Reading this scruffy little blog, readers may think I have some animosity toward Tesla. I have, of late, frequently written about their travails. I suggest, however, this is because Tesla, whose promotional materials laud their products as particularly visionary and brilliant, continues to have a great many difficulties maintaining that vision and brilliance as CNBC.com reports:
Luxury automaker Tesla is manufacturing a surprisingly high ratio of flawed parts and vehicles, according to several current and former employees, leading to more rework and repairs than can be contained at its factory in Fremont, California.
Tesla’s future as a mass-market carmaker hinges on efficient, automated production of the Model 3, which more than 400,000 people have already reserved, paying $1,000 refundable fees to do so. Musk said in July 2017 that Tesla would probably be making 20,000 Model 3s per month by December.
The company then later downgraded those expectations. It currently says it will make 2,500 per week by the end of this month and 5,000 per week by the end of June.
One current Tesla engineer estimated that 40 percent of the parts made or received at its Fremont factory require rework. The need for reviews of parts coming off the line, and rework, has contributed to Model 3 delays, the engineer said.
Well, that’s not good. But lo, it’s worse:
Another current employee from Tesla’s Fremont factory said the company’s defect rate is so high that it’s hard to hit production targets. Inability to hit the numbers is in turn hurting employee morale.
To deal with a backlog of flawed parts and vehicles, said these current and former employees, Tesla has brought in teams of technicians and engineers from its service centers and remanufacturing lines to help with rework and repairs on site in Fremont.
They also said that sometimes the luxury EV maker has taken the unusual measure of sending flawed or damaged parts from Fremont to its remanufacturing facility in Lathrop, California, about 50 miles away, instead of fixing those parts ‘in-line.
One primary reason startup carmakers fail is it is very difficult to produce quality, reliable motor vehicles in quantity. That difficulty is more commonly underestimated than over estimated. Unsurprisingly, Tesla has denied these claims from employees.
Tesla has acknowledged problems with production of batteries, but said it is still on track to meet its target of 2,500 Model 3s per week by the end of March, and 5,000 Model 3s per week by the end of the second quarter.
Over the weekend, Tesla revealed that it halted its Model 3 production lines in February to give the company time to make improvements.
A company spokesperson said temporary downtime for equipment maintenance and commissioning is “common in production ramps like this.” She said that there may very well be other periods of downtime on the line in coming months.
Tesla shares fell more 4 percent on Wednesday [03-14-18] in a mixed market.
And if that wasn’t bad enough news, Zero hedge reports:
With perfectly ironic timing, we pointed out that investors had built a record short position in Tesla bonds, and had been adding to it as the price had plunged.
Tonight, after hours, yield have smashed above 7% (and price plunged) as Moody’s downgrades the carmaker.
As Bloomberg reports, the rating agency says the company also faces liquidity pressures due to its large negative free cash flowand the pending maturities of convertible bonds.
In short, Tesla doesn’t have much operating cash on hand, major financing bills are coming due, and its bond rating is so low it may not be able to borrow more money. Tesla’s inability to meet its very optimistic production targets for the Model 3 are a real problem:
Tesla’s ratings reflect the significant shortfall in the production rate of the company’s Model 3 electric vehicle. The company also faces liquidity pressures due to its large negative free cash flow and the pending maturities of convertible bonds ($230 million in November 2018 and $920 million in March 2019). Tesla produced only 2,425 Model 3s during the fourth quarter of 2017; it is currently targeting a weekly production rate of 2,500 by the end of March, and 5,000 per week by the end of June. This compares with the company’s year-earlier production expectations of 5,000 per week by the end of 2017 and 10,000 by the end of 2018.
That situation is not improving, as Reuters explains:
Tesla Inc (TSLA.O) temporarily suspended production of its Model 3 electric car from Feb. 20-24 for planned work to adjust equipment in order to improve automation and increase production rates.
Tesla said the planned pause was normal and common for increases in output when a company is ramping up a new product.
‘Our Model 3 production plan includes periods of planned downtime in both Fremont and Gigafactory 1. These periods are used to improve automation and systematically address bottlenecks in order to increase production rates,’ a Tesla spokesperson said in an email. [skip]
Last month, Tesla said in a shareholder note that it continues to target weekly Model 3 production rates of 2,500 by the end of the first quarter and 5,000 by the end of the second quarter.
The company, however, said in the note that while it has plans to achieve those goals, ‘our prior experience on the Model 3 ramp has demonstrated the difficulty of accurately forecasting specific production rates at specific points in time.
Translation: We’re going to continue to promise the moon to keep the money rolling in, but we know our production forecasts aren’t accurate.
And if that wasn’t bad enough, The feds are after EV manufacturers because their products are too quiet! This throws the traditional EV selling point of quiet operation out the window. Road and Track explains:
A new ruling mandates that, by 2019, electric and hybrid cars must emit artificial sounds so pedestrians, cyclists, and the blind can better detect these ultraquiet machines. It codifies the Pedestrian Safety Enhancement Act that Congress passed in 2010, with support from engineering group SAE International and various industry and advocacy groups for the blind. The feds first raised the issue back in 2007, well before the second-generation Toyota Prius would push hybrids into the mainstream.
The National Highway Traffic Safety Administration (NHTSA) estimates the added noise will prevent 2400 pedestrian injuries each year after September 1, 2020, when every new hybrid and EV must be equipped to make sounds. Automakers must equip at least half of such models by September 2019. Only vehicles under 10,000 pounds GVWR are included; electrified motorcycles, three-wheelers, and medium- and heavy-duty trucks are exempt. Want more logic? Gasoline and diesel vehicles with auto stop/start systems aren’t required to make extra sounds while stationary, while EVs and hybrids must.
NHTSA will require automakers to install external speakers that emit simple tones whenever the car is stationary, in reverse, or traveling up to 19 mph (30 km/h was used as the cutoff). By “simple,” we mean that NHTSA doesn’t want automakers replicating the sounds of internal-combustion engines. Rather, they’re calling for two or four tones between 315 and 5000 hertz, separated in one-third-octave intervals.
What they’re describing is vehicles that play chords! That’s the brilliance of government, gentle readers. They’re turning vehicles into pricy music players.
And just how serious is the threat of a blind person being hit by an EV? The article doesn’t cite specific statistics, but I suspect that’s because there are no such statistics. There aren’t enough EVs on the road, and such laws are passed in the expectation they will become dominant, which, considering the Trump Administration is lowering the CAFE standards, is unlikely.
This does, however, offer some interesting possibilities. I’d like to see the burbling sounds the Jetson’s flying car made. Perhaps the whistling theme of the Andy Griffith show? How about a James Brown theme: “ow! ow! ow!”? Or better yet, The Ride of the Valkerie! That would really scream “get out of my way!”
And now we hear Elon Musk has taken to sleeping on a factory floor because he’s taken personal charge of Model 3 production.
I’ll let Road and Track end with a worthy suggestion:
But are quiet cars a true threat to road safety? In just nine years, the government has attempted to mitigate a very narrow risk factor—an electrified car, not just any car, crashing into a blind adult. Meanwhile, think about all the injuries we’d prevent (at no additional cost to automakers) if sighted people took out their earbuds and paid attention while walking.