Daily Management Review

Tesla Model X Launch Uncertain, Delay Likely to Throw Company Production off-Gear


08/07/2015




Tesla Model X Launch Uncertain, Delay Likely to Throw Company Production off-Gear
Facing a dual blow of reporting net loss for the second quarter and a predicted reduced vehicle output target for this fiscal, auto maker Tesla Motors shares tumbled under pressure this week.
 
The American car maker had posted a $184 million net loss for the second quarter of this fiscal year and had also predicted that its car output for the year would fall short by 9 percent.
 
This shortfall in production was due to delays in the launching the long-awaited Model X sport-utility vehicle.
 
Recently the company’s Chief Executive Elon Musk had noted in a conference call with investors that the company was in a stage of maturity.

 “Simply put, in a choice between a great product or hitting quarterly numbers, we will take the former,” Musk said.
 
The story behind this statement is the fact that the company is now trying to produce more than one car type from a single assembly line from its factory in Fremont, California.
 
While continuing production of the flagship Model S, Tesla is also to launch a new SUV in the fall. As if this was not enough, the auto maker has plans to introduce a new lower-priced Model 3 in 2017. The production of the entire line has been affected by the possible slowdown on the launch of the Model X, especially affecting the production of the Model S, the company said.
 
Therefore reduction in production, which most auto manufacturers face accidently at some point in time, was inevitable for Tesla, say experts resulting in a negative sentiment in the market.
 
Auto experts say that producing a number of cars on a single assembly line is a veery complex process that requires great flexibility and meticulous planning and deployment of resources. It is very different from the production process where a single model is produced in large numbers. This can be done quite comfortably. This is because if one part isn’t right, the whole factory grinds to a halt.
 
This complexity forced FiatChrysler to delay the launch of the popular Jeep Cherokee by about six months because of problems with its new 9-speed transmission.

Tesla had planned three new cars in just a span of a few years using a single assembly line which resulted in the debacle.
 
The car’s second-row seat as the seed of the problem for Tesla in its factory assembly line, said Musk. Though no names were put out, the company blamed the supplier for not providing the quality that would be just right and this was a challenge for the company.
 
 “It’s an amazing seat, a sculptural work of art, but a very tricky thing to get adding, however, that the Model X’s unique falcon-wing doors weren’t going to be a problem. It may be the hardest car to build in the world,” Musk said. He might be right, though I think BMW might contend its advanced carbon-fiber, plug-in i3 or i8 are pretty complicated as well,” Musk had said.
 
According to auto experts, this trend is spreading across the car industry as makers have developed a tendency to remodel cars every 5 years instead of the old norm of five year and inadequate technological advancement was causing the problem.  

(Source: www.forbes.com) 






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