by an investor on the call.

Tesla would be helped in advancing straight to production tooling by “advanced analytical techniques” – code word for computer simulations, he also said.

Tesla declined to comment on its production strategy or confirm details of the call.

And other companies too are preparing to meet the challenge. The entire assembly line and factory of a new plant in Mexico, that would produce cars, is being made using computer simulations of production tools by Volkswagen AG’s Audi division. Audi said it believed to be an industry first.  Audi said that production would be 30 percent faster than usual by the process.

(Adapted from Reuters)


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