Tesla's Gigafactories: the company’s most important innovation?

Over the past few years, many a Tesla skeptic has had to sit down to a meal of crow. One who is big enough to admit he was wrong is Matthew DeBord, who wrote in a recent Business Insider article that he regrets a clever quip he made a couple of years ago. 

Source: Tesla

In 2018, as Tesla was struggling to get Model 3 production ramped up quickly, the company improvised a third production line in what was popularly described as a “tent” (actually a semi-permanent aluminum structure). In fact, the solution did look amateurish by auto industry standards, and DeBord was one of many journalists who mocked it, saying that Elon Musk had promised an “alien dreadnought,” but given us a tent in the parking lot.

In hindsight, Mr. DeBord sees that “the tented assembly line was the best solution to the immediate problem.” The results are hard to argue with: Tesla delivered a record 250,000 cars in 2019. It’s also worth pointing out that the automaker recently began Model Y production faster than originally promised, indicating that the days of missed deadlines and long delays may lie in the past.

There’s a larger lesson to be drawn from Tesla’s wrongly maligned Gigatent: this company gets things done fast. The Shanghai Gigafactory broke ground in 2018, and was cranking out cars by early 2020. Following a brief virus-related shutdown, the new plant is propelling production (and TSLA stock) to record levels.

Now Tesla says it means to bring the next Gigafactory, in the heartland of Europe’s auto industry, into service by the middle of 2021. If Tesla meets this deadline, it will be doubly impressive. As DeBord points out, it’s one thing to throw a factory up fast in go-go China, but it’s another thing to do so in Europe, with its famous layers of labor and environmental regulations.

The next project in the pipeline—a third US plant that will build the new Cybertruck—is slated to go online by the end of this year. It’s an incredibly ambitious timeline, but this time, few doubt that Tesla will pull it off.

To be fair, the entire auto industry moves much faster than it did back in 2003 when the California cowboys crashed the party. However, according to DeBord, Tesla’s new factories are going up about twice as fast as facilities recently built by legacy automakers. For example, a new Volvo plant in South Carolina took about two years from groundbreaking to production.

Following the latest stock surge, Tesla has surpassed Toyota to become the world’s most valuable automaker, and it has a near monopoly on the EV market, which even the auto industry’s old guard concedes represents the future. 

Reasons for Tesla’s phenomenal success include its cutting-edge technology, its fanatical customer loyalty, and its passive-aggressive marketing maneuvers. However, there’s another big factor that’s often overlooked—Tesla’s formidable manufacturing infrastructure, which is continuously expanding in scale and improving in sophistication. As a few savvy observers have noted, it’s all about the Gigafactories.

Matthew DeBord reminds us of an important lesson about the auto industry: “It wasn’t the Model T that created Henry Ford’s fortune—it was the moving assembly line that enabled workers to rapidly build the car. It wasn’t the Camry or Corolla that made Toyota the world’s most valuable car company —it was the Toyota Production System, the just-in-time manufacturing model that replaced Ford’s earlier innovation.”

It’s pretty obvious by now that Tesla has revolutionized the automobile. Now it’s becoming evident that the company—whether it’s building cars in an alien dreadnought or an aluminum tent—is revolutionizing manufacturing as well.

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Written by: Charles Morris; Source: Business Insider