Tesla Model 3 charges in Tallahassee, trunk open.

Tesla Model 3 charges in Tallahassee, trunk open.

More delays ahead for Tesla Model 3 production? Really?

Tesla share prices, which had been stealthily rising over the past month, took a downward dive today (down −$8.25 (2.39%) as of this writing) after a CNBC report warned of more Model 3 delays and made allegations of potentially defective battery packs being installed into cars.

Tesla Gigafactory August 2017 Aerial Construction Update - Duncan Sinfield

Tesla Gigafactory August 2017 Aerial Construction Update - Duncan Sinfield

The report claims that the battery packs for the California automaker are still not in mass production. This, despite the fact that Tesla had stated it achieved a production run-rate of 1,000 Model 3s per week in the closing days of 2017. It begs the question: What, exactly, is mass production? CNBC says its sources, which include former and current employees, assert that the company was still doing some pack assembly by hand until some time in December, though it also says"

"Today, Tesla is dwindling down manual assembly as much as possible at the Gigafactory, a hopeful sign."

Confused warnings about continued production delays aside, the most damaging part of the story appear to concern allegations about safety. The report says some "...quality control workers are relatively inexperienced, make sloppy calculations and don't know when they're looking at flaws." The most concerning part though is the charge that some packs may be improperly assembled and may lead to fires. Says the article:

"Two current engineers told CNBC that they are concerned some of the batteries being shipped do not have the minimum gap required between lithium ion cells. These engineers warned that this "touching cells" flaw could cause batteries to short out or, in worse cases, catch fire."

These same engineers are purported to have said that their warnings to management went unheeded.

Short of Tesla allowing journalists into its Gigafactory complex where the battery packs are being built, there is no way to verify claims of manual construction or safety lapses, though we do expect pointed questions will be asked of CEO Elon Musk and other management officials during the end of quarter (and year) financial call with analysts set for February 7.

As might be expected, the allegations are not sitting well with Tesla and a spokesperson has sent up a lengthy rebuttal, which we have included in its entirety below.

“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. This is something Elon and JB discussed extensively on our Q3 earnings call, and it has no impact on the quality or safety of the batteries we’re producing. As noted in our Q4 deliveries release, during the fourth quarter, “we made major progress addressing Model 3 production bottlenecks, with our production rate increasing significantly towards the end of the quarter.

Furthermore, as is often the case in manufacturing, some parts of the production process require the expertise of employees with engineering or manufacturing experience, and others don’t. 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. New hires on the module line receive extensive training, including safety training, and learn about the importance of proper cell-to-cell spacing so they can identify such issues in the production process. More broadly, battery production – and the module line in particular – is overseen by our top engineering talent, and many of Tesla’s most senior leadership.  

Finally, the implication that Tesla would ever deliver a car with a hazardous battery is absolutely inaccurate, contrary to all evidence, and detached from reality. It is irresponsible to suggest as much based on unnamed, anonymous sources who have provided no such evidence and who obviously do not have a complete understanding of the extensive testing that all batteries in Tesla vehicles are subjected to.  As with Model S and Model X, which have well demonstrated safety records, we maintain a rigorous approach to quality and process control for the Model 3 battery. Even more importantly, to our knowledge, there has not been a single safety concern in the field related to Model 3 batteries at any point over the six months of Model 3 production.   As for the assertion about cells touching in Model 3 batteries, this is extremely misleading and displays a complete lack of basic knowledge about how our batteries work. Every battery in a Tesla vehicle has thousands of cells, the vast majority of which are at the same voltage potential as neighboring cells. Hypothetically, even if two cells of the same voltage potential were touching, there would be absolutely zero impact, safety or otherwise – it would be as if two neutral pieces of metal touched. Despite this fact, all Model 3 battery modules’ cell positions are measured twice in manufacturing to verify process control and quality of outgoing parts. Conversely, if at any point in the production process cells are touching at different voltage potentials, they cannot be electrically interconnected. Over the course of the production process, we conduct three different tests to ensure the right number of cells are electrically connected in Model 3 modules. Additionally, the long term reliability of cell position is something validated through testing, including shock and vibration, and high temperature and humidity testing, as well as thermal cycling endurance testing throughout design and via sampling in production. All of this testing is designed to prevent touching cells from being installed in any of our vehicles, including Model 3. Finally, the safety aspects of our module design would continue to function even in the presence of touching cells, so the concerns raised are further unfounded.  

These false claims are being made even though we have a proven history of making the safest vehicles on the road, with Model S and Model X receiving 5-star safety ratings not only overall but in every subcategory. Although not yet tested by NHTSA, Model 3 has been designed and internally tested to have the same result. Data from NHTSA’s testing shows that Model S and Model X have the two lowest probability of injury scores in the history of NHTSA testing. Furthermore, over billions of miles of actual driving, Tesla’s vehicles have been roughly five times less likely to experience a fire than a conventional gasoline vehicle. In light of these facts, it’s preposterous to suggest that a company as committed to safety as Tesla would allow untested or unsafe batteries to go in our vehicles.”

Source: CNBC