Tesla Starting Make-Or-Break Year With Model 3 Production and Automated Vehicles

There are those who think Tesla stands to either victoriously shine or flop in 2017, as Model 3 production begins and fully-autonomous features are added to vehicles in the factory.

This is according to a Wired think piece which tips its hat to Tesla making it this far, but explores the long list of challenges the company faces to thrive in the capital-intensive, complex auto manufacturing business.

Tesla’s tendency to overstate production target dates and to reset them was cited. While it was impressive to see about 400,000 consumers put money down for Model 3 pre-orders this year, the company will have to transform into a manufacturer that can produce millions of them. That means keeping them safe and up to quality standards, delivering them as on time as possible, and doing it all profitably. Corporate profits have been eluding the publicly-traded company since its inception 13 years ago.

Tesla CEO Elon Musk is well known for building a passionate audience of Tesla owners and fans, and for heating up the intensity. In May, he said the company will be producing a half million cars a year by 2018, up from a bit below 100,000 set as a target for 2016. Critics have questioned that goal, especially in light of the “production hell” that Musk has mentioned related to the Model X, which caused the all-electric SUV to come out two years later than the initial date.

Changes have been made to how the Model 3 is to be built but the company’s Fremont, Calif. plant has to scale up to meet production increases without sacrificing quality. Musk and other Tesla executives are known to stay on top of employees to keep vehicle testing and quality levels high.

Transforming vehicle production 10-fold over three years is a very big job. Beyond quality and safety, there’s relationships with a global supply chain. A delay getting parts and components over to the Gigafactory in Nevada will throw off the production schedule and hurt profits, as Tesla’s major competitors can attest to.

“Delivering a brand new electric vehicle built from scratch is not an easy task to accomplish,” said Raj Rajkumar, an expert in autonomous and electric vehicles at Carnegie Mellon University, who was interviewed by Wired.

Rajkumar thinks 2018 is a more realistic year than 2017 to start deliveries. Tesla has said it will get the $35,000 200-mile plus car out during 2017.

“They need to learn about volume production, and test new capabilities and functions,” he said.

Tesla will also be at least a year behind General Motors, which started delivering the first Chevy Bolts to customers this month. While GM is putting a lot into marketing the Bolt, its future isn’t dependent on the car being profitable – unlike Tesla, which will be dependent on the Model 3 making it.

“GM is a large company with global scale supply chain, and established manufacturing plants, but even then the Bolt will be sold at a loss,” says Rajkumar.

That may also be the case with Tesla competing with large automakers in the luxury space with its Model S, Model X, and Roadster. Companies like Audi, BMW, Jaguar, Mercedes, Porsche, and Volkswagen, have committed to taking on Tesla, sometimes at high-production levels.

Tesla will also be devoting much of its intellectual capital next year to getting fully automated features on the Model S, Model X, and Model 3 tested and approved by government agencies. The company has been feeling pressure on that front since the fatal collision in Florida earlier this year involving its Autopilot semi-autonomous system.

SEE ALSO:  City of Fremont Home to Tesla Factory and State’s Largest EV Owner Zip Code

In October, Musk announced those autonomous vehicle plans, stating that all of the new models at its factories would have these features added. They won’t be able to be activated for use by drivers until passing tests and government approval, though. The technology will be demonstrated as one of the self-driving vehicles goes from Los Angeles to New York by the end of 2017, Musk said.

“That’s definitely doable,” said Jeffrey Miller, an autonomous vehicle engineer at USC.

Miller said that other companies have shown similar capabilities, such as automotive supplier Delphi’s cross-country trip in 2015.

Rajkumar, who has overseen autonomous vehicle testing projects for several years at Carnegie Mellon, is a bit more skeptical about Tesla’s role in the future of automated cars. He thinks it will be more of a publicity stunt than evidence of Tesla’s ability. He doubts Tesla owners will be able to utilize all the autonomous features right away.

If it all comes together, Tesla could be in a very good place as autonomous vehicles start being taken seriously by car owners, Rajkumar said.

“Because the automated vehicle market is going to be very large in the future, Tesla needs to continue to be seen as a market leader,” he said.


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