Tesla – Deliveries Have Replaced Manufacturing as a Problem

Tesla have been in the wars this year for many reasons. Some have been widely reported with regards to Elon Musk’s behaviour and the financial side of the business and some of the problems have been with the production of the Model 3. This was the car that was supposed to be the vehicle that brought Tesla closer to the masses with a cheaper, more practical design.

The Model 3 joined existing lower volume cars and that was the crux of the problem. All the other vehicles were built on a slower production line, so issues could be ironed out with little effect on delivery times. All prior cars were seen as high tech pioneers and I think buyers gave some leeway when problems occurred.

The plan for the Model 3 was to dramatically increase volumes to help lower the pricing per unit. The company became the main manufacturer at the old NUMMI plant in Fremont, California. NUMMI, the New United Motor Manufacturing Inc factory, was originally owned by General Motors and Toyota producing badge engineered cars – basically the same vehicle with a GM or Toyota badge on it. Tesla took over in 2010 – GM pulled out a few years earlier as part of a restructuring and Toyota decided to get out as well.

Production under Tesla was no where near the ability of the previous managers and it took about eight years to get the production rates back up with various problems with quality on the Model 3 that were affecting the output. With many of those fixed and production rising, the next problem was getting them to new owners. People were buying however not receiving them! This is a classic example of fixing a process issue: the flow is slow all the way through and then you fix an early stage in the process that then creates a bottleneck further along the line.

What happened at Tesla was exactly this. With production volumes increasing, the delivery logistics have not been able to keep up and so cars are backing up in delivery yards across the US. One of the issues has been an interesting one for them – the customers were ordering cars with non-standard paint trims that took a little longer to manufacture so Tesla had to limit the number of paint options to get the cars out the door.

Other issues are simply the processing of the actual delivery. Some buyers have complained that they were given a short window to pick up their car and when they arrived later, they found that their vehicle had been sold to someone else. Others received chassis numbers and just prior to the expected delivery date, they received a letter to state that the delivery was delayed and the VIN had been cancelled or removed. Some States tried to ban direct selling by Tesla, demanding they create a dealer network and some owners felt that those Governments were sometimes getting in the way to prove that a dealer network was a better way of selling and servicing the vehicles.

In other instances, the cars ended up in the wrong city and the buyers were asked to travel several hours to get the vehicle. Many comments from owners were that the only message they received was that there were “logistical” problems and the common thread was a lack of communication. Others have found the call centre to be either undermanned or overworked with the volume of calls on a daily basis. This has meant the creation of new delivery centres or increasing the size of the existing ones. Tesla has been a punching bag for many over the years and they are now able to get cars out of the factory reaching many customers, showing that they are a serious market contender.

What they are experiencing is no doubt what other manufacturers have also experienced at similar times – growing pains. This is an interesting time for the manufacturer as they build and sell more cars. The number of competitors is growing and the next 18 months will be critical to the survival of the company. They need to keep deliveries flowing, quality up and hopefully a profitable flow of revenues. I’m sure that the delivery process and partners will evolve and get better over a short period of time – Tesla have to get this right to survive.