Today marks a product milestone for Tesla Motors, namely the public debut and availability of the new Model 3 SUV targeted for a broader customer base. In shades of Apple product availability events, Tesla’s PR team insures that photos of prospective customers camped out overnight at Tesla outlets are spread throughout media channels. 
The hype cycle is on but the real test will be Tesla’s supply chain and product management flawless execution in the coming months.
In a prior Tesla commentary published in January, Supply Chain Matters noted that while Tesla met its internal goal to deliver more than 50,000 total vehicles in 2015, customers who made deposits as far back as three years ago to secure the new Model 3 remained disappointed. The model, which was supposedly designed to be built for a lower price point and with higher output volumes, has undergone a series of repeated delays making the overall program almost two years later than originally planned for market availability. Of course, such a delay has provided industry competitors such as General Motors ad Toyota the opportunity to bring to market electric powered models that can compete with the Model 3.
Tesla’s founder Elon Musk has characterized the Model 3 as “The hardest car to build in the world.” We interpreted that statement to mean the most sophisticated engineered vehicle but not necessarily one designed for higher volume manufacturing. Its falcon wing doors and air filtering system are examples of noteworthy engineering accomplishments but call into question needs related to design for higher volume manufacturing. Luxury seat manufacturing was recently moved from a supplier, in-house to Tesla’s production facilities because of quality and volume needs. Another ongoing open question is whether the planned Gigafactory designed to produce lithium-ion batteries in-volume will be ready to meet production ramp-up needs.
According to the latest update on the Tesla web site, general reservations begin today on a worldwide basis with a different order queue planned for each geographic region. Existing Tesla customers will also get a priority in the queue, which at first blush, somewhat defeats the objective of a car produced for new customers. Volume production of the new model is noted as beginning in late 2017 with deliveries initially targeted for North America. While those expectations might change during tonight’s scheduled Model 3 unveil, it does set muted expectations as to when large numbers of global consumers can expect to be driving the new Model 3.
It would appear that this is another classic case of product marketing meets the hard realities of supply chain ramp-up execution of a product in high demand. As in the case of Apple, be careful as to marketing hype when supply chain is the real determinant of customer fulfillment.
© 2016. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.
Hello Everyone,
At last night’s Tesla Model 3 Unveiling event, Founder and CEO Elon Musk announced that customer online reservations for the new model SUV had approached 115,000 orders. That number is likely to rise substantially before production begins in 2017.
It further adds to the challenges facing Tesla’s manufacturing and supply chain teams to meet customer expectations for delivery.
Bob Ferrari
Hello Everyone,
Another update to share regarding the Tesla Model 3 Unveil. Reports now indicate that customer reservations for the Model 3 have now surpassed 276,000, what media classifies as staggering.
This poses a challenge for Tesla. With the current reservation volume now surpassing 50 percent of existing production capacity, executives have to make some crucial decisions. Do they elect to cutoff reservations at a certain point or plan for additional capital investment to increase capacity?
My view is that financial goals for profitability will preclude any significant capital investment for upside capacity. Instead, Tesla may position Model 3 orders as a valuable possession with considerable upside value for holders. That alone might lead to other market consequences.
Readers are welcomed to share their view.
Bob Ferrari