Tesla’s production rate
In the previous article, we looked at one of the reasons why Tesla’s (TSLA) CEO, Elon Musk, believes that the company could exponentially increase its Model 3 production rate going forward. Tesla investors seem to be closely observing the Model 3’s production rate, which was also linked to its stock price movement in the last few quarters. Tesla expects manufacturing to become one of its key strengths in the future.
Innovations in the auto industry
Auto manufacturing is a hugely capital-intensive business, and it takes enormous amounts of effort, time, and resources to support innovative production methods. For example, Ford (F) introduced the innovative concept of a moving assembly line in 1913, which allowed the company to significantly reduce its per-vehicle production time and costs.
Similarly, Toyota (TM) introduced the Just-in-Time (or JIT) manufacturing method for vehicle production in 1938. The company defines the JIT method as “only what is needed, when it is needed, and in the amount needed.” This innovation helped the automaker minimize its inventory of vehicle parts and the costs needed to acquire and maintain that inventory.
In the last few years, Musk has noted that manufacturing could become the company’s key competitive strength in the future. According to its first-quarter earnings report, Tesla’s prime focus is on “manufacturing that will create enormous benefits for quality, cost, efficiency and employee safety.” For this reason, the company favors maximizing the role of automation in the manufacturing process and minimizing manual work.
During Tesla’s shareholder meeting on June 5, Musk remarked, “It’s clear that there are some elements of production, which are really well suited to people doing it and some parts of production that are really well suited to robotics.”
Read on to the next part for an update on Tesla’s Superchargers.