Tesla Taking High Risks To Speed Up Model 3 Production

The stakes are high for Tesla as CEO Elon Musk pushes to start producing the high volume Model 3 in September by skipping traditional auto industry manufacturing practices.

Musk told investors on a call last month that the electric carmaker would skip the traditional “beta” production testing that other automakers use, to speed up assembly and rollout. One of the investors on the call revealed the comments on Reddit, Automotive News reported.

The Tesla CEO said the company would instead by using “advanced analytical techniques,” which refers to computer simulations, to jump forward in production tooling.

Musk is known for making grand claims about hitting launch dates and other targets that many times have missed the mark.

In February, he’d committed to launching production of the Model 3 by July. Hitting that mark and ramping up to volume production by September is a high-risk venture that steps over traditional auto industry practices. Other automakers start by testing out a cheaper prototype model to make sure parts and components fit and don’t cause unexpected problems.

With Tesla’s target of manufacturing and selling 500,000 vehicles a year by 2018, the cost of discovering unexpected problems could be staggering. The automaker is facing losses through potential recalls or warranty repairs.

“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.

Investors in the company do buy into Musk’s promises and expect Tesla to hit its production targets. That’s helped the company’s stock soar 39 percent since January as the electric carmaker reinvents its identity in the market as a mass producer. Hitting the 500,000 mark would increase the company’s annual sales fivefold, which is critical for Tesla’s efforts to stop burning cash and to become profitable.

“It’s an experiment, certainly,” said Consumer Reports‘ Jake Fisher, who has been part of the publication’s extensive testing of Tesla’s Models S and X.

Tesla may be able to tap into its ability to fix problems quickly, “or it could be they have unsuspected problems they’ll have a hard time dealing with,” Fisher said.

Consumer Reports and others had taken Tesla to task for several problems being handed over to Model X owners.

Some of that problem had come from the electric carmaker using lower grade, disposable tools in the final phase of production. Known as “soft tooling,” going that cost-saving route complicated the Model X debut in 2015, according to a person familiar with the matter. Time had run out to resolve the errors thoroughly during the switch over to permanent production tooling, creating a set of challenges that had to be corrected after the product launch.

“Soft tooling did very little for the program and arguably hurt things,” said the source.

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After that crisis in 2015, Tesla acquired a Michigan tooling company that has speeded up manufacturing equipment for the car 30 percent faster than before and cheaper, the source said.

Another block in hitting its ambitious launch target could take place overseas. The company is still waiting to hear whether workers at Tesla Advanced Automation Germany will vote to go on strike for higher pay.

In late 2016, Tesla acquired German company Grohman Engineering, which was changed over to the new Tesla business unit name. That deal was made as part of the U.S. electric automaker’s strategy to speed up the development and production process for the Model 3.

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