A front-page report in today’s published U.S. Edition of The Wall Street Journal, Tesla Faces Crunch as Cash Hoard Thins, (Paid subscription required), should serve as a sobering message to the auto manufacture’s manufacturing and supply chain teams. The message boils down to the reality that time is running out.

The second paragraph to the WSJ report is the shock statement:  Tesla Model 3 sedan

Mr. Musk has good reason to worry about Tesla. The auto maker is entering one of the most critical phases in its history, a make-or-break period in which Tesla must boost production of the Model 3 or possibly face severe financial consequences.”

The report goes on to state that: “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.” In other words, the financial well is running dry, as is investor patience. Tesla is testing the patience of financial markets and needs to deliver credibility in operational performance. Since becoming a public company in 2010, the manufacturer has consumed $10 billion in cash without demonstrating operating profitability.

Supply Chain Matters has provided running commentaries focused on Tesla’s Model 3 supply chain and manufacturing ramp-up. The reasons are many. 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. Upwards of half a million customer deposits have been made to secure a firm delivery commitment to experience the Model 3 driving and performance experience.

Once again, the Model 3 has great promise and potential for its market segment, but Tesla now, more than ever, needs to continue to devote lots of manufacturing management expertise on required operational and supply chain execution remedies. Creditability is waning and so is the patience of customers shareholders and perhaps, employees as-well. Burnout is an important consideration for the latter.

In a prior blog, we highlighted aggressive plans from Volkswagen to design, introduce and manufacture at least three million electric vehicles per year by 2025.  VW is not alone, with Toyota, General Motors, Ford, and other global brands stepping-up their game. With most all have in common is their expertise in introduction, scale and volume manufacturing and supply chain capability.

From our lens, what is still missing at Tesla is the lack of an operational voice at Tesla. It should not be just CEO Musk.  That lack of transparency and information flow leads to continued speculation and concerns, and places even more pressures on manufacturing and supplier teams. Instead, are statements from CEO Musk that: “the Model 3 is making good progress.” If such progress is being made, then let operational teams have the ability to communicate current output levels and efforts to meet the June goal.

When all eyes are turned to operational performance, transparency, clarity and demonstrated commitment can be a good thing. A CEO speaks for the business model and for overall performance. Operational and supply chain executives speak for and establish operational accountability.

Instead, a lack of updated information and transparency fosters external stakeholders to become zealous and relentless in pursuit of any and all information that lacks proper context.

 

Bob Ferrari

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