Tesla Model 3 production held up by welding woes?
October 16, 2017  

Tesla's entry-level EV is having trouble making it out of the factory 

Spot-welding hasn't been essential to Tesla production until now

What's behind Tesla's manufacturing woes? It could be something as simple as

Based on details in a Wall Street Journal report and in a video of the
production line posted on Twitter by Tesla CEO Elon Musk, experts say the
electric vehicle maker appears to be struggling with welding together a
mostly steel vehicle, as opposed to the primarily aluminum bodies of the
Model S and Model X.

The company fell short of its third-quarter production target for the Model
3 — the lower-cost vehicle intended to mark Tesla's entry into the mass

With an influx of competitive EVs on the horizon, Tesla must iron out its
manufacturing problems in the next few months or risk losing its competitive
edge before the Model 3 reaches a larger audience.

"Before, there was only Tesla. Now, there's going to be dozens of
alternatives," said Ron Harbour, a manufacturing consultant at Oliver Wyman.
"They're going to have to get really efficient at manufacturing. They have
to be cost competitive and price competitive to stay in the business."

Details in the Oct. 6 Wall Street Journal report suggest the delay may stem
from Tesla's inability to get the Model 3 production line up and running.
The report said the Model 3 assembly line was still being built as late as
September, while employees put together cars in a separate area of the

The Model 3's aluminum and steel body requires more welding rather than the
adhesive and rivets in aluminum bodies, experts say.

Harbour described the difference between the body of the Model 3 and those
of the Model S and Model X as "partly cloudy vs. partly sunny." The change
in materials would require processes new to Tesla.

"There's a big difference there. They haven't been doing a lot of spot
welding on the first two vehicles because they're all aluminum," Harbour
said. "The learning curve is pretty steep."

After the Journal report, Musk tweeted a video of the Model 3 production
line, which was operating at one-tenth of its potential speed. In the video,
sparks fly as two robotic arms assemble parts of the vehicle frame. He
followed with another on Wednesday, Oct. 11, showing body panel stamping at
full speed.

"Resistance welding should make a little smoke, but when you see stuff
popping out like that, that's called expulsion," automotive manufacturing
consultant Michael Tracy of Agile Group in Howell, Mich., said of the first
video. "It's symptomatic of weld spots getting too hot because they're
poorly planned, or in this case, the metal not being pulled all the way

Poor welds can increase the damage to a vehicle in an accident, and can lead
to rattling and squeaking as the car ages, Tracy said.

In its third-quarter sales report, Tesla said it built 260 Model 3s, a
number "less than anticipated due to production bottlenecks." The automaker
had targeted output of 1,500 cars in the third quarter, with production of
20,000 vehicles per month by December. By sometime next year, Tesla expects
to build 10,000 vehicles a week.

"We are deep in production hell," Musk tweeted after announcing that the
unveiling of a Tesla semitruck would be delayed to November so the company
could focus on the bottlenecks.

A spokesman for Tesla issued a statement saying that the Model 3 is being
built on a fully installed production line that is increasing in automation.

"As we've always acknowledged, it will take time to fine-tune the line for
higher volumes, but as we have also said, there are no fundamental issues
with Model 3 production or its supply chain, and we are confident in
addressing the manufacturing bottleneck issues in the near-term," the
statement read. "There's a reason it's called production hell."

Tracy said slowed assembly lines do little to prove production is running
smoothly because lines perform differently when running at full speed.

"At this point, you would only be running it slow if you were having
troubles and you were afraid the welds you were going to make weren't going
to be good," Tracy said. "It has to be able to run at rate for acceptance

The types of problems Tesla is dealing with are normally worked out long
before the assembly line is expected to be working at capacity, Harbour

"This is something a plant typically goes through four to six months in
advance of a production launch," Harbour said. "This raises the question:
'Is the expertise there?'"

Mark Platshon, managing director of Icebreaker Ventures, said he sees the
slow production ramp-up as a sign Tesla is ensuring that everything is
working before it hits the mass market.

"Given the number of new parts, the multilevel supply chain and the new
automation at the factory being debugged, I am not surprised by the slow
ramp," wrote Platshon, an early Tesla investor, in an email. "They are being
careful to get it right before shipping a lot."

No matter the cause for the production delays, Tesla has a tight window to
ramp up Model 3 production before luxury competitors such as BMW,
Mercedes-Benz and Volvo Cars introduce more electric offerings.

The Model 3 is expected by many industry watchers to bring about Tesla's
"iPhone moment," when a new product is shown to have revolutionary
potential, as Apple's iPhone had in the mobile phone industry. But the more
competitive products become available, the less revolutionary the affordable
EV appears.

"The Model 3 ramp could be dragged into the second half of 2018 or even
2019, when the competitive threat will likely become more imminent," wrote
Barclays analyst Brian Johnson in a note to investors. "And in the face of
increased competition, the 'iPhone moment' appears less certain."

Since July, automakers have been one-upping each other on plans to electrify
their lineups. Volvo said it would introduce only electrified vehicles
starting in 2019. Jaguar Land Rover said it would offer electrified versions
of all of its vehicles by 2020. BMW expects to be able to mass-produce EVs
by 2020, offering 12 models by 2025. Mercedes said it will electrify its
lineup by 2022.

Detroit also has been turning its attention to electrification. Ford Motor
Co. plans to introduce 13 electrified vehicles in the next five years,
including a crossover with 300 miles of range. General Motors introduced the
Chevrolet Bolt last year, with at least 20 all-electric ... coming by 2023 —
two such vehicles will be introduced in the next 18 months.

In addition to approaching competition, Tesla is close to running out of
federal tax incentives, which can shave $7,500 off the price of an EV. The
credits begin to phase out once an automaker has sold 200,000 EVs. In July,
Edmunds estimated Tesla had about 79,000 credits left.

If the credits run out on sales of the Model S and Model X before the Model
3 reaches full production, Tesla could lose its lower-budget buyers to
growing competition, Tracy said.

Yet Tesla has succeeded in growing and maintaining a loyal customer base
since its founding nearly 15 years ago — as shown by the 455,000 Model 3
deposits the company reported in August. The slow production ramp could be
another bump in what has been a consistently bumpy road for the company.

"They will solve all these niggling problems," Platshon wrote. "I suspect
very few of the early preorder customers care if their car is a month or
three months later than hoped."
[© 2017 Crain Communications]
Here is why the new electric car production is being ... CEO Elon Musk said
that the new car would see the company enter ... that the cars were being
built by hand, which was causing the delays but ... Tesla Model 3 production
has not hit …

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