Image Name: Tesla’s EV boom overshadowed by alarming
Image Credit : Autoblog
With a brand that is inextricably linked to electric vehicles (EVs), it has been an extraordinary decade for Tesla, Inc. and its growth in the EV market. As an ever-growing portfolio of groundbreaking models comes on stream, Tesla has been able to stir the curiosity of customers and investors as well. Nevertheless, beneath this turnaround rests a brewing crisis: production bottlenecks that may impede the company’s ability to keep up with this stupendous growth. With the rise in the number of consumers willing to purchase Tesla’s cars, the company has faced various problems that threaten to undermine its EV boom.
The Demand-Supply Imbalance
Tesla is a pioneer in harnessing EV technology and has seen impressive growth thanks to the Model 3, Model S, and Model Y among other models. This increase in demand is good news for the company; however, it has raised a red flag about the company’s ability to satisfy that demand with production. The company’s production lines have not been able to keep up, giving rise to longer delivery periods and unhappy customers. Tesla has few delectable cherries on the cake of the demand-supply equation—the EV market, yet many of its factories have become a problem instead of a solution.
Another primary reason for this bottleneck is that the company has built and is using a small number of production plants. At present, Tesla’s main assembly lines are located in Fremont, CA, and Shanghai, China, with new production plants being built in Berlin, Germany, and Austin, Texas. But it is not clear how quickly these new plants can come onstream and reach full production.
Supply Chain Disruptions
The effect of the global supply chain crisis on almost all sectors of the economy has been an important factor, and Tesla’s case is no exception. In fact, it is very hard to keep up with the production schedules owing to the global chip shortage. Semiconductors are critical components in a Tesla car utilized from the power management systems up to the entertainment systems within the car. As the demand greatly exceeds the availability of chips, Tesla has had to push forward the timelines for production or even stop production altogether in some instances.
Moreover, apart from the chip shortage, Tesla has also struggled with acquiring other important elements used in EV manufacturing such as lithium, cobalt and nickel, especially used for batteries. These materials take a lot of effort to mine and process and due to geopolitics and the need to protect the environment further supply chains have been dependent on these regions. Owing to these developments, it would be a challenge for Tesla which has its eyes on increasing production.
Labour Shortages and Factory Setbacks
In addition to supply chain constraints, labour issues have also plagued Tesla’s plants. The infectious disease outbreak caused disruption everywhere, especially to full-time workers in the manufacturing plants who had to stay away from work or perform under restrictions. Although the situation appears to have improved, the company is still finding it hard to recruit workers as it is busy ramping up production at its new factories.
One of the projects that has had high hopes from the company is the Gigafactory Berlin which for instance has not gone into operation due to several addressed problems that include policies, ecological issues and even missing employees. The facility’s launch was originally scheduled for mid-2021. However, this timeline has been extended on quite a number of occasions, the most recent being that production will not start before the end of 2022. These delays are not only expensive but also restrict the strategic expansion of the company in Europe where the number of customers for its products is on the rise.
Image Name: Tesla’s EV boom overshadowed.
Image Credit : Autoblog
Quality Control Issues
One more element that dampens the expansion rate in the production numbers for Tesla is the never-ending battle with quality control. Since the firm began to race in churning out more and more cars, reports concerning defects and quality problems have shot up. Issues have been reported by customers that include chipped paint, unevenly installed panels, and defective software among others. While these concerns have been micromanaged by Tesla, these problems remain a major hindrance to some prospective buyers.
Such quality control issues are not only a threat to the image of the company, they are also a source of direct costs. The effects of correcting defects after the product has been issued to the market are veteran expensive, and where there is a significant problem with quality, the risks of recalls present are very high, and high potential to incur other negative consequences to the production system as well as the tourist costs.
Competition on the Rise
As Tesla faces hurdles within itself, competition in the electric vehicle market is going beyond capture. Traditional vehicle manufacturers such as Ford, General Motors, and Volkswagen are investing considerably and increasing electric vehicles production. Startups such as Rivian and Lucid Motors have also thrust into the market with a great array of innovative products that have received raving feedback from customers.
There are significant aspects of the value chain that Tesla has built to create an unfair advantage in the EV market, albeit all these aspects might not be sustainable. The competition is coming to an end. Excessive production shutdowns could lead to the erosion of Tsela’s market share.
Innovation vs. Production Reality
One of the most significant advantages of Tesla is its astonishing ability to innovate. The company has always explored the possible extremes of electric vehicles, for instance with its pioneering Autopilot, or the coming Full Self-Driving (FSD) features. But too often, the chasm between the concepts and the ability to deliver on them has been the Achilles’ heel.
For instance, take the case of Cybertruck, the much-awaited Tesla electric pickup. The vehicle was first revealed in 2019 and was expected to go into production by 2021 but has undergone several delays. The latest reports go as far as stating that mass production will only commence towards the end of the year 2022 or the beginning of 2023. Perhaps owing to the buzz concerning the futuristic design and features of the Cybertruck, many people have ignored the fact that such delays point out the difficulty that Tesla has in making their visions a reality.
The Road Ahead
There are measures that can be put in place by the company to mitigate the production bottlenecks faced, but they need to be acted on immediately. To sustain the sudden rise in demand for electric vehicles, increasing production capacity, establishing dependable supply chains, and enhancing quality assurance will be necessary steps the organization will have to implement. The successful opening of the Berlin and Austin Gigafactories will go a long way in easing some of the production constraints but that is only part of the answer.
Even then, the company will have to keep looking for ways to sharpen its production processes, which in this case is similar to what has been achieved in vehicle production. Long-term fixes to these types of constraints may come in the form of robotics, lean manufacturing, and complete control of the supply chain.
Conclusion:
Tesla’s evolution from a limited electric vehicle maker to a worldwide automotive giant has been quite breathtaking. On the other hand, the ability to solve production constraints, which risks eclipsing the company’s EV boom, is crucial to the future success of the firm. Although the road ahead is full of challenges, Tesla has shown time and again that it can adapt to challenging circumstances. In this regard, the company does not have to limit itself to its current position but can strengthen the fight against rivals in the electric vehicle revolution in the years to come. This can be done by putting more effort into production capacity, ensuring supply chains, and concentrating on quality.
