Posted on June 05, 2016 by Matt Pressman
Guest Blog Post: Zachary Kyra-Derksen is a curator at Elon Musk News - a newsletter about Elon Musk, Tesla, SpaceX, Hyperloop, and SolarCity.
Tesla Motors [NASDAQ: TSLA] does not have a great record of delivering its vehicles on time. Delivery of the original Tesla Roadster was delayed by 9 months, the Model S was delayed by 6 months, and more recently the Model X was delayed by a whopping 18 months between Tesla’s projected launch date and its first deliveries. Will the Tesla Model 3 suffer the same fate as its electric vehicle stable mates? Judging by history, most likely. However, I don’t believe the delays will be as long, and I don’t think it’s objectively a bad thing for Tesla to deliver late. Here’s why.
Source: Bloomberg Business
In the last Tesla earnings call, Elon Musk said this about meeting the Model 3 production date: “I think it's worth explaining sort of how manufacturing a complex object with several thousand unique components actually works. And what date's relevant and – in order to achieve volume production of a new car with several thousand unique items, you actually have to set a target date internally and with suppliers that is quite aggressive. And that date has to be taken seriously… The date we are setting with suppliers to get to a volume production capability with the Model 3 is July 1 next year.”
Flickr: NVIDIA Corporation
Despite July 1, 2017 being a serious target, Musk is the first admit that it will almost certainly not be met. He goes on to say this: “Now, will we actually be able to achieve volume production on July 1 next year? Of course not. The reason is that even if 99% of the internally produced items and supplier items are available on July 1, we still cannot produce the car because you cannot produce a car that is missing 1% of its components. Nonetheless, we need to both internally and with suppliers take that date seriously, and there needs to be some penalties for anyone internally or externally who does not meet that timeframe.”
Another reason the July 1st, 2017 date is nearly impossible is due to the fact that the design for the Model 3 isn’t yet finalized. As was reported in BGR, the trunk and front grill are still being revised. Which means that Tesla and its suppliers collectively have ~1 year to finalize the design, and produce the world’s first mass market electric car. This is a truly Muskian timeframe, one which is well beyond the normal realm of ambition. This timeframe speaks to Musk’s need for the world to switch to sustainable transport, and an ambitious target was the only way to get ~400,000 pre-orders for a car almost no one has driven.
Source: Motor Trend
If Musk and Tesla had given the Model 3 a timeframe that it could hit with even 90% certainty, then it is very unlikely that the ensuing buying frenzy after the unveil would have occurred. If Tesla was being pragmatic, they could have given a date four or even five years out. But four or five years out is nowhere near as exciting, and would not have allowed Tesla to raise an extra $1.7 billion to put towards the Model 3 program as they did recently.
As Electrek reported, “Capital supports accelerated ramp of Model 3. Because of the overwhelming demand that it has received for Model 3, Tesla intends to use the net proceeds from this offering to accelerate the ramp of Model 3. As noted in the Company’s first quarter shareholder letter, Tesla intends to start volume production and deliveries of Model 3 in late 2017 and to accelerate its 500,000 unit build plan from 2020 to 2018. Proceeds may be used for working capital and other general corporate purposes as well.”
Youtube: Fabien Tivolle via Tesla Motors
As a Model 3 reservation holder myself, I would be overjoyed to see a Model 3 sitting in my driveway by the end of 2017. However, I’m glad that Musk and Tesla set serious deadlines that are nearly impossible to reach. Those deadlines put a blazing fire under Tesla that drives them to achieve their "ludicrous" goals late, but achieve them nonetheless. So even though Tesla is not great at meeting production targets, they are exceptional at making people care about electric vehicles, and sustainable transportation in general.
It is superhuman efforts like this that enable Musk and Tesla to achieve the impossible. As Will Oremus in Slate so eloquently reflects, “Musk’s track record of promising the impossible is matched only by his track record of delivering the wildly improbable.”
Flickr: TED Conference
Ultimately, I think I would be disappointed if the Tesla Model 3 arrived exactly on schedule. Imagine if all of Tesla’s vehicles arrived on time. Actually meeting aggressive timetables does not allow for cars with blistering 0-60 MPH times, or Bondesque features like a bio-defense mode and falcon wing doors, or S?X appeal for that matter.
In my mind, an on time Model 3 would equal a Model 3 that didn’t reach its potential. But I’m not worried, Musk and Tesla have never failed to deliver on the wildly improbable.