At the end of 2015, Tesla essentially ran out of cars. Its most recent vehicle, the Model X, had a dismal sales quarter, which a new report says was caused by “Tesla’s hubris in adding far too much new technology to the Model X in version 1.” Essentially, Tesla’s Model X was so high tech that independent suppliers couldn’t keep up with demand for the parts needed, meaning the bought and paid for Model X’s couldn’t be built and delivered to their owners.
The report said that the missing parts were only 6 of over 8,000 unique parts in a Model X, but Tesla didn’t have enough “internal capabilities” to manufacture the parts themselves. Still, despite the shortage, the report claims that Tesla is back on track to meet their delivery goals for 2016. They delivered 14,820 cars in total, although only 2,400 of those were Model X’s. The parts shortage hit hardest in January and February of 2016, but build rates were back up to normal by the end of March, when Tesla was able to pump out about 750 Model X vehicles per week. Tesla’s main factory produces around 500,000 cars per year, and their new super-massive gigafactory in Nevada will produce about the same amount, doubling Tesla’s output.
Still, even the biggest building in the world can’t put out cars if independent suppliers can’t get their parts in. A lot of Tesla’s financial future is riding on the success of the Model 3, which has racked up 276,000 preorders and counting. The Model 3 is also loaded with high-tech equipment, despite its $35,000 price point.
The Model 3 isn’t supposed to begin production until 2017, but the enormous demand has made it imperative that it not see any of the parts setbacks like the ones that delayed Model X deliveries. Musk has been continually surprised by the huge rates of pre-orders, but seems to be willing to adapt his production plans to meet it.
And the report assures customers that such a shortage won’t happen again. Aside from their self-proclaimed “hubris,” the company blamed “insufficient supplier capability validation” and internal manufacturing capabilities, but said they were “addressing all three root causes to ensure that these mistakes are not repeated with the Model 3 launch.” While Model X sales and deliveries seem to be back on track, we’ll have to wait and see how things go for the Model 3.