Tesla refocuses on financial stability and manufacturing throughput in Q2

June 4, 2019 by Kyle Field

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Tesla CEO Elon Musk went on the Ride the lightning podcast with Tesla enthusiast and Ryan McCaffrey, Editor-in-Chief of IGN for an interview of one hour. The topics covered range from the Tesla pickup truck to the Y model and even the possibility of creating a Tesla application store in the future.

In his interview with McCaffrey, Musk outlined Tesla's top priorities over the next few months. Between comments on the company's exciting new projects, he spoke of a new impetus within the company to stabilize the flow of its automotive manufacturing lines. Stable throughput and reliability is the constant core of any manufacturing company. This is all the more true for a market company like Tesla, which derives the bulk of its sales revenue from the auto sector.

1 – Tax liability

"Our main focus right now is just to make sure Tesla is in good financial health," said Musk. The claim that financial stability is Tesla's top priority goes back to Musk's bold statements last year that the company would achieve sustained quarterly profitability starting in the third quarter of 2018. It was indeed profitable for the third quarter and again in the fourth quarter, but the company lost its anchor in the first quarter of 2019. The intensification of the wave of model 3 auto deliveries in Europe and China in the same quarter, while a $ 920 million bond repayment was due to pushed the company to fall back into the red when the cards were dropped.

At the beginning of the second quarter, the company sought and found a new breath of financial air in the form of a $ 2.3 billion capital increase. As a result of this increase, Musk sent an e-mail to the employees, which was then disclosed, inviting staff members to maintain their financial vigilance after the new injection of funds. The letter was misinterpreted by mainstream media as a statement about the inevitability of bankruptcy, but in reality it was simply a reminder to Tesla employees of the fundamentals of the business world. Our own Zachary Shahan summarized the Lord's e-mail as follows:

"Hey, people of Tesla, I know you've seen that we just collected a few billion dollars, but do not be complacent. Do not think that means you can spend money carelessly. We must still vigilantly look for ways to reduce costs and become a more efficient company. "

Elon's mail was not insulting, but one way or another, the mainstream media managed to mislead it, revealing their ill-will towards Tesla. Zach's interpretation of e-mails was confirmed by a tweet from Elon shortly after the publication which, as you can see, was one of its shortest.

2 – Stable production

The stabilization of production is sometimes a further reflection in a company focused on continuous improvement, but it is one of Musk's top priorities. Why? Because Tesla Model 3 production lines are proverbial aircraft built in flight. Tesla has made every effort to ensure that the production of Model 3 is operational in 2017-2018 and has rallied again to increase production at a rate of 5,000 vehicles per week. (President of the Tesla Automotive Industry, Jerome Guillen, spoke with CleanTechnica about this in March of this year.)

Today, production regularly exceeds 5,000 vehicles a week, but the fast pace of the past two years leaves little time for reflection.

Musk and Team Tesla stop to take a breather while stabilizing production lines in Fremont before again ramping up Model 3 production at Gigafactory 3 in Shanghai, China, later this year. Immediately thereafter, the team will begin again by installing Model Y production lines at the Fremont factory or at Gigafactory 1 (more on this later) and at Gigafactory 3 in parallel.

The Fremont Model 3 production lines are neater and better tuned before Gigafactory 3 arrives in the equipment, the better, and even more so for the Model Y. Every improvement that can be made now saves 3 times more pain in the line. In business, this translates into money. It's cheaper to fix it now than having to solve it 4 times if a problem is discovered next year. It's just a good business to take a break to solve all the problems, and that's exactly what Musk and his team are doing.

3 – Offer an experience

As difficult as it may be, it was not the steady flow that sank Tesla's profitability aspirations in the first quarter. The conversion of all these vehicles into cash only occurs when cars are in the hands of customers. Musk told McCaffrey that Tesla intended to address issues related to the delivery process in order to go beyond these challenges.

This is clearly a statement on the latest markets at Tesla beachheads in the EU and Asia. The establishment and improvement of its delivery process will continue to be a priority for the company, which regularly adds the distribution of Model 3 to new countries. Tesla has implemented a sophisticated delivery process for its S and X models around the world, but Model 3 is quite different. On the one hand, in the European Union, model 3 is shipped fully assembled on the continent, which is not the case for S & X.

Equally punchy, the Model 3 is the first of a handful of Tesla 's high – volume vehicles, which put North American delivery teams under severe strain last year, as it was the first time it was used. they went through the growing difficulties of delivery.

(Editor's note: Tesla is not the only company affected. I spoke today with an owner of a vehicle delivery company in the United States. He pointed out that the cost of shipping a car from California had increased by about 50% because of Tesla, which had engulfed the vehicle delivery capability and even some companies.)

4 – Increase in the efficiency of manufacturing

Continuous improvement is in the blood of Tesla. This prompted the team to build an electric car that was not just as efficient as combustion vehicles, but a breakthrough. This desire to constantly improve the product in order to reduce costs, be better for customers, be more efficient, more comfortable or faster results in vehicles without a real model.

Regarding the efficiency of manufacturing, Tesla continues to push the limits. Musk shared a dramatic example of this with regard to the back frame of the Model 3. The current manufacturing process requires the assembly of 70 pieces of aluminum and steel in the back frame of the Model 3. Tesla exchanges all these elements. parts for a molded piece from a small casting machine that will allow the company to initially go down to just 4 pieces. Tesla is already looking for a larger casting machine that would allow it to consolidate a part.

This not only simplifies the number of parts in the car and the number of places where a fault can occur, but also greatly simplifies the manufacturing process. Eliminating the need to assemble and move about 70 pieces means eliminating a small army of robots from Tesla's body shop. Fewer robots means less capital expenditure to install a new production line (I'm looking at you, Gigafactory 3). Each of these robots also requires a team of maintenance personnel, downtime, and so on. This is a major step forward and one of the many improvements made by Tesla to improve the efficiency of its manufacturing lines.

The Y model is to exploit as much as possible the model 3. The first figures indicated that the model Y shared 76% of its parts with the model 3. Elon told Ryan on the podcast that "we tried to make the car too similar as possible to 3, except to the extent that a change is necessary. reach the SUV feature. This shared DNA also means that Tesla needs to rethink its manufacturing process for the Y, with the added benefit of being able to test and take advantage of improvements to the Model 3 lines.

5 – Success in Shanghai

The construction of Tesla's Gigafactory 3 in Shanghai, China continues to surprise its global audience. The power of Chinese industry is put forward on the world stage. The plant has moved from a muddy ground to a fully-built building, with plans to start producing cars in less than 12 months after the start of construction work. GF3 will be Tesla's first North American factory and will for the first time use batteries of Chinese origin. Musk told McCaffrey that "staying on track with the Shanghai Gigafactory" was one of his top short-term priorities for Tesla.

Achieving the first goals of Gigafactory 3 is another way to prove to the world and to investors that Tesla can adapt and that Tesla can compete in manufacturing and sales in the largest single-car market in the world. Gigafactory 3 will build on Tesla's lessons learned from the ramp-up of Model 3 to improve its production.

Tesla is heading for unknown waters with Gigafactory 3, which is the first foreign owned auto plant in China. He will not have the support of a company a few hours away or an army of 10,000 colleagues in Fremont. So the challenge is real, but the benefit if Tesla can succeed. The construction of cars in China could allow it to take advantage of the incentives of the Chinese government for rechargeable vehicles, gradually fading.

6 – Model Y

Beyond the stabilization of manufacturing, delivery, and new markets for Model 3, we have the Y. The Y model should benefit from a larger market than Model 3 and Elon and his team are gearing up for launch next year. Musk told McCaffrey that the longest items for the Y model were the stamping dies for exterior body panels; it was therefore priority items to nail down.

McCaffrey leaned toward Musk to find out where the Y model would be made and Musk said Tesla's Fremont car plant or Gigafactory 1 in Sparks, Nevada could work. Fremont has the advantage of having all the existing automotive equipment on site and would allow Tesla to share common manufacturing lines with Model 3 up to a certain point. At Gigafactory, Tesla would avoid shipping batteries, chargers and drive units from Nevada to California, Tesla has many lands to develop and Nevada has a lower cost of living. Musk said his team had convinced him that, despite his capacity constraints, Fremont was probably the most sensible and was currently the default plan.

For more details on the Ride the lightning podcast in which Ryan McCaffrey interviewed Elon Musk, watch the video version below or post it on your favorite podcast app.

Keywords: China, Elon Musk, IGN, The Lightning Ride, Ryan McCaffrey, Shanghai, Tesla, Tesla Factories, Tesla Financial Data, Tesla Fremont Factory, Tesla Gigafactory 3, Tesla Model 3, Tesla Model Y