As anyone who has driven or ridden in the Tesla Model X all-electric SUV will tell you, it is unlike any SUV you’ve been in before. From its distinctive all-electric falcon wing doors to its insane 0-60 mph time, fully automated seats and sensor-laden autopilot capabilities, the Tesla Model X is the most advanced car Tesla has made to date.
That advancement shows in the Tesla Model X’s high-end sticker price ($80,000 before incentives for the entry-level Model X 70D) — but it’s also now being blamed for a parts supply problem which meant that Tesla failed to meet its projected delivery targets during Q1 this year by more than 1,180 cars.
In keeping with a practice it began last year at the beginning of every quarter, Tesla released preliminary delivery figures this afternoon for last quarter, admitting that its actual delivery figures were slightly short of the projected 16,000 target it had set itself at the end of last year. (Unlike other automakers, who publish monthly sales figures for the industry to scrutinize, Tesla only release figures at the end of every quarter, a practice it adopted in order to prevent wild speculation over delivery figures ahead of its quarterly sales calls.)
In total, Tesla says it managed to deliver 12,420 Model S electric cars during the first quarter of this year alongside 2,400 Tesla Model X electric crossover SUVs. In total, 14,820 Tesla car were delivered during Q1, nearly fifty percent more than were delivered during Q1 of 2015. Compared with the previous quarter (Q4, 2015) total deliveries were down by 2,600 vehicles.
Blaming the lower-than-expected figures on parts availability, Tesla admits in its official statement that “severe Model X supplier parts shortages in January and February [lasted] much longer than initially expected.” Once those issues were resolved it says, production and delivery figures for Model X rose substantially, resulting in a build rate of 750 Model X cars per week by the end of the quarter.
Despite this rise in production, Tesla notes that many of the vehicles produced in the final week or two of the quarter were simply built too late to be delivered to their owners before the quarter’s end. This should mean that those cars will help bolster Q2 delivery figures a little, although we won’t know that until three months’ time.
Of the parts themselves, Tesla notes that only a half-dozen parts out of the 8,000 or more unique parts that go into a Tesla Model X were the cause of the delay. Sadly, it declines to detail which parts they are. To its credit however, it admits some of the parts problems were down to making the Model X such a complicated car.
“The root causes of the parts shortage were: Tesla’s hubris in adding far too much new technology to the Model X in version 1, insufficient supplier capability validation, and Tesla not having broad enough internal capability to manufacturer the parts in-house,” it states in its official release.
“Tesla is addressing all three root causes to ensure that these mistakes are not repeated with the Model 3 launch,” it adds.
This isn’t the first time the Tesla Model X has experienced parts supply problems. Back in January we explained some of the more recent delays in getting the Tesla Model X to production were caused by a chosen parts supplier failing to satisfactorily produce the hydraulic lifting mechanism needed for the Model X’s massive falcon wing doors. While the company in question — Hoerbringer America Holding, Inc — was able to convince Tesla during the bidding process that it could engineer the lifting mechanism, Tesla claims all of the prototypes supplied to it were substandard and unfit for use. This ultimately caused Tesla and Hoerbringer to part company, taking each other to court in the process. At that time, Tesla had no choice but to redesign the component in question, using a different parts supplier to construct an entirely electronic lift mechanism instead. Due to the extra time that took, Tesla was forced to push production back to the end of 2015 — well beyond its original production schedule.
Speaking at the Tesla Model 3 reveal event on Thursday evening, Tesla CEO Elon Musk addressed production volume concerns by stating that Tesla’s Fremont facility was more than capable of producing the high volume of Tesla Model 3 electric cars needed to ensure customers weren’t kept waiting too long for their cars. Prior to being owned by Tesla, the automotive production facility — which was known as the NUMMI facility and owned jointly by Toyota and General Motors — peaked at a vehicle production volume of 500,000 units per year.
If it once produced 500,000 cars, then it could again, he said.
While the latest parts crisis does now seem to have resolved itself, it doesn’t bode well for a company which has just take more than $260 million (as of the time of writing) in deposits for its just-revealed Model 3 electric sedan. With tens of thousands of new reservations coming in every day, Tesla will need to ensure it has a flawless supply chain and exemplary quality control process in place for late 2017, when Tesla has promised it will begin Model 3 production.
It’s a fact Tesla is acutely aware of, but it’s also one which highlights Tesla’s relatively limited experience with automotive parts suppliers.
To ensure the Model 3 reaches market on time and on budget, Tesla will have to tread a fine line between obtaining the parts it needs at the price it wants versus while carrying out better due diligence and validation before picking its chosen suppliers. Based on Tesla’s approach to the Gigafactory — where it broke ground on multiple sites before finally choosing Reno, NV as the site of its first Gigafactory — we’re guessing Tesla may even line up multiple rival parts suppliers to ensure these kind of issues don’t happen again.
While Tesla [NASDA:TSLA] stock rose today by 3.96 percent during trading as a response to the its record-breaking pre-reservations for the Tesla Model 3, the close of business news from the company’s Palo Alto headquarters has resulted in a 4.21 percent slump in after-hours trading. At the time of writing, Tesla shares are down from a daytime high of $251.84 to $237.41, negating all the gains made today as a result of reaction to weekend Model 3 reservations totals.
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