Tesla Model 3

[JSH]

Originally Posted by Old Tele man

Paying $$ to jump to the front of the queue line!

Tesla is running out of orders for the profitable version of the car. Instead they have hundreds of thousands of people that want to buy the loss leader. Musk wants Tesla to show a profit in the 4th quarter so he simply isn't fulfilling orders for the base model. Tesla also doesn't have the cash on hand to sell cars at a loss anymore.

[redpoint5]

Originally Posted by JSH

Tesla is running out of orders for the profitable version of the car. Instead they have hundreds of thousands of people that want to buy the loss leader. Musk wants Tesla to show a profit in the 4th quarter so he simply isn't fulfilling orders for the base model. Tesla also doesn't have the cash on hand to sell cars at a loss anymore.

It seems battery capacity is the easiest way to turn a profit, as Tesla marks them up about 100% over their cost to build. Musk said that once production hit a certain throughput the base model would be profitable, and I would assume that time is fast approaching. It certainly isn't profitable to idle expensive production equipment, so they better start churning out standard range models soon.

[JSH]

Originally Posted by redpoint5

It seems battery capacity is the easiest way to turn a profit, as Tesla marks them up about 100% over their cost to build. Musk said that once production hit a certain throughput the base model would be profitable, and I would assume that time is fast approaching. It certainly isn't profitable to idle expensive production equipment, so they better start churning out standard range models soon.

Musk says a lot of things, most of which is widely optimistic. For example he says they are going to launch a semi, Model Y, and a new roadster in the next 2 years even though Tesla hasn't managed to launch a single product on time let alone 3 at the same time.

They do have a tent assembly line that they could shut down. They could stop working people 12 hours a day / 6 days a week. The overtime alone has to be killing them.

[redpoint5]

Originally Posted by JSH

Musk says a lot of things, most of which is widely optimistic. For example he says they are going to launch a semi, Model Y, and a new roadster in the next 2 years even though Tesla hasn't managed to launch a single product on time let alone 3 at the same time.

They do have a tent assembly line that they could shut down. They could stop working people 12 hours a day / 6 days a week. The overtime alone has to be killing them.

The cost of overtime is generally not as big a deal as the cost of idle production capacity. Overtime represents a good value to business as they get more labor, but don't have to train/insure extra people. As long as Tesla doesn't burn out their production laborers, it's in their interest to keep working them.

An idle tent production line is just as costly as one housed in a permanent structure, as the expensive machinery isn't paying for itself just sitting there.

I came from a silicon wafer manufacturing fab, where inspection tools might cost $3M each, and there would be rows and rows of these machines. Idling these machines for even a few minutes represents huge losses in revenue.

[JSH]

Originally Posted by redpoint5

The cost of overtime is generally not as big a deal as the cost of idle production capacity. Overtime represents a good value to business as they get more labor, but don't have to train/insure extra people. As long as Tesla doesn't burn out their production laborers, it's in their interest to keep working them.

An idle tent production line is just as costly as one housed in a permanent structure, as the expensive machinery isn't paying for itself just sitting there.

I came from a silicon wafer manufacturing fab, where inspection tools might cost $3M each, and there would be rows and rows of these machines. Idling these machines for even a few minutes represents huge losses in revenue.

You can't work people 12 hours a day / 6 days a week for an extended period of time. They do burn out.

The tent production line is to add capacity because the normal line isn't working as it was designed. It isn't working because Musk had his people skip basic steps in the development process and implemented a level of automation beyond what any other automaker has attempted. A lot of that automation isn't working so Musk is throwing humans at problems as a short-term fix.

I come from the automotive manufacturing industry and currently work as a manufacturing engineer.

[redpoint5]

Originally Posted by JSH

You can't work people 12 hours a day / 6 days a week for an extended period of time. They do burn out.

The tent production line is to add capacity because the normal line isn't working as it was designed. It isn't working because Musk had his people skip basic steps in the development process and implemented a level of automation beyond what any other automaker has attempted. A lot of that automation isn't working so Musk is throwing humans at problems as a short-term fix.

I come from the automotive manufacturing industry and currently work as a manufacturing engineer.

I don't doubt you know more about auto manufacturing than me. That said, I stand by my point that increased volume is the pathway to profitability, not idling production capacity.

I agree that too much OT will burn out employees. That's not a long term solution, and neither is a tent for a building.

That said, Munro says there is a 30% margin on the $55k 75 kWh version of the Model 3; higher than any other EV profit margin. Tesla's cost in materials and labor is somewhere around $38,500 for this higher spec'd version.

https://jalopnik.com/engineering-fir...-li-1827632866

The long range battery is 75 kWh, and the standard is 50 kWh; a difference of 25 kWh. Tesla's cost for those 25 extra kWh is about $4750, which when subtracted from the $38,500 car, comes to $33,750 for the standard range.

This is all speculation, but it seems Tesla can break even selling the stripper version of their Model 3 for $35k, and any options at all should return a marginal profit.

[thingstodo]

Originally Posted by JSH

You can't work people 12 hours a day / 6 days a week for an extended period of time. They do burn out.

The tent production line is to add capacity because the normal line isn't working as it was designed. It isn't working because Musk had his people skip basic steps in the development process and implemented a level of automation beyond what any other automaker has attempted. A lot of that automation isn't working so Musk is throwing humans at problems as a short-term fix.

I come from the automotive manufacturing industry and currently work as a manufacturing engineer.

I'm not involved in automotive production, but automation is my day job.

Having people work out how it's got to be done manually, then implementing that with automation is a method that I am all-too-familiar with. It makes sense to management, but it removes many options in the design of the automation to limit yourself to what humans can do, and the speed that they can do tasks at. But it also makes things difficult in that machines are not really equipped to do things like humans do. Dexterity, recognition of complex geometry, sensing vibration and bad, loud noises without specific sensors, etc etc.

Elon's rumored to be using SCRUM, Agile methods, and Lean manufacturing. All of those are disruptive, and something that no other automaker implements to the degree that Elon is attempting. Or maybe they just don't talk about it, tweet, it, etc like Elon does? Just because the rest of the automotive industry does things following specific steps, and Elon has skipped steps, does not make Elon wrong in the same way that it does not make the existing automotive industry right. There are many solutions to any problem.

I can understand why Tesla, perhaps, is not staffing up. If they are working to get the automation working correctly and the extra people would end up getting layoff notices. But that's making a bunch of assumptions ... which may or may not match reality ..

[JSH]

Originally Posted by redpoint5

I don't doubt you know more about auto manufacturing than me. That said, I stand by my point that increased volume is the pathway to profitability, not idling production capacity.

The tent assembly line is not a real assembly line. It is 100% manual assembly of the vehicle using humans. Pallets of parts on the ground, 80/20 workbenches, and batch manufacturing identical vehicles. See attached picture.

So there is no expensive machinery to idle. The tent is just a massive increase in variable cost necessary in order to reach the 5000 vehicle target. It is necessary because the highly automated line inside the building isn't working as intended.

Originally Posted by redpoint5

This is all speculation, but it seems Tesla can break even selling the stripper version of their Model 3 for $35k, and any options at all should return a marginal profit.

You seem to have skipped some key parts of that article:

"But Munro’s manufacturing costs for the Model 3 don’t include everything. Design time for engineers to develop the parts, sales and dealer distribution, marketing or any of Tesla’s “selling, general and administrative expenses” aren’t included. Munro’s figure essentially just considers the material and labor expenses needed to manufacture the vehicle.

I asked Munro & Associates how profitable a cheaper Model 3 might be, but spokespeople told me that the 30 percent margin can’t necessarily be used to extrapolate what the margins are on cheaper Tesla Model 3s like the mystical $35,000 one, mostly because the components may be different. “The problem with trying to figure out what the lower trim model costs, is: What does it have?” James Hadley from Munro told me.

He said it can be fairly straightforward to crunch numbers on the difference in cost based on kilowatt-hours of the lower-capacity battery, but devising cost for the car without the Premium Trim package would be hard. “What kind of functionality are they taking out? What kind of materials are they taking out for the lower trim model?” he continued. It’s for this reason that Munro & Associates says it’s hesitant to give any figures about the profitability of a cheaper Tesla Model 3 trim."

[JSH]

Originally Posted by thingstodo

I'm not involved in automotive production, but automation is my day job.

Having people work out how it's got to be done manually, then implementing that with automation is a method that I am all-too-familiar with. It makes sense to management, but it removes many options in the design of the automation to limit yourself to what humans can do, and the speed that they can do tasks at. But it also makes things difficult in that machines are not really equipped to do things like humans do. Dexterity, recognition of complex geometry, sensing vibration and bad, loud noises without specific sensors, etc etc.

I agree planning for automation from the beginning is much more efficient than automating a formerly manual process. The problem is the automation doesn't work. So either Musk tried to automate things that aren't a good fit for automation, his automation people didn't know what they were doing or Musk didn't give them enough time to work out the bugs before starting production. My bet is on the first and last options.

Originally Posted by thingstodo

Elon's rumored to be using SCRUM, Agile methods, and Lean manufacturing. All of those are disruptive, and something that no other automaker implements to the degree that Elon is attempting. Or maybe they just don't talk about it, tweet, it, etc like Elon does?

Yup, we use SCRUM, Agile, and Lean manufacturing (and lots of other buzz word methods of lean manufacturing that happen to be in vogue)

Originally Posted by thingstodo

Just because the rest of the automotive industry does things following specific steps, and Elon has skipped steps, does not make Elon wrong in the same way that it does not make the existing automotive industry right. There are many solutions to any problem.

If the Model 3 launch was successful you (and Musk) would be right. But it wasn't and instead it was "Production Hell"

For example, Musk skipped the soft-tooling stage. This involves making cheap, lower grade set of tooling to make sample parts. If something doesn't turn out right you modify the tooling and test again. When everything works you cut the purchase order for production hardened tools and discard the soft tools. That way when the line starts up all the parts fit together.

Musk went straight from rapid prototypes parts based on CAD to production parts from hard tool. He did this because he said the soft-tool stage in the Model S production wasn't useful. It wasn't useful because he didn't wait until all the tweaks were made before ordering the production tooling. Musk's take-away from this was not to follow the industry standard process and take the time to do the soft-tool stage correctly for the Model 3. Instead he just skipped the step and we have the fiasco

It seems very odd for a new company to skip basic steps when they don't know what they are doing. However, Musk doesn't know what he doesn't know and isn't willing to listen to people that do know.

For example Audi also skipped soft-tooling when they started then new plant in Mexico. However,

A. They already know how to do a product launch.
B. They already build the car in other locations.

You have to walk before you run and crawl before either.

[thingstodo]

Originally Posted by JSH

I agree planning for automation from the beginning is much more efficient than automating a formerly manual process. The problem is the automation doesn't work. So either Musk tried to automate things that aren't a good fit for automation, his automation people didn't know what they were doing or Musk didn't give them enough time to work out the bugs before starting production. My bet is on the first and last options.

Absent more information - you could be correct.

Yup, we use SCRUM, Agile, and Lean manufacturing (and lots of other buzz word methods of lean manufacturing that happen to be in vogue)

Hmm. Everyone that I know that has ACTUALLY implemented SCRUM and Lean, using Agile methods, knows that it is not just a list of buzz-words. And that AGILE is not a noun. I'm not saying that you are not using parts of SCRUM and Lean, or using Agile methods ... but perhaps you are not doing it well? At least well enough to get all of the advantages ...

BTW - my day job does *NOT* implement any of this. You are far ahead of the curve simply acknowledging that better methods MAY exist. And implementing this stuff is HARD and takes TIME and EFFORT. Even thinking about doing a SCRUM implementation at work gives me a head-ache.

If the Model 3 launch was successful you (and Musk) would be right.

Agreed .. sort of. Portions of the system can be well done, well designed, and perform. But the whole system needs to work at the same time, and together, for a successful plant. So YES, it was not successful. I don't know how many systems failed. But at LEAST one failed in spectacular fashion. Likely more than one, or it would have been fairly quick to fix.

For example, Musk skipped the soft-tooling stage. This involves making cheap, lower grade set of tooling to make sample parts. If something doesn't turn out right you modify the tooling and test again. When everything works you cut the purchase order for production hardened tools and discard the soft tools. That way when the line starts up all the parts fit together.

Musk went straight from rapid prototypes parts based on CAD to production parts from hard tool. He did this because he said the soft-tool stage in the Model S production wasn't useful. It wasn't useful because he didn't wait until all the tweaks were made before ordering the production tooling. Musk's take-away from this was not to follow the industry standard process and take the time to do the soft-tool stage correctly for the Model 3. Instead he just skipped the step and we have the fiasco

That is an EXCELLENT example. I appreciate you taking the time to write it out. But it helps me to understand why you think he skipped critical steps ... which is would appear that he DID. And it shows that Elon, and by inference several of his team, did not understand how reality encroaches on your carefully laid plans.

It seems very odd for a new company to skip basic steps when they don't know what they are doing. However, Musk doesn't know what he doesn't know and isn't willing to listen to people that do know.

It is not odd for a new company to challenge the status quo, and change things up to make things that should be more efficient. It is odd, in my view, for them to go 'all in' on a change like this when they released ... 8 was it? .. difference release candidates for the Model S as they progressed from garage hack to polished design.