A published report indicates that Tesla is executing extraordinary actions in order to revamp automation of its lithium-ion battery production processes related to higher-volume production of its Model 3 sedan. The move is bold and is likely an indication of a revised strategy related to automation of battery assembly after an initial process faltered.

Supply Chain Matters has provided running commentaries focused on Tesla’s Model 3 supply chain and manufacturing ramp-up. The reasons are many and the Model 3 represents a huge strategic effort for Tesla in its ability and creditability to mass produce an electric vehicle designed for a far broader group of customers.

In mid-March, we highlighted a front-page report published by The Wall Street Journal that served as a sobering message to the auto manufacture’s manufacturing and supply chain teams. The message boiled down to the reality that time is running out. That report declared:

Meeting the production goal of producing 5000 Model 3’s per week by the end of June is crucial to generating enough cash to sustain operations without having to raise more capital.

Since that time, there have been some noteworthy senior management changes at the company and CEO Elon Musk has become very impatient, and perhaps rude to equity analyst and media reporter questions related to Q1 financial and operational performance, declaring such questions as: “boring and rude”.  After investors pounded Tesla’s stock on such news, he later admitted that he “kinda, sorta, messed-up.” A new senior management re-structuring has since been announced aimed at reducing perceived management layering and improving tactical and operational communications.

Last week, an exclusive published report from Reuters, citing a number of informed sources, indicates that the electric vehicle manufacturer had loaded-up six planes with robots and manufacturing automation equipment and flew this equipment from Europe to California. This move was characterized as follows:

Transporting equipment for a production line by air is costly and hardly ever done in the automotive industry, and the move underscores Tesla Chief Executive Elon Musk’s urgency to get a grip on manufacturing problems that have hobbled the launch of the high-volume Model 3 and pushed Tesla’s finances deep into the red.”

Our automotive and other supply chain readers will likely attest to the extraordinary and admittedly very expensive aspects of such a move, particularly at this stage in the Model 3 volume manufacturing ramp-up process. It smacks of the war-room conditions that we have called for, perhaps a bit on the extreme, but none the less, a sense of required urgency.

Of more significance is that the context of this production equipment is specifically noted as addressing reworking the bottlenecks existing at the battery production line at the Gigafactory located near Reno Nevada. According to the report, Musk first disclosed plans for this battery production line in a conference call held with analysts in November. The original battery production line was designed and built by an unnamed subcontractor. The Reuters report reminds us that in  February, Musk had communicated that Model 3 production bottlenecks remained in battery module production, and that Tesla had become “a little overconfident, a little complacent “ in its ability to execute. Tesla Battery Gigafactory

Once more, Tesla’s public communications were such that they de-emphasized any structural deficiencies or bottlenecks with the Model 3 supply chain, instead focusing more on final production challenges. In April, we highlighted the announcement of an unusual 4-5-day suspension to make needed production for supply chain modifications. Musk finally acknowledged that the goal for excessive automation of Model 3 sedan assembly was likely a mistake. Musk tweeted on April 13th: “Yes, excessive automation at Tesla was a mistake. To be precise, my mistake. Humans are underrated.” In a CBS This Morning broadcast network tour of the Tesla factory, Musk also acknowledged what others continue to speculate, that the volume of completed battery modules produced at the Gigafactory have been lagging as-well

According to the latest Reuters report, Musk had previously indicated that Tesla would still be able to reach its output target of 5000 Model 3 cars per-week by June without the addition of this new battery cell production line. Yet, Musk insists that the new automated battery production automation effort be: “a no-expenses-spared effort, according to Reuters sources.

Reuters indicates that Tesla declined to comment on its latest report, published last Friday, related to shipping new production equipment from Europe.

Supply Chain Matters has in the past, echoed observations in our ongoing Tesla focused commentaries, pointing to what we believed was over confidence, bordering on arrogance, as well as a lack of operational savviness and experience in communicating operational status. All of that now seems to be changing as the realities of “manufacturing hell” become ever more persistent.

Such reports and added developments may collectively be good signs that the sense of urgency for Tesla’s Model 3 manufacturing and supply chain activities are now dealing with what needs to get accomplished. The open question remains timing and follow-through.

 

Bob Ferrari

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