Elon Musk is certainly taking a lot of risks when it comes to his company, Tesla Inc. Most people already know that Tesla is incorporating a lot of unproven technology into its latest car model. Now, Elon Musk is pushing the envelope further by upping the ante when it comes to the factories that make the Tesla cars.
Most automakers test the waters by building a vehicle using proven prototype tools. Once the production line can assemble the car suitably, it is then scrapped and replaced by higher quality and more permanent tools.
It seems Elon Musk is skipping this industry norm. Right off the bat, Elon Musk is ordering the more high tech equipment.
One of the reasons why this is such a risky move is because automakers usually test the capability of the production line first. It's more cost-efficient to fix problems when the tools are a lot cheaper. In the car industry, this is referred to as "soft tooling."
One of the reasons why Tesla skipped the "soft tooling" phase is because the lower-grade equipment causes a lot of complication to the Model X SUV.
Another big reason is that Tesla is working on a self-imposed tight deadline. While "soft tooling" may be the safer route, it's time-consuming. For one, you need to dispose of the lower quality tools. Then, you need to order and install the higher quality ones. Tesla just can't afford to do this with such a demanding deadline.
Additionally, Tesla is becoming good at modifying production tools. Back in 2015, Tesla purchased a Michigan tooling company. With such acquisition, Tesla can now create said tools faster. Also, they can produce tools 30% cheaper when compared to the past.
The self-imposed tight deadline is partly driven by the financial pressure. Tesla Inc. simply wants to deliver the Model 3 to as many people as soon as possible. According to some reports, there are already 373,000 customers who paid a $1,000 deposit for the Model 3. With an estimated price of $35,000, Tesla is looking to book around $13 billion from the 373,000 customers alone.
Tesla was established back in 2003. From the day of its establishment, the company has yet to produce a profitable year. Elon Musk also added that the Tesla Inc. is "close to the edge" with its capital spending already reaching $2.5 billion while still in the first half of 2017.
Recently, Tesla got some breathing room by raising $1.2 billion of fresh capital. The fresh influx of capital was due to the sale of the 5% stake of the company. The buyer was Tencent Holdings Limited, a Chinese Internet company.
Recently, Elon Musk shared his vision for what he calls as the factor of the future. According to Musk, the factory uses robots and artificial intelligence to build cars faster and safer than ever before.
While Elon Musk may be a visionary, the car industry is still heavily regulated. All of Tesla's effort to speed up the process might eventually hit the proverbial brick wall.