Tesla Motors CEO Elon Musk announced this week that the electric auto makers has developed plans to build a new ‘Gigafactory’ and engineering design center in Berlin Germany.
This facility will represent Tesla’s third automotive manufacturing complex. In addition to the company’s Fremont California final assembly manufacturing and Reno Nevada ‘Gigafactory’ producing battery assemblies, the company is about to startup a brand-new combination manufacturing and ‘Gigafactory’ complex near Shanghai China. The China facility has been constructed and fitted out in near record time after being announced earlier this year.
Musk indicated to reporters that Germany was chosen because of its reputation for engineering and design excellence. In 2016, Tesla acquired Germany’s manufacturing and design automation firm, Grohmann Engineering, which subsequently contributed to the manufacturing automation process needs for the Tesla Model 3 sedan. The automaker indicated plans to produce the Model 3 sedan and Model Y crossover SUV at the German facility.
With the addition of an Asian and Eurozone manufacturing presence, the company comes closer to aspirations for being a global based brand in the electric auto market. None to soon given the current accelerated efforts among other major global automakers such as BMW, Daimler, Ford Motor, General Motors, Toyota, Volkswagen and others to introduce premium electric powered models over the next two years. Ongoing global trade and tariff developments added to need for Tesla to establish a broader global manufacturing and supply network presence.
It has been quite evident that Tesla continues to struggle with the operational basics of high-volume manufacturing, consistency in quality, delivery logistics and customer service. Consistent profitability has been a more acute challenge. In the most recent third quarter, the electric automaker finally delivered a noteworthy operating profit of $261 million. Despite record quarterly deliveries of 96,000 vehicles, the automaker remains challenged to meet or exceed its originally stated goal for producing a total of 400,000 vehicles in 2019. Overall revenues in the most recent quarter slipped by 7 percent amid concerns for declining sales volumes of the premium Model S and Model X models.
Tesla’s introduction of manufacturing presence in Asia, and eventually Europe comes as the overall industry struggles with declines in overall market volumes. Competition will obviously become fierce as existing players jockey for control of the electric auto segment in the coming decade. The automaker needs to have further quarters of consistent execution with managed costs.
© Copyright 2019, The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.