Well, my previous video questioning Tesla’s ability to revolutionize the auto industry with electric vehicles certainly hit a raw nerve.
A dozen comments have come back to me in response, several of which are quite critical of my premise. So for the sake of clarity, and in response to RobSez, Ticobird, Jpeg, DeeAgeaux and the others, let me double down on my original comment: Tesla will never become a mainstream manufacturer of mass-produced electric cars.
Why? Here just a few reasons:
Tesla fans routinely confuse brilliant product design with brilliant product manufacturing.
The ability to make a great product is not the same as the ability to mass produce a great product. Tesla currently builds their vehicles in the old GM/Toyota NUMMI facility in California using modern techniques, but from what I’ve seen their equipment utilization rate is very low.
At the sub-30,000 cars per year production volume that Tesla currently runs, the economics would suggest using contract manufacturing for most major assemblies, but which is something Tesla prefers to do in-house.
Vertical integration has a long history in auto manufacturing, starting with Henry Ford’s Rouge complex. Over the last 70 years, the most efficient production model pushes design and manufacturing down the supply chain to Tier 1 and Tier 2 operations.
So what is Tesla up to? I believe they are anticipating significantly larger production runs, and building an operation with enough value that it can be easily sold to an existing automaker. This would be a natural fit for a Chinese company.
The notion that the current major automakers like Toyota, Volkswagen, Ford and General Motors are somehow ossified relics of the 20th century is, in a word, ludicrous. As I stated before, don’t confuse the product itself with the manufacturing process.
In Tesla’s price segment, it’s possible to miss cost targets in numerous components and subassemblies, yet still produce a sellable product. Try that with the VW Golf, Ford Focus, or Chevrolet Cruze, for example, and the result may be a half-billion-dollar market failure.
No one is better at mass-producing automobiles than the top half-dozen global OEMs.
This production capability is the result of a century of experience in production automation. Numerical control of machine tools was introduced to the industry in the 1950s. General Motors first used robotics in 1961.
Expertise in mass production doesn’t come from teenagers pounding out code on a Malibu beach; rather, it is embedded in the large and complex system that has evolved over multiple decades.
Traditional OEMs also operate in a brutally competitive environment, a market that burns away inefficient competitors with regularity. American Motors, Studebaker, Packard, Kaiser-Fraser; there is a long list of major auto manufacturers who couldn’t keep up.
Do Teslaphiles really think their favorite car manufacturer has some “secret sauce” that can’t be replicated by corporations with literally thousands of engineers?
More importantly, it seems clear to me that Elon Musk doesn’t intend to dominate the automotive world with Tesla. I believe Tesla’s intentions are to kick-start consumer consciousness about, and generate demand for, electric vehicles. This would be a demand which will be most efficiently met by the existing automakers.
This impending electric vehicle demand would also create a very large market for Tesla’s battery technology, which is where the Nevada “Giga Factory” comes in. Batteries are where the action is for Elon Musk, not cars.
Tesla’s hyper-fans, most of whom don’t own and will never own the actual car, are deeply rooted in the environmental movement. This movement has morphed into something that is more about counterculture politics than it is about addressing CO2 emissions.
For modern environmentalists, it’s becoming a sacrilege to comment on or criticize technologies that reduce carbon emissions. But the fact is that Tesla Motors is not a profitable enterprise, despite considerable government subsidy. And as of yet, no one has been able to crack the affordability barrier.
There’s no doubt that once it becomes feasible to profitably mass-produce a $22,000 all-electric sedan, every major OEM in the world will be doing it. Musk has built a brilliant brand in Tesla, and I see it becoming a natural premium electric car division under Mahindra, Geely or BYD ownership.
Musk will probably make a fortune with the sale, and he deserves every penny. But if you believe that Tesla Motors will knock off Toyota, Volkswagen or General Motors, then I suggest you’re smoking something you shouldn’t be, unless you’re in Colorado.