CLOSE It’s in “production hell,” according to Elon Musk Time
Elon Musk, CEO of Tesla Motors, poses with a Tesla car in front of Nasdaq following the electric automakerís initial public offering on June, 29, 2010, in New York. (Photo: Mark Lennihan, AP)
Corrections & Clarifications: A previous version of this story misstated the rate of Tesla vehicle sales in comparison to DeLorean Motor Co. sales.
The annals of the automotive industry are filled with bold upstarts who failed to reinvent the business after they gravely underestimated how hard it really is to make cars.
Look no further than John DeLorean, for example. DeLorean's car company flamed out in the 1980s after turning heads with gull-wing doors that bear a striking resemblance to the falcon-wing doors on Tesla's Model X.
Will Tesla CEO Elon Musk join the Back to the Future carmaker on the list of swashbuckling executives who made a big splash but ultimately failed to reimagine the auto business?
To be sure, Musk has already accomplished much more than DeLorean, whose DeLorean Motor Co. built only 9,080 cars before collapsing. That's about as many as Tesla sold monthly last year.
But with production of the new mass-market Tesla Model 3 electric car struggling to speed up, some investors are losing faith in the billionaire innovator, who is also CEO of rocketmaker SpaceX.
Tesla stock plunged 23% from March 12 through March 29, the last day of active trading. At $266.13, shares are 32% below their all-time high of $389.61.
Last week, Moody's downgraded Tesla's bond rating and lowered its outlook from stable to negative.
"Tesla's ratings reflect the significant shortfall in the production rate of the company's Model 3 electric vehicle," Moody's said.
Musk has acknowledged navigating "production hell" with the Model 3, which has been plagued by delays as he tries to adopt advanced factory automation. But Musk remains confident he can revolutionize vehicle making.
"The car industry thinks they're really good at manufacturing. And actually they are quite good at manufacturing, but they just don't realize just how much potential there is for improvement," he said in February. "It's way more than they think."
Musk bragged that Tesla's futuristic approach to vehicle manufacturing, which relies heavily on high-tech robotics, will be its "long-term, sustained competitive advantage." That includes automating not just the processes of stamping, painting and welding, which most automakers already do, but also eventually automating final assembly.
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Since launching production in July, the company has reportedly encountered a litany of challenges, such as parts shortages and basic miscues that have forced technicians to scramble to fix assembly-line production errors after the cars were supposed to be finished.
Consequently, industry experts are beginning to question Musk’s manufacturing strategy.
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"Tesla has not only tried to reinvent the car, but has also tried to reinvent the production line, with hyper-automation," Sanford Bernstein auto analyst Max Warburton said Wednesday in a note to investors. "This is creating serious issues."
Part of the problem is that Tesla rushed into manufacturing too quickly, said AutoPacific analyst Dave Sullivan, who formerly worked in an assembly plant.
John DeLorean answers reporters' questions at a news conference in New York on Feb. 19, 1982. DeLorean developed the short-lived gull-winged sports cars featured as a souped-up time travel machine in the "Back to the Future" movies. (Photo: AP)
The company appears to be "more concerned with getting butts in seats and fixing the quality issues after the fact," Sullivan said. "Early adopters will look the other way for now, but that goodwill won't last for long."
Tesla did not agree to comment for this story.
But engineering chief Doug Field told employees in a March 23 email obtained by Bloomberg that workers should find it "personally insulting" that critics are questioning Musk's strategy. He exhorted workers to help boost Model 3 production.
“Let’s make them regret ever betting against us," Field reportedly wrote. "You will prove a bunch of haters wrong.”
Investors want to see accelerated production of the Model 3 when the compan