Stop The Presses! Tesla Stopped Producing The Model 3!!

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… Or it will stop producing them in a few hours.

Is this the end of Model 3 production? Or just media hype?

(Rant forthcoming.)

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Did you fall for this clickbait headline? You are not alone. Even the serious Dutch press thought it worthy to write about a car factory in California which performs normal scheduled upgrades/improvements on their production line while it is in development. When the local village paper in Fremont, California, mentions it because of the extra visitors to the shopping mall, that is understandable. But what crazy world do we live in that this is worldwide news? This has happened a number of times, by the way.

Is it because high-tech Silicon Valley has reached the world of legacy industries at last? And all those experts entrenched in the old world do not understand what is happening? They think Tesla is a carmaker, a new and stupid one, but a carmaker nonetheless. I have news for those old-world analysts and journalists — Tesla is not a carmaker. Tesla is a high-tech company making a computer on wheels. It is using new IT development and production processes that enable the company to do things faster and better.

That all the serious news outlets have been telling you that Tesla is slow is just because they don’t understand what Tesla is doing. And Tesla is partly to blame for this, because Tesla did not provide a translation for them. But most of the blame falls squarely on the media. It is their profession to translate what is happening in some obscure part of the world, like Silicon Valley, into something that can be understood by both Joe six-pack and the specialists in Detroit. They failed miserably, as is evidenced by this quote from Bob Lutz in the LA Times: “Periodic shutdowns of hours or a day are not uncommon during pre-launch pilot build. They are unheard of in regular production, where he supposedly is.”

No, Mr. Bob Lutz, Tesla is not in regular production. Tesla’s primary concern is getting the production line to function as designed. A key metric is cars produced per week. Other automotive experts showed a comparative level of ignorance. The press should do a better job.

This is the new production line for battery module Zone 4. Will play a key role in getting from 3000/week to 6000/week for Model 3.

— Elon Musk (@elonmusk) May 25, 2018

All four. Zone 3 throughput was solved a couple of weeks ago.

— Elon Musk (@elonmusk) May 25, 2018

Update: Airlift stories have now taken over the current Tesla news. All are based on a Reuters piece that claims Tesla is panicking and throwing money at the problem. I put the news in broader perspective in another article that complements this one. The planned improvement to production capacity is what the current shutdown is all about.

Let us first look how the old world would have prepared for the Model 3 production. They would have started building at least two years before planned start of production, battery production line ready year in advance, tested evaluated, mothballed. Same for rest of critical parts of the production line. They would start with 6 months of pre-production, to configure all the robots right, train the workers, and have the logistics worked out. Then, there would be the start of official production and a slow ramp, like we have seen with the Bolt.

Now, take a look at what Tesla did that fooled us all.

Tesla received 467 robots in April 2017 to use to build the Model 3. Except for some parts that take longer to build (the stamping presses and the paint shop were ready in advance), this was the start of building the production lines. Less than 3 months later they started running the line. Tesla called this start of production, but it was not start of production in the old meaning of the car industry. It was the test, configure, and training phase of building the assembly and production lines.

As a modern Silicon Valley high-tech company, Tesla uses a different methodology based on frequent incremental improvements. Run the line until you have identified some areas that need improvement, shut down and apply the fixes, repeat. Initially, there are numerous shutdowns and small fixes. As the line matures, the time between shutdown increases, and probably the number of fixes in each shutdown.

This is also why Tesla does not use model years for its cars — they are continuously updated just as the production and assembly lines are continuously improved. This organization of design, improve, and upgrade is fundamentally different from the yearly cycle approach the rest of the car industry takes.

The advantage of this method is the rapid improvement and scaling of production, as I described in a previous article. The drawback is the inability to predict the speed of improvement and scaling. The classic method of taking ample time to prepare for production and solving all mistakes during this preparation phase gives you a clear timeline, great predictability at the price of high costs, and slow development.

If we compare what Tesla did from the start of building the production lines in April 2017 to reaching full production in July 2018, Tesla is 1 to 2 years faster than the Detroit Dinos. Nevertheless, all the experts and industry insiders are shouting that Tesla should listen to their wise voices and copy the way it is traditionally done. The current outcry over this shutdown fits perfectly in that mindset, “This is not the way Detroit should have done this.” And Tesla is doing it this way for a very good reason.

Tesla does not have the money nor the time to do it that way. From the beginning, Tesla intended to use this methodology to build the production line. Originally, it intended to do so in a slower manner that enabled self-financing the Model 3 production and assembly lines (and was considered by the industry insiders impossibly fast). After receiving 450,000 reservations, that changed to an accelerated timeline that was never expected to be met, as described in a previous article.

Shortly after the “start of production,” Tesla concluded that it was not necessary to build a second 5,000/week line beside the current line. It would require far less capital expenditure (CAPEX) to upgrade the current line to 10,000/week after they reached 5,000/week. Such a change of plan is unthinkable in the old car industry.

For all Tesla watchers, prepare for a lot more shutdowns of a few days in the rest of this year.

And don’t panic, they are planned. As is often the case, the rumors of Tesla’s demise are grossly exaggerated.

Related: Our Tesla Bankwuptcy series