Tesla taking a huge risk with Model 3 production


Tesla Model 3 design prototype  -  reveal event  -  March 2016

Tesla Model 3 design prototype - reveal event - March 2016

Enlarge Photo

Tesla is often known as an unconventional automaker, which can be traced to many facets of its operations.

However, the electric car company's unconventional procedures surrounding the much-hyped Model 3 represents a major gamble.

It turns out Tesla will skip the normal production procedure of prototype tools to assemble the Model 3. These prototype tools help automakers see where potential issues may arise through fit and finish. Once this process is finished with pre-production vehicles, the cheap prototype tools are discarded in favor of permanent tools which are much pricier.

For the Model 3, Tesla is jumping straight to the permanent and expensive part of the equation.

It's a major gamble for Model 3 production, but also shows Tesla CEO Elon Musk's confidence in the upcoming electric vehicle. Skipping the process will likely allow Tesla to meet its production deadline of July 2017.

Tesla Model 3 design prototype - reveal event - March 2016

Tesla Model 3 design prototype - reveal event - March 2016

Enlarge Photo

"He's pushing the envelope to see how much time and cost he can take out of the process," Ron Harbour, a manufacturing consultant at Oliver Wyman, told Reuters.

The problem is that if the equipment turns out to be flawed, it can cost millions to replace or fix defects in the tooling, not to mention delays in production. Let's not forget, Tesla hasn't had the cleanest record when it comes to quality and the Model 3 is estimated to boost production as high as 500,000 vehicles per year, a rate ten times higher than that of the Model S.

Musk claims advanced computer simulation technologies have helped the company skip the "beta testing" for its production tools and allows the automaker to move straight into final production. Additionally, an unnamed source claims the "soft tooling" hurt the Model X production plans.

"Soft tooling did very little for the program and arguably hurt things," the source told Reuters.

Ultimately, Tesla won't know if its gamble pays out until production and deliveries of the Model 3 begin. There's a lot riding on the automaker as investors continue to rally around the promise that is Tesla.

 
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