Tesla Model 3 production delays revealed: manual assembly to blame

　　Tesla Inc. (TSLA) said it has only achieved a fraction of its goal to produce 1,500 Model 3s due to production bottlenecks. The luxury electric car maker hopes to break into the mainstream market with the Model 3, which starts at $35,000.

　　As of early September, major parts of the Model 3 are still being assembled by hand rather than on an automated production line, according to people familiar with the matter, something that analysts, investors and the hundreds of thousands of consumers who have reserved the car do not know.

　　Although production of the car began in early July, Tesla’s much-vaunted advanced assembly line wasn’t fully ready a few weeks ago, these people said. Tesla ’s factory workers spliced ​​the car’s parts in a special area as the company raced to get the production line up to meet its goal of producing thousands of Model 3s a week, they said.

　　Auto experts say it is unusual to manually assemble a large part of a car during production. Dennis Virag, a production consultant who has worked in the auto industry for 40 years, said it was not how cars were mass-produced. It was the way they were made in the horse-drawn carriage era, not in the automobile era today.

　　In a statement, a Tesla spokesperson declined to answer questions for this article, saying that for a decade, The Wall Street Journal (WSJ) has been relentlessly attacking Tesla with misleading articles that almost invariably stretch or cross the boundaries of journalistic impartiality, and that while this article may be an exception, the likelihood is extremely low. The WSJ disagrees with Tesla's assessment of its news coverage.

　　Tesla unveiled the Model 3 at an event outside the company’s factory in July, with Chief Executive Elon Musk driving a shiny red Model 3 onto the stage as hundreds of employees cheered as the first cars rolled off the production line.

　　Within minutes of stepping out of the new car, Musk warned his engineers and designers that the coming months would be challenging. He joked that the company was "frankly heading into production hell, welcome."

　　Unbeknownst to the outside world, the production system to build the car was weeks behind schedule, the people said.

　　The extent of the problem became apparent last Monday, when Tesla said it produced just 260 Model 3s in the third quarter, an average of three a day, which it attributed to production bottlenecks without offering further explanation.

　　The company said at the time that while the vast majority of manufacturing subsystems at its California auto plant were operating at high speed, a small number of systems were taking longer than expected to be enabled.

　　In Musk's quest to wean the auto industry off the internal combustion engine, Tesla is trying to apply Silicon Valley's spirit of rapid change to the complex manufacturing processes that traditional automakers have spent decades perfecting. Tesla's challenge is coordinating an army of workers to assemble about 10,000 parts from suppliers around the world, an unusual approach in the U.S. tech industry, where even hardware companies generally outsource manufacturing.

　　Tesla’s 2015 Model X sport-utility vehicle was also plagued by quality and design problems that left suppliers scrambling to deliver and temporary workers scrambling to meet demanding targets. But the Model 3 is a much bigger project, meaning the lack of a fully functioning assembly line so late in the production schedule could hit Tesla harder.

　　Mr. Musk has said Tesla has learned from its mistakes with the Model X. Mr. Musk has proven skeptics wrong before by creating a luxury brand that competes with BMW and Mercedes-Benz for buyers and by demonstrating that all-electric vehicles can attract a passionate following beyond a niche market of environmentalists.

　　Musk calls his cars "computers on wheels," and Tesla has introduced features such as semi-autonomous driving systems and over-the-air software updates, a rapid-change capability that caught conservative Detroit automakers off guard. Tesla's stock price has surged about 69% in the past 12 months, and its market value once exceeded that of General Motors Co. (GM).

　　But reaching 500,000 vehicles a year, a goal Musk expects Tesla to begin next year, would be a big leap for a company that made just 84,000 Model S sedans and Model X sport-utility vehicles last year. By comparison, General Motors, the largest U.S. automaker by sales, delivered about 10 million vehicles last year, or more than 27,000 a day.

　　To approach the production levels of a typical North American factory, Tesla, which is only 14 years old, must increase its production capacity to produce a car every minute of the workday and ensure quality so that consumers don't have headaches with car problems on the road.

　　Most automakers run assembly lines for about six months, churning out hundreds of cars to work out any problems before they declare a new vehicle ready for production, said Doug Betts, senior vice president of global automotive at consulting firm J.D. Power and a former manufacturing executive at Toyota Motor Co., Fiat Chrysler Automobiles NV and Apple Inc.

　　Betts said that if you don't put the line into operation, you can't really improve the final production process. He said that problems can only be solved if they are found.

　　It is not uncommon for much larger automakers to build pre-production versions of a car by hand before it goes on sale, but these versions are generally only given to employees or others willing to test them and eventually return them to the factory. By the time a car goes on sale, the entire body shop is usually fully automated.

　　At Tesla’s Fremont plant, equipment for the Model 3’s so-called body-in-white production line, which welds the body’s metal panels, wasn’t in place until around September, workers said, and they guessed it would take at least another month to debug the equipment.

　　A former Model 3 worker said he saw young workers in September struggling to move huge sheets of metal and weld them together, rather than using robots that are common on traditional production lines. The Model 3 production workshop has been dubbed "Area 51" by some for its restricted access and secrecy.

　　The worker recalled what he saw, saying that two colleagues were standing where the robot had originally been. Next to them was a large, old-fashioned spot welder connected to the ceiling by chains. One colleague was responsible for maintaining balance to keep the spot welder in the right position, while the other welder controlled the spot welder with his arms; sparks were flying.

　　In August, Musk told analysts that the Model 3 cars coming out of the factory were not engineering validation products.

　　Musk said that these are fully certified, fully approved production vehicles by the U.S. Department of Transportation (DOT) and the U.S. Environmental Protection Agency (EPA). These cars are not prototypes in any way. They are not validating anything. They are fully production vehicles.

　　But he also said there would be different batches of early versions produced at the Fremont factory, which is why the first cars were provided to employees and investors who had paid up.

　　Tesla has said it expects to start delivering its first cars to non-employees this quarter, and the company will have to significantly increase production to reach Musk's target of 5,000 vehicles per week.

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