Tesla. Elon Musk. You’ve probably heard of both. Tesla was founded in 2003 by a group of engineers who wanted to prove that buyers didn’t need to compromise looks and performance to drive electric—that electric cars could be “better, quicker, and more fun to drive than gasoline cars.”60 Musk was not part of that original group but led the company’s Series A investment (the name typically given to a company’s first round of venture capital financing) and joined Tesla’s board of directors as chairman. He soon took an active role in the company and oversaw the design of Tesla’s first car, the Roadster, which was launched in 2008. Next came the Model S, introduced in 2012 as the world’s first premium all-electric sedan. The next product line expansion was the Model X in 2015, a sport utility vehicle, which achieved a 5-star safety rating from the National Highway Safety Administration. The Model 3 was introduced in 2016 and production began in 2017. From the beginning, Musk has maintained that Tesla’s long-term strategic goal was to create affordable mass-market electric vehicles. And the Model 3 was intended to be that product. It represents Tesla’s first attempt at manufacturing a mass-market car.61 The company is, thus, at a critical juncture in its history … a make-or-break moment. And things aren’t looking so good right now.

The company’s long-term production goal was to increase production to 500,000 vehicles a year by 2018. Tesla’s vehicles are produced at its Giga Factory in Fremont, California, as are most of its vehicles’ components. Inside the factory, 1,068 robots weld, glue, or rivet parts together for the Model 3 sedans.62 In April 2018, Tesla produced only 2,270 Model 3s, a far cry from the 5,000 cars a week that was its original goal for the end of 2017. So far, as of April 2018, only a total of 8,810 Model 3s have been delivered to customers since the beginning of the year. And there are 500,000 customers who have backorders on the car. During the first and second quarters of 2018, the company had to halt production to update some of its manufacturing lines. Musk himself says that the Model 3 is mired in what he calls “production hell.”63 A critical bottleneck? The production of batteries, which are made at its battery factory in Nevada.64 It takes seven hours to product a battery pack. That’s an eternity in an industry where production lines need to run continuously or risk burning through tons of cash. Musk sat down with workers and engineers, who had been discussing solutions for months, and worked to slash production time to 70 minutes. How? By completely reordering the flow of battery assembly.

So what’s going on with the company’s production processes? The company says that these downtimes are “planned” in that it gives company employees time to improve the automation and methodically tackle bottlenecks in order to increase production rates.65 Tesla employs its own version of the Japanese principle of “kaizen” or “continuous improvement—something it calls ‘continual disapproval’ of its processes as it looks for ways to be more efficient and effective.”66 However, although such adjustments and temporary shutdowns are nothing new in the automotive industry, Tesla is fighting to make a name for itself and production mishaps like this don’t help that situation at all. One industry expert says that although Tesla may be a “pioneer in technology and a trailblazer in the electric vehicle market,” those strategic capabilities and core competencies don’t necessarily translate to knowledge of the manufacturing process.67 Scaling up production has its own unique set of challenges, as Tesla and Musk are discovering. In addition to the production challenges, there’s a financial roadblock. The company is burning through cash as it works through its production struggles. Other financial measures—including net working capital, market value of company stock, credit rating, and free cash flow—are also deteriorating.68 Another challenge for Tesla is that two top key executives have “stepped away from” the company as it works to boost production of the Model 3.69 One of those executives, according to a company spokesperson, is taking six weeks off to recharge and spend time with his family. The other executive has joined self-driving car company Waymo.

Epilogue: Tesla employees at the Fremont production facility met the 5,000 cars a week production goal the last week of June 2018 … the final week of the second quarter. However, analysts now say that the true test is whether Tesla can maintain that aggressive rate without sacrificing quality.70