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Grant Gerke writes about manufacturing, factory and plant automation, packaging, electric cars and renewables for business and consumer media sites.

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Saturday
Feb132016

Brass tacks and Blue Sky for Tesla's Model 3

There's been a definite mixed bag of reactions coming from the Interwebs on the latest Tesla earnings call, but one article released the hounds on how Tesla should just throw in the towel with its Model 3, mass-market vehicle. “Tesla Will Get Trampled by the Mass Market,” by Ed Niedemeyer, poses some valid questions about Tesla's ability to ramp-up production for the Model 3. 

From the Bloomberg article:

As Tesla produces at higher volumes and sells at lower prices, Tesla will learn one of the most counter-intuitive truths of the car business: Mass-market consumers are actually harder to keep satisfied than luxury buyers.

Total agreement on customers being much different, but how many mass-market consumers are we talking about in 2018-19? The article trots out the Elon Musk marketing rap of 500,000 Model 3 vehicles by 2020. Those are big number and it sounds like a stretch to me. What's more realistic?

A recent article by Fred Lambert at Electrek predicts Model 3 volumes by using the same growth pattern as the Model S sedan, from 2012-2015. Click here to see the chart depicting Model 3 annual sales versus competitors.

From the Fred Lambert Electrek's article:

For the projection, I assumed that the Model 3’s market shares would grow in 2019-2020 exactly like the Model S’ did in 2014-2015 (up to 25.4%), while for the sake of simplicity the midsize luxury sedan segment had the same flat year has the large luxury sedan segment in 2015.

So using those predictions, there will be approximately 75,000 Model 3s (2018) on the road and eventually hitting 148,000 by 2020. Those lower volume numbers would be target practice for Tesla in 2020 -- it does beg the question about company's balance sheet in 2020 though. 

With reduced numbers, Niedemeyer's argument about serious manufacturing production problems and customer service issues -- not enough -- begin to wilt.  There have been reliabioity issues with Model S, but he leaves out that the Model S is a new car as of 2012. Even for legacy auto OEMs, production issues are quite often present in new models.

And recent news reports are showing lower service center numbers for 2014 and 2015 Model S vehicles.“We're seeing dramatic improvement in reliability and reductions in servicing needs," Musk said in the most recent earning call.

Brass tacks and blue sky from Musk.

Niedemeyer also mentions that when Toyota — a Tesla Killer??— left the Tesla nest, from a partnership a long time ago, that production excellence never really took off like it should have at the old Nummi plant in California.

Or, maybe Toyota didn’t learn anything about innovative design during its brief partnership. Just look at the new Mirai and Toyota’s angular design themes with their new models? 

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