Both Tesla and its chief executive Elon Musk are known for taking on risky or otherwise financially dangerous challenges that have, in turn, led to significant returns when the company has turned around and produced results. They had trouble back in 2007 when they lost then CEO Ze’ev Drori who hadn’t lasted a year with the company, they struggled to deliver orders between 2008 and 2012, and then the recalls last year, then there were the Model S fires in 2013 and then the recalls in 2016. In the wake of those troubles, however, the company has grown, and the world has eagerly awaited the arrival of the new Model 3.
As such Tesla has adopted a new and remarkably risky strategy to match the enthusiasm of its market: skipping soft tooling. Companies use soft tooling when prototyping tools and machinery for mass production to ensure that the fit, finish, and tolerances for the new vehicle parts are correct. Then, the company purchases permanent, expensive production equipment to produce the retail models any average consumer will buy.
That Tesla is skipping this step isn’t surprising if not unorthodox (which should be tattooed on Musk’s body by this point) as the company is known for defying conventional industrial standards. There are risks as the heavy production equipment is, obviously, more expensive to modify and fix if there are errors.
This change wouldn’t be as large a concern if not for the fact that Tesla was already facing the possibility of a strike with their facility in Germany. It seems that IG Metall, Germany’s biggest union is claiming that workers are paid 30% less than the union pay scale or $270 US a month. Not their first tussle with a union to be sure after reports of recent labor concerns with the UAW. As it is a striker here would provide a costly expense for the company if the facility in Germany indeed strikes.
If this new production method fails, then the resulting damage for the company would be considerable. As it is, Tesla announced Monday that they would double the number of superchargers in their network from 5,400 to 10,000 with 1,000 of those units going to Tesla’s key demographic in California. That increase is a logical move given that their projected sales goal for the Model 3 is around 500,000 units. If they do succeed at matching that number, there will need to be charging stations to match. The 10,000 goal is projected to finish by the end of 2017.
The question remains is that if this risk will pay off? Obviously, Tesla as a company has weighed the risks of skipping this step and compared it against previous production runs, judging it to be unnecessary. But, will the recent controversy stop the company? As it is Tesla’s stock rises continually passing the $300 US mark this April, despite experts predicting that such an increase must result in an eventual crash. The answer will come from the Tesla Model 3 itself.
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