Production bottlenecks caused by slow suppliers

Production bottlenecks caused by slow suppliers

According to Oppenheimer & Co, the slower than expected Model 3 production is being caused by suppliers who failed to meet their delivery dates. Oppenheimer also predicts that Tesla will deliver about 3,000 Model 3s this year:

It is not surprising. You can have the fastest and best assembly line in the world but if your suppliers don't give you all the parts you need, it will physically limit how many cars you can build. Hopefully, Tesla can either pressure the suppliers to speed it up or find better suppliers. I am confident that Tesla will be able to fix Model 3 production. But watching this early ramp up of production, is nerve racking to say the least.

ReD eXiLe ms us | 17. Oktober 2017


andy.connor.e | 17. Oktober 2017

The disease seems to be spreading. And all from the same presumed people that have a track record of negativity.

Shock | 17. Oktober 2017

"Though Tesla produced only 260 Model 3 vehicles at the end of September, far from the 1,500 units that Musk had originally anticipated, the company is expected to achieve an exponential production ramp period in the coming months and produce up to 5,000 Model 3 vehicles per week in December. Oppenheimer expects that Tesla will deliver 3,005 Model 3 and 100,056 total vehicles in 2017."

These numbers don't jibe.

Surely nobody still believes Tesla will be making 5,000 Model 3's week at any point in 2017. And if they did, I don't see how any ramp up toward that would result in only 3005 deliveries, even accounting for the time between completion and delivery.

andy.connor.e | 17. Oktober 2017

Thats why, as ReD has accurately stated, its "[FARGIN' BOLSEVIK]" | 17. Oktober 2017

I'm always leary of estimates like this that have 4 digits of precision. It's amazing that someone without any knowledge of Tesla's internal operations can predict they will produce exactly 3005, not 3004 or 3006 cars in 2017. It is a clear sign of a totally made up number intended to sound more accurate and grab headlines. I have no idea how many cars Tesla will make in 2017, but I'm not about to make up a number to gain attention or push some hidden agenda.

Coastal Cruiser. | 17. Oktober 2017

Yeah, that 3005 number is impossible to believe.. like some kind of set up for a bad Maxwell Smart joke...

Well then, would you believe it's an Excel rounding error?

Would you believe we used an Abacus with missing parts?

How about we got the number from a fortune cookie at a Chinese restaurant in Detroit?

Rocky_H | 17. Oktober 2017

*note* Whew, saved this one. I selected and copied the text before submitting, and sure enough, this was the moment it picked to log me out.

@TeslaTap, I saw it discussed in another thread on this. The 3005 doesn't indicate a made-up number. It represents putting together a forecast extrapolation with projection lines from a couple of points, and then you read the number off the graph at a certain point. It will have some exact number of precision, but obviously since the curve was built with a very few number of start and end points, there is too much variability for the number spit out by the graph to be trustworthy in its precision. So for the sake of the person saying what the graph says, they should probably not just repeat the exact number it says, which makes people suspicious, but should round it off to indicate that it's not precise. | 17. Oktober 2017

@Rocky - You may be right, but when someone does not under basic concepts of precision and accuracy, makes me doubt their analytical abilities. Could be a simple mistake, but someone who understands these important details would never make this error. I've seen too many cases of WAGs (Wild-Ass Guesses) that add digits of precision to make it look like they actually did some real research and act like know what they are talking about :)

carlk | 17. Oktober 2017

Yes putting 4 significant figures in such kind of estimates is just too amateurish.

carlk | 17. Oktober 2017

From another article. "As for the limited number of suppliers that failed to make deliveries on time, one was already replaced by insourcing.

That's the reason why Elon always wanted to go the vertical integration route. The companies will eventually go fully vertically integrated.

jan.stubbs | 17. Oktober 2017

Stop pointing the finger like trump get off your ass and get it done:) suppliers my as you did it for spaceX

WantMY | 17. Oktober 2017

"Tesla will deliver 3,005 Model 3 and 100,056 total vehicles in 2017".
LOL, wow what a precision!, but I like below projection better:
"Tesla will deliver ?,005 Model 3 and ?00,056 total vehicles in 2017". | 17. Oktober 2017

Vertical integration has is downside. It can be very wasteful. You have a facility to turn out part A. You size it for the ultimate demand and until you reach that point you are paying for underused facilities and labor. If you guess wrong and don't size it big enough, part A limits your product manufacturing volume. It is not a panacea.

phil | 17. Oktober 2017

Yes, Toyota and GM sure are lucky that they don't have suppliers to manage. It makes it so much easier for them to meet their production schedules.

topher | 17. Oktober 2017

" It will have some exact number of precision"

Nope, it will have number of specified digits, it will only have that precision if it was measured with that precision.

"I have no idea how many cars Tesla will make in 2017"

Tesla has no idea how many cars Tesla will make in 2017.

Thank you kindly.

Coastal Cruiser. | 17. Oktober 2017

I have just formed a new investment bank called Coastal & Cruiser and Company.

CCC has examined every possible variable of Model 3 production with π precision and geometric logic. We are putting our reputation on the line by predicting that Tesla will deliver something other than 3,005 Model 3 vehicles and something other than 100,056 total vehicles in 2017.

Our company slogan: "CCC. The power to make it up as you go."

carlk | 17. Oktober 2017

@george It's true but suppliers have the same issue too. The idea of vertical integration, at least Elon's, is he can manage the parts production better than suppliers can. Delays and quality concerns were primary drivers for him to produce rocket parts in house at SpaceX. It seems to have worked very nicely there.

Rutrow | 18. Oktober 2017

C_C, Franklin Roosevelt just issued you a cease and desist order for copyright infringement of "CCC" The New Deal Inc. holds all rights to that string of letters. If you'd like to instead name your outfit Koastal & Kruiser and Kompany, New Deal Inc. will have no dispute with you.

dortor | 18. Oktober 2017

Rocket production is not the same as high volume vehicle production - anyone who thinks they are or should be the same isn’t paying attention.w

SamO | 18. Oktober 2017

What about high volume rocket production?

hsadler | 18. Oktober 2017

It's actually 3005.4

andy.connor.e | 18. Oktober 2017


SamO | 18. Oktober 2017

Speed is the first advantage. Launching a new product presents a team with thousands of small decisions. If you choose to outsource a component, you often need to send people to live in the factory for a prolonged period of time. This means accepting that it’s going to be harder to make choices and to influence outcomes. First, you’re operating within someone else’s environment. Second, you have far less of the product design team available for on-the-spot consultation and decision-making. Nothing beats the ability to have the full engineering team walk into the manufacturing area every day, talk to the people building the products, and gain insights on how to improve. Factory information has a very short half life. Despite what many contract manufacturers promise, the reality of outsourced manufacturing is that you are getting on an airplane to solve problems you could otherwise solve by walking across your building. - Greg Reichow, former Tesla VP of Production

SamO | 18. Oktober 2017

Sorry george. Left out the second paragraph:

"The second reason building your own products makes sense is that it enables you to drive faster cycles of learning and improvement. The idea of bundling improvements and building them into the next platform every three to four years (the typical development cycle for the car industry) made absolutely no sense to us at Tesla. Rolling many improvements into a package often means that some items get delayed waiting on some other item that’s essential to their production, which results in a lower cumulative improvement rate."

SamO | 18. Oktober 2017

Sorry george. Left out the second paragraph:

"The second reason building your own products makes sense is that it enables you to drive faster cycles of learning and improvement. The idea of bundling improvements and building them into the next platform every three to four years (the typical development cycle for the car industry) made absolutely no sense to us at Tesla. Rolling many improvements into a package often means that some items get delayed waiting on some other item that’s essential to their production, which results in a lower cumulative improvement rate."

SamO | 18. Oktober 2017

Finally, when you build something yourself, you develop a far deeper understanding of your product and how to improve it—and the pain of doing it yourself gets transmuted into gold. A great example is the innovation that allowed Tesla to make “Ludicrous Mode” possible. One of the constraints in increasing the power output of the battery in the early Model S was the safety fuse and switch system that was integrated into the pack. A fuse? How hard could it be to find a fuse that enables the increased current levels needed for this performance?

It turns out that it is really hard to build a fuse that allows a massive amount of current to flow during normal operation while also protecting the car in milliseconds if there’s an abnormal spike in current flow. Building fuses in-house helped us solve this problem. The coupling of deep product knowledge with a fundamental understanding of the underlying physics allowed us to do what most people thought was impossible. As a result, Tesla drivers everywhere are grinning slyly as they shock their passengers with the thrill of a 0-to-60 sprint in under 2.8 seconds.

Is building your own product always the right answer? Certainly not. If you’re building a product that leverages commodity items and will not change significantly, then it doesn’t make sense to build yourself. Yet if you’re building a product that contains unique intellectual property or has a high change velocity, it can be the best choice.

ReD eXiLe ms us | 18. Oktober 2017

dortor chastised, "...or should be the same isn’t paying attention."

Over the past 40 years, GM dropped from having a 53% U.S. market share in the mid 1970s to 35% in the mid 1980s to having a 17% market share in 2016. The ones who weren't paying attention were the old dogs in charge of engineering and production, who were warned the Japanese were making strides in dependability and reliability from using tight tolerances. Tolerances similar to those used in aerospace technology, and universally poo-pooed as a 'waste of time' by The Detroit Big Three. Accuracy, efficiency, and redundancy are the hallmarks of aerospace design and production. Any claim that adopting those principles for automotive production is doomed to be hopelessly incorrect every time. Those who will not accept that automotive production must change and improve are destined to steadily shrinking market share.

ReD eXiLe ms us | 18. Oktober 2017

SamO: +42! The American aerospace industry made the same mistake as the American automotive industry, by contracting the individual conponents of their design to third party suppliers. Just as SpaceX leads larger competitors through vertical integration, Tesla will do the same. Once Tesla grows to have as many employees as Chrysler, Ford, or General Motors, with multiple factories in the U.S., even the political pressure wielded by those old companies will diminish, as there will be no excuse left to support actions against them.

Rocky_H | 18. Oktober 2017

@topher, Quote: "Nope, it will have number of specified digits, it will only have that precision if it was measured with that precision."

Huh. If only I had figured that out. Oh, look, I actually SAID THAT in my original comment.

" there is too much variability for the number spit out by the graph to be trustworthy in its precision."

I explained why the numbers are there but aren't real precision.

carlk | 18. Oktober 2017

SamO Another very important, if not the most important, thing is you can keep the know how in house. Apple is probably regretting now for the stupidest thing it has done by outsourcing pretty much everything. It turned out its suppliers are happy to make parts or do assemblies for other companies as they do for Apple. Anyone now can come into the market with a design to make a device just like Apple's. Apple could have owned the smart phone market but instead it has to share the market with everyone only because of its laziness and its attempt to pump up a little extra profit.

sosmerc | 18. Oktober 2017

I worry that Tesla will have to build a plant in China.....might as well hand the company over at that point. Maybe China is changing, but I really do worry about them taking all of our tech.

rgrant | 18. Oktober 2017

@Carlk - Apple does own the smartphone market if you’re talking about making money...

rgrant | 18. Oktober 2017

I was going to post something clever about hardware and software but Mollom was unimpressed...

carlk | 18. Oktober 2017

@rgrant True but Apple could be making much more money if there is no Samsung and others. Apple is struggling in China because many local companies are undercutting its price by half with phones 95% as good as iPhone.

@sosmerc I've heard Tesla might be getting a deal with Chinese government that its plant will not be required to have a local ownership. In addition it likely will only be an assembly plant as required for import duty purpose. You're right Chinese will do anything to get the technology but Tesla should have much better control of that than Apple could now. On the hardware side motor and battery technologies likely will not leave its US site.

rgrant | 18. Oktober 2017

@carlk - had a longer answer but Mollom wants it simple, so China = We Chat. Phone features are irrelevant there.

rgrant | 18. Oktober 2017

Interesting - We Chat without a space triggers spam filtering...

WantMY | 18. Oktober 2017

Based on what I know, Tesla is designed like a modern iPhone (very rough approximation, but very close in general design pattern), the "know how" is in software, the rest is just commonly available components (same as in iPhone) connected with busses that interconnected with gateway, but they are useless without brains (the software that runs every control unit/module). So not much of a thread as long as software source code is safe.

rgrant | 18. Oktober 2017

@WantT3 - I’m not sure it’s quite as simple as that but reverse engineering hardware is easy compared to reverse engineering software. I think Tesla has some really smart hardware folks but it’s hard to keep the magic secret.

ReD eXiLe ms us | 18. Oktober 2017

The braking and electric steering systems in a Tesla may be off-the-shelf components from suppliers, but nothing else that might be considered part of the drivetrain apart from tires would be. The Jaguar XE, Alfa Romeo Giulia, and BMW 3-Series use the same transmission, but have different programming profiles for their operation. Tesla has co-opted the third party supplier system that was fostered by traditional automobile manufacturers where appropriate. Glass windows and power seats don't require motivation by ICE.

carlk | 18. Oktober 2017

Apple thought it held the iOS trump card but then came the Android. Hardware is not hard to reverse engineer but Apple's fallacy is it helped to create the huge parts/manufacturing infrastructure it has not control of that everyone can use. It would be much harder for HTC, Samsung or Huiwie to get in the game if Apple instead of Foxxcon and other suppliers owned the manufacturing technology. Tesla's gigafactory and align dreadnaught manufacturing could be the barrier of (easy) entry for other auto companies. It does need a lot of time and effort to set something like that up.

rgrant | 19. Oktober 2017

@carlk - totally agree that US tech handed its manufacturing infrastructure & expertise to China in return for short-term cost reductions. Good to see Tesla reversing that trend.

jordanrichard | 19. Oktober 2017

I am sure Elon and crew are fully aware on how the Chinese do business.

dortor | 19. Oktober 2017

I'm still not sure of how it's a "fallacy" when Apple by all accounts is capturing >90% of the profits from the entire cell phone industry, while the rest of the players barely turn a profit - Apple is the largest and most successful tech company at the moment and has a cash horde of more than most medium/small countries…

please explain the "fallacy" you speak of?

dortor | 19. Oktober 2017

oh now I see it - yeah you're right - Apple is totally failing…gotcha - that whole making a ton of money selling people products they don't want is really working out poorly for Apple…

carlk | 20. Oktober 2017

Apple could have dominated the market for a long time if not forever but it now has to compete hard with second tier and not too second tier companies especially in the largest smart phone market in the world China. It's all because it easily gave an important part of the know how away for a little extra profit. This getting the most profit now without worry about the future mentality is what has killed off many great companies in the past. Imo Apple is like Microsoft ten years ago or IBM twenty years ago or Kodak thirty years ago. Great company with great product and essentially printing money at will. As for future it has none. To a lesser extent the same could be said about legacy auto companies too.

carlk | 20. Oktober 2017

If you have not seen it this article ~Tesla's Secret Second Floor~ posted in another thread it gave many reasons what Tesla is doing that Apple is not. One of that is what he said "Why am I so passionate about this? Early in my career, I was a participant in the offshoring of US manufacturing. We built factories that were pushing the state of the art in several areas of technology—yet all of it was outside of the US. Because of this trend, American industry lost some of the fundamental knowledge that comes from building your own products."

And why Tesla is doing it but not others: "For too long now, a fear of building new hardware companies has gripped enterprises and entrepreneurs. To solve many important problems, ........ We need bold founders to tackle these important problems."

BTW the author is no longer with Tesla so I assume there is no PR intention for writing that.

ReD eXiLe ms us | 20. Oktober 2017

Happy Accidents versus Happy Incidents...

Apple sort of accidentally came up with a hit when they developed the iPod, and then expanded upon that same success with iPhone. No one expected such a thing in the wake of Napster going belly up. The next 'accident' was the success of iStore. I sincerely doubt Apple new ahead of time how much tying everything from music and video to books and software to a singular online portal would win over so many customers to their platform, their 'ecosystem'. But that success led them to decide hardware manufacturing was not their forte so much as software design, so actual manufacturing was largely farmed out, though for hardware built 'to spec'. Their brand was primarily tied to the iOS (i$#!+) development platform instead of the underlying hardware. This notion also affected (infected?) the Macintosh, as it moved from Motorola to Intel based processors and a Unix clone operating system. The Apple identity started with strict control of hardware and software, but now seems lacking on the hardware side, considering the underground movement to build 'Hackintosh' systems on hardware typically used for Windows installations.

Tesla planned from the outset to build the best car on the market. Not the best 'luxury' car, but the best 'premium' driving experience, in a vehicle that happened to be fully electric. That was purposeful. What was incidental was that they made a great car and so many agreed it was great.

In a market segment well known for high margins on tiny sales, the Model S grew to industry leading sales in short order and kept climbing. Over five years later, detracting statements that their success was some type of 'passing fad' have been shown to be no more than short sighted sour grapes. Tesla supplanted the reigning monarchs among high end flagship vehicles and proved there was not a 'limited market' for expensive electric cars at all. There was a burgeoning one, one that continues to grow today.

Yodrak. | 20. Oktober 2017

Apple was originally proud of doing all of its manufacturing in the USA. One of the benefits it found by moving manufacturing to China was the ability of the Chinese manufacturers to respond to design changes more quickly than USA manufacturers. The Chinese were able to push their employees harder, OT and such, to get the work done, giving Apple an advantage or at least allowing it to keep up with competitors.

Here in the USA Tesla factory workers are going through "production hell", because Tesla is innovating the manufacturing process to speed up the transition from design to salable product, and the workers want to unionize. I've no opinion on whether or not that would turn out to benefit them in the long run.

ReD eXiLe ms us | 20. Oktober 2017

Yodrak: No. The UAW wants the public to believe Tesla's workforce wants to unionize, and that Tesla would punish them for voicing such a request. That is complete BULL... 2... 3... 4... $#!+. The UAW has been desperate to unionize the Fremont facility since the day Tesla was announced as its new owner. Tesla was very accommodating, even providing offices at their factory for UAW officials. Due to the 'NO [ICEHATS]' hiring policy at Tesla, fair pay, good benefits, and a great working environment, there have never been enough UAW members on staff to warrant a vote to unionize the facility.

Even actual socialists think the UAW sucks...

[ YouTube -- S4DZ74IXh1U ]

Any Tesla employee that is aware of what the UAW did when the site was NUMMI would be well advised to NEVER join their concept of 'organized labor'.

carlk | 21. Oktober 2017

ReD Your "Happy Accidents versus Happy Incidents." is the best description I've ever heard. Tesla and Amazon are definitely happy incidents. Google and Facebook can be described as happy accidents although they are now all planning on to have happy incidents in the future. Unlike Tesla/Amazon they don't have the track record of creating happy incidents to happen so it remains to be seen how they will do in the future. Apple imo will never have a happy incidents in the future.

I also don't think reason for Apple to move to China is it can respond faster there. It's actually contrary to that since design engineers and manufacturing engineers are located in two different continent and time zone. The article I linked above from the ex-Tesla executive said to be able to make changes faster is exactly the reason why they wanted to make things in house. That's also what Elon said about the reason for SpaceX's highly vertically integrated manufacturing.