Tesla Driving the Automotive Industry Forward
Most of the biggest selling cars in America today, generally average sales of about 300,000 units per year. However, within two days of being announced, Tesla had already received more than 270,000 pre-orders of its latest all-electric car, the Model 3.
This massive number of orders, far in excess of even the most optimistic forecasts for the vehicle, turns everything we know about selling cars on its head, and it is expected that it will spur the entire industry dramatically and shift more focus on the marketing of electric car technology to consumers.
Several major car manufacturers have tried out electric technology, with some making some headway in putting their vehicles on the road. However, until now, it has been a niche category, with sales figures in the thousands, not hundreds of thousands.
A lot of the intense demand for the vehicle is the result of the company’s public relations push that centers on Tesla’s charismatic CEO, Elon Musk. Critical acclaim for his more expensive car models as well as flashy presentations of his cars’ technology, are allied to a unique way of building and selling cars that is different from anything the motoring world has ever seen.
Could The Tesla Way Be the Future of the Car Industry?
Now, it would appear that Tesla is succeeding in what no other car maker has been able to achieve – selling electric cars to the mass market. First off, it is clear that we cannot afford to ignore the fact that we need to shift from powering automobiles with fossil fuels, to more efficient and renewable energy sources.
Besides the technology aspect (offering a viable alternative to an internal combustion engine is revolutionary in itself), Tesla has also changed how cars are sold. The company owns its own showrooms, which sell cars directly to the consumer through online transactions at fixed, non-negotiable prices.
The company is now going a step further by changing the entire mass production process by building a factory that will be like no other currently in existence.
Tesla’s Gigafactory to Change the Face of Mass Manufacturing
Tesla’s Gigafactory 1 is a lithium-ion battery manufacturing plant that is currently under construction. Upon its completion, the Gigafactory, located in the Nevada Desert, will boast the largest footprint of any building in the world. Although just a small fraction of this massive, $5 billion building is complete, reporters who were recently given a guided tour of the facility witnessed an engineering marvel that has been designed to efficiently use every square inch of each of its four storeys.
While the scale of the Gigafactory is impressive and is what has got most of the public’s attention, its size is actually one of the least important aspects of the facility. The shift that it represents for large-scale manufacturing is what is truly amazing about this revolutionary factory. For the first time since Ford introduced its mass manufacturing process for the Model T, which has been the template for large factories for over a century, Tesla is now reinventing the manufacturing in two major ways.
A Factory Designed with the End Product as Its Starting Point
Although other auto makers have tried to update the approach to mass manufacturing through quality engineering and have improved the stations on the assembly line with RFID systems and intensive use of robotics, the essential system has remained the same ever since it was introduced by Ford.
The re-engineered manufacturing method, that is being pioneered by Tesla, takes the end product, and then reverse-engineers a system that can be used to build the product as efficiently as possible. By taking the factory-as-a-product approach, Tesla aims to use energy intelligence and intense re-engineering of the manufacturing process to reduce the unit cost of its batteries.
Net Zero Emissions
The second major way that the Gigafactory is set to revolutionize manufacturing is by placing a lot of emphasis on energy efficiency. To quote Musk during the unveiling of his company’s new factory, “Tesla’s mission is to speed up the transition to sustainable energy.”
The production system that has been designed for the Gigafactory seeks to put back as much energy into the grid as it takes from it. Further, the factory has been built not to pollute water, the ground or the air. This is known as a carbon-neutral approach, a way of manufacturing that is so revolutionary that throughout much of the history of manufacturing, it has been considered an impossible ideal.
Overly Ambitious Financial Targets and Huge Projects Affect Q2 Earnings
Within the last three months, the company has not only ramped up production in its factories and undertaken the bold Gigafactory construction project, but it has also taken on a multibillion dollar acquisition of a solar power systems manufacturer and unveiled a new corporate strategy. However, there is one challenge it has yet to meet – financial analysts’ expectations.
The Palo Alto-based car maker this week reported a loss of $2.09 per share in the second quarter, which is $1.06 per share when expenses are excluded – a far worse result than had been expected. Analysts who took part in a Thomson Reuters poll had earlier estimated that the company would make a loss of 95 cents per share.
However, many market watchers are still optimistic of the company turning a profit for the first time this year, despite pessimism in other quarters. Musk says that his company will hit the mark, as long as investors do not take into account the expenses of building the Model 3, since demand for Tesla cars remains as strong as ever.