Chinese Tesla rivals are forcing Elon Musk to be boring

Ever since Henry Ford, the sector has been geared towards reliable and affordable mass production. Today, the auto industry boasts the world’s most advanced industrial robotics and the most complex supply chains. Toyota’s kaizen, or continual improvement, has spilled out into other fields, such as government. In all this, the cars are almost an afterthought.

With Tesla, Elon Musk injected Silicon Valley’s “move fast and break things” culture into the auto industry. He demanded very rapid development that was extremely risky.

But making a reliable mass market car is very different to the kind of trailblazing manufacturing that has made the company’s name. It will require a huge cultural shift.

In addition to now targeting a 15-fold increase in volume, Tesla says it wants to achieve a 50 per cent reduction in cost. It’s going about both challenges in its own typically risky way.

For a start, Tesla is going to be developing as much technology as it can internally. In addition, it’s betting on the modular approach of creating larger, complex parts that can be bolted together easily, an approach called sub assembly. But both strategies increase risk significantly.

The established industry is horizontal: carmakers farm out much of the work to contractors and partners, keep inventories lean, and focus on the final assembly instead.

Tesla is the opposite, with a highly vertically integrated system. It has its own dealers and charging network, and its own gigafactories.

Becoming more vertically integrated will help it discover cost savings, it argues. That could be true, but if a $1 part doesn’t work, then it’s much faster and cheaper to find a replacement than it is to replace a complex $300 sub assembly module. Halting the production line when the market expects over 50,000 finished working cars a day will be catastrophic. It may well write off the entire financial quarter, or even year.

“For people who know how production lines work – for people who never deal with physical things and only deal with virtual things – all this sounds novel, but it isn’t,” one expert told me. “Elon Musk views risk in a different way to everyone else.”

That’s reflected in many of the stories recounted by Edward Niedermeyer in his book Ludicrous: The Unvarnished Story of Tesla Motors. Engineers and managers who wanted to slow down development, and factor in risk, were overruled or fired.

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So far, Tesla has been blessed. Its early models were sold to rich customers who already had several cars, and were happy to bask in the halo of prestige that Tesla conferred. Musk even slapped down those who complained, once deriding George Clooney for protesting that his Tesla was almost always broken down. Devoted fans took recalls in their stride. But as prices fall, reliability becomes much more important to the consumer.

Musk has also been fortunate in that the established industry was slow to adapt and clumsy, too. A month ago, Ford chief executive Jim Farley admitted that each Mustang Mach-E electric car contained a mile of extra wiring that it didn’t actually need, adding an extra $US300 ($445) to its price tag. A whole mile? Yet the incumbents are learning and may catch up fast.

Cheap mass production is a tall order. Tesla has plenty to deal with already, consistently over-promising and under-delivering its autopilot capabilities. It has just been forced to upgrade more than 360,000 cars because the United States’ national road safety agency the NHTSA found its Full Self Driving (FSD) to be unsafe.

All carmakers have reliability issues, and Tesla is not the worst. But can Musk learn to be dull, reliable and dependable – everything he is not today? The future of Tesla depends on it.

The Daily Telegraph, London

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