Optimism is something deeply associated with daring enterprises: no one starts something at which they don’t believe they can succeed. Yet, believing you can make it does not imply you are certain about it. This seems to be the case with Tesla when you analyze its behavior regarding quality control and beta testing: it had to prove what it could do while it had the time, before it might go out of business. Let’s check the facts.
The first one is the “deliver now, fix later” strategy. Philippe Chain disclosed this was the idea back when the Model S was first presented. As he was the VP for quality then, Elon Musk allegedly urged him to deliver cars and fix whatever issues they had later with recalls or over-the-air (OTA) upgrades.
Well-documented issues with the Model 3 and the Model Y show the strategy probably remains in place. Instead of exhaustively testing its cars, as most carmakers do, Tesla appears to just develop and deliver them.
It seems even the hardware on Tesla vehicles is in beta testing. If “users” find any issues with it, Tesla tries to fix them on the fly in its increasingly crowded Service Centers. This is what technical service bulletins from the company show, as we discussed some days ago.
In some cases, the issues can be fixed on the production line. This seems to be what happened with paint issues on the Model 3 and the Model Y: we have not seen any more complaints about that in a while. The other possibility is that people just know they have to apply paint protection film to the cars and rush to do so.
Other issues, such as spontaneous window-shattering, will just persist, or Tesla will “fix them” with over-the-air updates if it can. The company has done so with Model S and Model X battery packs and is currently facing a lawsuit: owners accuse it of trying to conceal fire risks by capping the voltage of the cells.
The second point that supports the idea that Tesla was not really sure about its success was disclosed by Elon Musk himself on Twitter.
Musk is currently the richest man on Earth due to Tesla’s market cap. If he were certain his company would become the most valuable car company in the world by such a large margin, he would not have considered selling it to Apple or to anyone else. He would only try to do so if he were desperate for funding the company or just keeping it alive.
In that sense, delivering vehicles without the typical amount of testing that other automakers perform appears to be part of that desperation. With critics saying the company would never manage to manufacture and deliver cars, proving them wrong was crucial, even if that meant delivering products that could use more testing before reaching customers.
Putting the situation in very clear terms, Tesla may have rushed to deliver because it was worried it would not be around in the future. The Autopilot beta testing smells of this urge to prove what Tesla could do while it could.
This analysis is important because things have changed dramatically, but Tesla’s strategy hasn’t. When it saw people were willing to buy its cars even without proper testing, the company may have thought this was a winning strategy and decided to keep it going.
Consider how many people are willing to test FSD. Tesla has already said it is in beta testing and that it “may do the wrong thing at the worst time.” Yet, Elon Musk promised to release a monthly subscription for a feature that is not production-ready. The fact there are people willing to subscribe proves the strategy still pays off, even if not always.
The situation with the LFP batteries on the Chinese Model 3 is a good example. If Tesla has tested the cars long enough, it would have figured out that they take more time to supercharge than the ones with NCA cells, which is causing lines at Chinese Supercharger stations. It turns out these batteries also hold their range less in colder temperatures.
Build quality at Giga Shanghai appears to be much better than that of Fremont. On December 31, we told you JD Power's quality survey placed Tesla in second among the best electric car manufacturers in China – Nio was the first. However, PingWest published on December 25 a detailed article on why Tesla's quality control was going down the drain due to pressures to deliver more cars as fast as possible.
The LFP issues made Chinese customers reject the LFP Model 3 and look for older versions of the car, with the same batteries it has in the US. With the Chinese Model 3 reaching the European market, there’s a good chance that this story will repeat itself there, which could hurt the company.
Tesla’s market cap is currently $770 billion, which makes it more valuable than Facebook in the S&P 500. It only loses to Apple, Amazon, and Alphabet (Google) and is the fourth largest company in that index. With such a high market cap, Tesla should feel secure in its future.
With that, it's time for the company to change its philosophy of delivering now and fixing its vehicles later. It should test its vehicles for millions of miles until it figures out how to improve them and fix issues before the cars reach customers.
If Tesla were in a rush to prove it was viable in the past – especially when it was really a question, as Musk now admits – that does not seem to be necessary anymore. On the contrary: Tesla is worth more than the next six largest automakers combined now.
The question is, will Tesla stay on that path if it persists in rushing with deliveries? Other than Tesla fans and shareholders, regular customers may not be willing to be guinea pigs and put up with defective cars. It is time to start acting like the most valuable car company in the world.