Last we checked, there were more than 400,000 folks waiting to take delivery of the Tesla Model 3, a potential problem considering the slow ramp-up of production. But even though some potential buyers might now have to wait until 2019 – perhaps beyond – they shouldn’t consider that a delay but simply a “time shift,” according to CEO Elon Musk.
The South African-born entrepreneur famously predicted his company’s Fremont, California assembly plant would go through “production hell” when it launched its first mainstream model last July. And, indeed, it had to largely hand-build them for the rest of the year. Tesla recently released numbers that showed first-quarter production reached 2,000 a week, but even that was 20% below the company’s target. And that’s leading some frustrated shoppers to cancel their advance reservations.
“You’ll definitely get your car,” Musk declared during an interview on CBS on Thursday, suggesting customers shouldn’t think of what’s happening as a delay, but “a six- to nine-month time shift. That’s literally it, and three of those months have already passed.”
Whatever you call it, Tesla customers should be getting used to not having products ready on time. The company hasn’t managed to meet its targets once, starting with the roll-out of the original Roadster. The Model X was a full two years behind schedule.
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Technically, Tesla actually did hit its production date last July, but it also took a lot of shortcuts to get there, according to industry analysts. And, if anything, that ensured the factory would sink into production hell. The company didn’t properly validate the Model 3 line’s manufacturing equipment and processes, and there were numerous issues at the Nevada Gigafactory battery plant that slowed things down. Meanwhile, supplier validation issues have resulted in issues with parts and components requiring extensive rework after vehicles roll off the line.
Musk confirmed to CBS that he has taken to sleeping on the factory floor, something he did a couple years ago during the delayed Model X launch. It’s “not because I think that’s a fun place to sleep. I don’t believe people should be experiencing hardship while the CEO is off on vacation.”
Whether that has actually accomplished much isn’t certain, but he did insist, during a recent conference call with media and analysts, that Tesla expects to double its line rate in the coming months and come closer and closer to schedule.
There’s an asterisk to that, however. The latest target is 5,000 vehicles a week by around the end of the second quarter, but that’s still way short of the nearly 10,000 Tesla should be producing based on a much earlier Musk promise to have Fremont roll out 500,000 vehicles this year, 80% of them Model 3 battery-sedans.
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Musk was nothing upbeat during his TV interview, however, asserting that, “As long as you can see that you’re ascending the levels of hell, that’s okay. Then, at least that gives you hope. And I think we’re rapidly – Tesla’s rapidly on its way out of production hell.”
Perhaps, but Musk again acknowledged a concern raised during the earlier production conference call: at least some reservation holders have been canceling out. Several Chevrolet dealers in California, for example, have reported that some frustrated Tesla fans have instead opted to buy a Chevy Bolt EV.
“It’s mostly, like, people cancel because, you know, they just needed a car and we didn’t have a car for them,” Musk explained on Thursday.
Tesla might dismiss that issue and note that it is still expecting to take new orders. But those reservations each carry a $1,000 downpayment – Tesla reporting that putting more than $850 million in its corporate bank account. Right now, it can use every penny. It reported a far worse-than-expected loss during the fourth quarter of 2017, and it’s expected to go deep in the red again for the January-to-March period.
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During the conference call, Tesla executives tried to downplay concerns that this will force the company to go back to the equities market, declaring they won’t need to raise more capital – “this year.” But there remain serious questions about what might have to happen in 2019 if production continues to lag and the Model 3 “time shift” grows even longer.