Musk On Tesla Model 3 Production Bet-The-Company Situation

JUL 23 2018 BY EVANNEX 19


Here’s a news flash for all the amateur stock pundits out there: starting a company to produce a completely new product is risky. Elon Musk has known all along that Tesla (and SpaceX and SolarCity) could fail, but there’s no safe way to remake the world’s transportation system (as the legacy automakers are learning, those who play it safe get left in the dust). Musk’s master plan had three stages, and at each of those stages, he literally had to “bet the company.” If the Roadster, Model S or Model 3 had been a failure, the entire undertaking might have gone down the drain.

*This article comes to us courtesy of EVANNEX (which also makes aftermarket Tesla accessories). Authored by Matt Pressman. The opinions expressed in these articles are not necessarily our own at InsideEVs.

Above: Tesla’s Model 3 (Image: Tesla)

In each case, however, thanks to the hard work of thousands (not just Musk) and a tremendous slice of luck, Tesla prevailed. Model 3 production is ramping up, the new owners are loving their cars, and no one living in the real world thinks the company is still anywhere near the drain (some of us don’t believe it ever really was, but that’s another article).

As for Mr. Musk, he’s heaving huge sighs of relief. The third and hopefully final existential crisis is over. “I believe Model 3 is the last bet-the-company situation,” he told Bloomberg in a recent interview. “We will still need to work hard and be vigilant and not be complacent because it is very difficult just to survive as a car company. But it will not be the same level of strain as getting to volume production of Model 3.”

Bloomberg, which has always been one of Tesla’s favored media outlets, has published a meaty article about the current state of the Model 3 ramp-up. Production hell may not be over just yet, but it seems to be winding down. “I feel like we have got like one foot in hell,” says Musk. Deliverance from the inferno will be “basically 5,000 [Model 3 vehicles per week] without requiring a lot of effort. It’s still quite painful to produce 5,000 a week. But I think in a month, it will not be. It used to be hell to make 2,000 S’s and X’s in a week, and now it’s normal. In three months, I think 5,000 will feel normal.”

Of course, Tesla and Elon have been through hell twice before. “There have been three situations where it was necessary to bet the company,” Musk explains. “The creation of the Roadster – obviously, we’re a brand-new company, it’s our only product. From the Model S, we went from like 600 cars a year to 20,000 cars a year and a much more sophisticated car. Obviously, that was a bet-the-company situation. Model X was painful but not a bet-the-company situation.”

Above: Tesla continues to refine its production at the Fremont factory (Image: Tesla)

“Model 3, even to basically be healthy for the Model 3 system, it’s 5,000 cars a week. So it’s a half order of magnitude increase relative to the S or the X. That is necessarily a bet-the-company decision. You cannot have that much of a step change for a manufacturing company without this being a bet-the-company decision. But I do not see us doing another thing where we go five times bigger. Once we break through to mass market cars, where mass market is on the order of a quarter million vehicles per year, I cannot see us doing a 1.2 million-vehicle program of one particular model.”

The last week before reaching a production level of 5,000 cars per week, Musk and his team descended to the lowest circle of production hell. “I spent almost the entire time in the factory the final week, and yeah, it was essentially three months with a tiny break of like one day that I wasn’t there. I was wearing the same clothes for five days. Yeah, it was really intense. And everybody else was really intense, too.”

Yes, Tesla has its share of disgruntled employees, and yes, the company dispenses free Red Bull (a shocking revelation!), but Tesla couldn’t have accomplished what it has without a huge number of totally dedicated team members. “I think there was quite a good esprit de corps,” says Musk. “People were pretty fired up. You can see it in the pictures that people posted. You can tell from looking at people’s faces. But everybody was super gung ho to make the number and to make sure that they could do it.”

Why the last-minute scramble? Why was it so important to meet a self-imposed (or media-imposed) deadline? “I think we had to prove that we could make 5,000 cars in a week,” says Musk. “5,000 Model 3s and at the same time make 2,000 S and X’s, so essentially show that we could make 7,000 cars. We had to prove ourselves. The number of people who thought we would actually make it is very tiny, like vanishingly small. There was suddenly the credibility of the company, my credibility, you know, the credibility of the whole team.”

Above: Tesla team celebrates their recent production milestone (Image: Tesla)

Musk readily acknowledges his gratitude to Tesla’s 40,000 employees. “I care very deeply about the people at Tesla. I feel like I have a great debt to the people of Tesla who are making the company successful. OK? The reason I sleep on the floor was not because I couldn’t go across the road and be at the hotel. It was because I wanted my circumstance to be worse than anyone else at the company on purpose. Like whatever pain they felt, I wanted mine to be worse. That’s why I did it. And it makes a huge difference to people…The reason people in the paint shop were working their ass off is because I was in the paint oven with them.”

The relief is palpable now, but make no mistake, the strain has been enormous – and some fear that it’s gotten under the Iron Man’s armor, causing him to lash out at his critics in counterproductive ways. What Bloomberg calls “Musk’s stress-fueled Twitter barrage” peaked in June, as he was going through what he described as the most excruciating time of his life. “It’s been super-hard,” he says. “Like there is for sure some permanent mental scar tissue here.”


Written by: Charles Morris; Source: Bloomberg

*Editor’s Note: EVANNEX, which also sells aftermarket gear for Teslas, has kindly allowed us to share some of its content with our readers, free of charge. Our thanks go out to EVANNEX. Check out the site here.

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19 Comments on "Musk On Tesla Model 3 Production Bet-The-Company Situation"

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I suppose all Evannex articles read like an advertisement for Tesla.

Love my cars and hope the company will be around for years. My reasons are very selfish: eventually, I might need some service done on my TM3s. A Tesla Service Center is conveniently located in a close proximity to where I live.

A steady production of 5,000 3’s and 2,000 S and X’s a week gets you almost to 30,000 a month, even with the odd stoppage or slowdown. That isn’t happening yet, but it will soon. More importantly, when we see quarterly US sales of more than 90,000 Tesla’s sold in the US, that will be a great day indeed! And it will probably happen this year.
Q3 will probably fall a bit short of 90k sales, or it might just make it as they move past producing “just” 5,000 per week for the 3. But in Q4 90k+ US sales will happen, or so I hope, and that accomplishment can’t come too soon!
I don’t know if Tesla is out of the woods yet, but they can see the edge of the woods from here!

Q3 might hit 60k US sales, but I wouldn’t bet money.

I would. 60k seems very do-able… 70k is unlikely though.

I would expect a 90K number for 4Q production, then a lighter january. 3Q will still be modifying the production line, maybe some parts changes, and some more changes from robots to workers. Q3 2019, should be at least 150,000 units if they get things right and clean things up with suppliers.

There won’t be more changes from robots to workers. Things get more automated as issues are worked out; they just had to temporarily go back on automation, because they started out with too much at an early stage.

EVen insideEVs seems to give little credit for the CONCEPT of electric cars at the core of TeslaMotors [or any other 100% EV company]. Of course, credit goes to the builders,designers and admins. with NO hesitation, but driving a gasser, a cute , sport gasser, as a courtesy while the prius I am borrowing while I get a new pack together for my car, is in the shop, is AGONY.

This bet is not about producing 5.000 TM3 per week, it is about making money doing so.

So, no 1.2 million car per year program? What about Model Y, it’s going to be a CUV, I would not be surprised to see 1.2 million reservations… Then there is the Pickup, which AFAIK not going to be ready for another 3 years? It will likely see at least 1.2 million reservations(remember, the 3 best selling vehicles in the US are all pickups). AFAIK in 5 years, Tesla might put out a compact car, maybe cheaper than Model 3, that might bring in lots of demand as well.
Maybe Elon means no plans for 1.2 million cars per year until they have several Gigafactories around the world?

I think he meant that no single product would be 1.2 million per year. Unless it fails (very unlikely), Tesla will get to and exceed 1.2 million vehicles total per year when they have production going in the US, China and Europe. For perspective, total world vehicle production is about 100 million per year.


“…he’s heaving huge sighs of relief…” — *having a — I think it what you meant.

If the Model 3 will be Tesla’s last bet the company product, it might not be for the reason Elon thinks.

Sadly, Eleventy Pretend Electrics, you’ll keep regurgitating your anti-Tesla bull pucky no matter what happens, good or bad. The only thing that will change in your posts is how many EVs you pretend to have owned.

I put my $1000 deposit down before first day reservations. I took possession in November 2017. The model 3 is the best car I have ever owned. I will put a deposit on the model Y first chance I get. All the FUD means nothing to anyone that actually owns a model 3. We know!!!

Unless Tesla plans to stop at some specific number, it is hard to believe they wouldn’t be opening more factories in other locations (I think I read plans for China already) and therefore increasing production. If they had 2 Fremont factories, that would be 14,000 vehicles. Not too hard to imagine at all.

It’s not that easy. You have to determine what the world’s appetite is for Tesla’s. We know it’s pretty much at the limit for model S/X since sales aren’t growing. For model 3’s we don’t know yet. But what we do know sedan sales worldwide have been falling and especially in the US. Also outside of the US the model 3 would be considered a rather large vehicle which also wouldn’t sale as well. So I have to imagine any new factories would be building vehicles besides the model S/X/3 given the factory wouldn’t come online for years.

TM3 is about the size of BMW 3, Audi A4, and Mercedes C. As I understand, these sedans are very popular in Europe while SUV are nowhere near close to their popularity in the US.
Why would the European market not like TM3?

Model S and X are production constrained at the moment — we don’t know what the limit is for sales.