More tales of Tesla woes

Tesla’s Model 3 production problems, and rumors about the company’s travail, continued this week, led by a report Thursday from CNBC, citing unidentified Tesla employees, that previously reported delays are getting worse as the electric car company continues to be unable to automate battery production.

Tesla Model 3

CNBC said, “Tesla’s problems with battery production at the company’s Gigafactory in Sparks, Nevada, are worse than the company has acknowledged and could cause further delays and quality issues for the new Model 3, according to a number of current and former Tesla employees.” The Model 3 is Tesla’s attempt to roll out a reasonably-priced electric car, with a base price of $35,000. The current Model S sedan and Model X SUV are twice the price ($68,000 for the Model S and $79,500 for the Model X).

The whistleblowers said Tesla is assembling the battery packs for the Model 3 by hand, while the economics of the car rest on automated battery production. Delays are punishing for Tesla, which saw some 400,000 customers make $1,000 refundable reservations to queue up for the cars. According to former Tesla employees, CNBC reported, the car company has had to “borrow” employees from Panasonic, a partner in the giant Nevada battery factory, to build the lithium-ion battery arrays.

The whistleblower accounts also raised questions about the quality of the Tesla Model 3 batteries and said that complaints to management were summarily rejected.

The CNBC account caused a precipitous decline in Tesla’s stock price on Thursday, dropping quickly from $345/share to below $338/share. The stock rebounded on Friday to $342.

Tesla stock

Tesla quickly responded, issuing a long, detailed rebuttal of the story. The company said, “This is an extremely misinformed and misleading article. To be absolutely clear, we are on track with the previous projections for achieving increased Model 3 production rates that we provided earlier this month. As has been well documented, until we reach full production, by definition some elements of the production process will be more manual.”

Tesla also put a political spin into its rebuttal, saying, “We’ve created thousands of new high-quality jobs in Nevada in recent years. As we continue to expand Gigafactory 1 and ramp Model 3 production, we’ve been able to teach new skills to thousands of new employees, many of whom had no manufacturing experience prior to joining Tesla.”

The investment site Seeking Alpha, which has been critical of Tesla’s failure to meet production goals for the Model 3, said, “While some issues might not be a surprise given multiple delays that Tesla has already announced, it further cements the notion that the company’s window to capture the mass market EV space is closing rather fast.”

Business Insider looked at Tesla’s production problems for its most important car, seeing a broader problem for EVs. The article’s headline: “Tesla’s Model 3 problems reveal a hidden cost in electric cars.” The article observed, “The battery in a Tesla is a very costly component that’s complicated to put together.” While Tesla has managed to build batteries by hand for the Model S and Model X, “that won’t work for Model 3 because it would be too slow, hence the significant automation at the Gigafactory to supply enough battery packs and at the factory in Fremont, California, to roll out more than twice as many cars as Tesla produced in 2017.”

The Business Insider article noted that Tesla’s electric motors and battery packs are expensive, likely to cost Tesla over $10,000 each. “So the cost of the most important parts of a Tesla is concentrated, high, and disproportionally exposed to production bottlenecks.”

But internal combustion cars are far cheaper than electric vehicles. The article says, “A gas tank is a few hundred bucks, and Ford will sell you a powerful ‘crate motor,’ a V8 that goes into one of its Mustangs, for less than $8000. Smaller gas motors cost much less.” The article concludes that “for now, this imbalance between gas cars and electric vehicles has become particularly glaring.”

As a side note, Chrysler is offering a Pacifica gas-electric hybrid seven-passenger minivan (the company invented the minivan), which it claims gets 84 miles per gallon. The sticker price is about $42,000, which suggests some traditional car-buying haggling would bring the price down well below that.

— Kennedy Maize