Tesla is a company built on revolutionary technology; they’ve led the way on everything from battery technology to sensor tech. Tesla has strong leadership and excellent funding. There is a long waiting list for their cars. So why are they struggling to build cars and deliver them on schedule for the promised price tag?
Too Much Automation
Perhaps the biggest mistake Tesla made was automating everything without doing a cost-benefit analysis. They tried to automate everything, including tasks that are easy for people to do but hard for robots to do. The “automate everything” mantra sucked up time, talent and resources that could have gone into building cars. The sunk cost of these automated assemblies adds to the overhead costs that have to be factored into the cost of every new car. The cost of removing their insanely complicated network of conveyor belts is another waste that the firm had to absorb.
They should have focused on automating assembly tasks that are difficult for people to do. You automate where it is dangerous for humans, hard to do properly or put humans at risk for repetitive stress injuries. The return on investment would have been better if they automated when it would have eliminated expensive skilled labor or expensive unionized labor, instead of trying to replace unskilled manual tasks like changing tools, removing defective parts and loading parts. The remaining skilled labor is focused on managing production, managing unskilled labor, and maintaining the equipment. Tesla would have seen a greater ROI if they’d started with simpler, less automated production lines and invested time in optimizing operations.
Insufficient Planning for Production
A related problem is Tesla’s plan to build fully automated production lines from the get-go. Automation is best implemented when you have a standard product, standardized assembly process, and high volume. They should have worked out how to build cars correctly, cheaply and efficiently manually. Once they had proven processes, they could automate piecemeal. That would give them the flexibility to improvise and improve in other areas. Eventually, they could automate everything and enjoy high quality, reliable assembly processes that pump out cars at the rate that rivals a Toyota factory.
Instead, they tried to automate their factory based on various assumptions, sometimes locking in less than ideal processes. Making changes for the sake of manufacturability is now expensive, disruptive and time-consuming. That compounds the mistake they made in maximizing various high-tech aspects but not factoring in the need to design things to be easy to assemble.
Assuming High Tech Is Always Good Enough
A related mistake Tesla has made is to assume that high-tech is good enough for the market. A self-driving Tesla car killed a pedestrian. That led to a voluntary recall of 123,000 model S cars.
The advanced AI behind the system clearly isn’t good enough for public use. In the same vein, Tesla assumed high-end batteries, sensors, and intelligence would yield a perfect car. Yet they’re creating an unexpectedly high ratio of flawed vehicles and parts. It doesn’t matter if you have a top-of-the-line AI in the car if the car body doesn’t have a smooth profile or parts break early in the vehicle’s operating life. Tesla’s cutting edge batteries has been a particular problem.
The factory has so much reworked and repair that the Fremont, California factory can’t handle it. The company failed to plan for enough quality checks and tests during production, so they have to repair final assemblies at a greater cost.
The Risks of Vertical Integration
Tesla is different from most car companies because it is vertically integrated. They make everything themselves in house. They don’t buy parts from other companies that make these items in volume and at a low, per unit price. This means there isn’t a network of third-party suppliers to deliver replacement parts for those who need service or could share their specialized expertise in product design and service with Tesla. Tesla had to do something similar by bringing in teams of techs and engineers from service centers to help improve their product rework and repairs in the factory, but these are not industry experts in manufacturing and quality.
Tesla has been accused of shipping flawed parts to remanufacturing plants to avoid scrapping them altogether. The demonstrated problem is that by trying to set up a whole production line while building a de facto prototype in mass means they had to revise and re-iterate often, pushing changes down the line that added delays to repairs and rework by their service centers. And added to the total bill.
Where Is Tesla Now?
Tesla simplified its assembly line and brought back human labor for a number of roles. This has allowed them to reach their goal of 2000 cars a week. More importantly, they are sustaining that production rate. However, the company’s experience will be a case study in why you cannot assume that high tech prototypes can and should be considered good enough on their own.
