Analysts and Suppliers Suggest Tesla Is Overstating Aggressive Delivery Targets

Elon Musk’s bold statement that Tesla Motors will produce 500,000 electric vehicles per year by 2018 has been called into question by several sources close to the issues.

According to a Reuters report citing analysts and supplier executives who asked not to be identified, Tesla’s ambitious plan calling for moving up high-volume Model 3 production two years earlier than originally projected will be very difficult and potentially costly. North American auto plants capable of building 500,000 vehicles per year are all run by automakers with decades of experience, they said. Tesla continues to have delivery delays for its Model X crossover, and its Model S also missed delivery targets when launched.

Tesla hasn’t yet finalized it Model 3 design and specifications, and probably won’t be hitting its June 13 target to have it in place, according to automotive consultants and supplier executives. The June 13 deadline was months ahead of the planned production startup, and it’s not the only deadline that may have been overstated by the company.

During an April conference call with analysts, Musk cited “tremendous demand” for the Model 3, which he said would start delivery in late 2017. Tesla so far has taken 373,000 orders for the Model 3.

Musk said Tesla told suppliers to prepare for Model 3 production tests in July 2017, a goal he acknowledged may be unrealistic for some. But he said the “aggressive” target was necessary to reach production goals.

“Now, will we actually be able to achieve volume production on July 1 next year? Of course not,” Musk said to analysts. “The reason is that even if 99 percent of the internally produced items and supplier items are available on July 1, we still cannot produce the car because you cannot produce a car that is missing 1 percent of its components.”

Musk said the Model 3’s simpler design, new production hires and enthusiastic suppliers would help the company make its goals. He said Tesla would drop suppliers that could not meet deadlines and that Tesla would be doing more parts production in-house than its automaker competitors typically do.

SEE ALSO: Tesla Model X Pipeline Finally Opening With Yesterday’s First Signature Delivery

Under ideal conditions, automakers have launched new assembly lines in 18 months, but they typically take two to three years after the first tooling and supply contracts are signed, according to manufacturing consultants. Fiat Chrysler Automobiles is converting a Sterling Heights, Mich., plant to produce 300,000 Ram 1500 pickups a year, a 50 percent increase in capacity. Suppliers have doubts about FCA being able to hit that target, according to a supply sales executive.

Auto manufacturing consultant Ron Harbour of Oliver Wyman said increasing production at the Fremont plant to 500,000 vehicles in 2018 would require more stamping, welding, and assembly machinery than Tesla seems to be expecting. It could take up to 18 months to order and install. Musk’s plan to make parts in-house can minimize risk, but it also can be more expensive and distracting, Harbour said.

Reuters