Tesla’s $25,000 car means throwing out the 100-year-old assembly line

By | March 30, 2024

Tesla has a plan to fend off cheaper competition from China with a $25,000 electric car. But first it must overhaul a century-old manufacturing process developed by Henry Ford.

The company is moving to what it calls an “unboxed” approach, which is more like building Lego than a traditional production line. Instead of a large, rectangular car moving along a linear conveyor belt, the parts are assembled simultaneously in special areas and then the sub-assemblies are all put together at the end. Tesla says the change could reduce its manufacturing footprint by more than 40%, allowing the automaker to build future factories much faster and at less cost.

If the new assembly process is successful, Tesla says it could cut production costs in half. That will be key to delivering a car cheap enough to fuel demand, which has slowed recently and put pressure on the electric car maker’s share price. Shares of Tesla are down 29% so far this year, compared with a 10% gain in the S&P 500 over the same period.

“If we want to scale the way we want to, we need to rethink production,” Tesla vice president of vehicle engineering Lars Moravy said during the company’s investor day in March 2023.

The problem is that investors haven’t heard many details about how Tesla has moved forward with the idea since then, even as Chinese automakers have cut costs and Detroit automakers have also refocused their efforts on cheaper models.

On the company’s most recent earnings call in January, CEO Elon Musk stuck to the generalities, saying only that Tesla was “very far along” in making a cheaper car, which is expected to start production late next year. Although he called the new “revolutionary production system” and it was “far more advanced than any automotive production system in the world, by a significant margin,” he did not elaborate.

Musk is notorious for missing deadlines, and some on Wall Street doubt Musk can meet his already delayed timeline — he first teased a $25,000 EV way back in 2020 — let alone savings targets. Tesla’s method is unproven and may come with its own inefficiencies and risks. A recent analysis by Bloomberg Intelligence estimated that the new modular manufacturing process would reduce costs by 33% – not half.

Tesla did not respond to requests for comment.

In the absence of details, some people take it upon themselves to figure out how well the system might work. Mathew Vachparampil, CEO of Caresoft, an engineering and automotive benchmarking firm, said his company’s engineers spent 200,000 hours building a digital replica of Tesla’s unboxed platform. They found that Musk’s ambitions are technically possible, and Vachparampil said they would make “tremendous financial sense” – if realized.

Ford’s Highland Park plant, birthplace of the plant’s assembly line. (Ford)

Ford’s legacy

Most mass-market automakers still stick largely to the same basic setup that Henry Ford used to create the Model T in 1913:

  • Stamped panels are assembled in a framing station and welded into a rectangular, box-shaped car.
  • Doors are being installed.
  • The vehicle then goes through the paint shop – either immersed in a large vat, or sprayed and dried in large ovens.
  • The freshly painted doors are then removed.
  • Wiring and a motor or motors are placed along a winding conveyor belt.
  • Seats and other parts of the interior are installed and then glass windshields and windows are added.
  • The doors open again just before a final inspection.

That process, Tesla executives say, is fraught with inefficiencies. Moving a car-sized ‘box’ through a factory (as shown at the top of this article) takes up a lot of space. Painting an entire machine, instead of just the panels that need it, takes time and energy. And because you’re working from a colossal frame, only a few people can put their parts together at any given time.

The unboxed method does not require a large skeleton of a machine to move around a factory. Instead, workers, split into small groups, work on different parts of a vehicle simultaneously before it comes together at one point for final assembly.

The potential cost savings are significant, according to Vachparampil. Caresoft sees a reduction of at least 50% in investments in paint workshops in new factories alone.

Paint has long been the most expensive part of any car factory: the high heat required for car paint is energy intensive and there are strict emissions requirements. According to automotive factory experts, the production capacity of the paint shop largely determines the total production of a factory.

A typical body is 6 feet wide and 15 feet long. Instead of sending the entire rectangular body through a paint shop, Tesla’s unboxed process involves spraying the individual panels before the car is assembled.

Untested method

The unboxed method itself poses numerous risks, especially since it is unproven and requires a shift to a new assembly process, which can lead to production delays.

But this isn’t the first time Tesla has made significant changes to improve long-standing manufacturing practices.

With its Model Y, instead of stamping different parts of the car, Tesla turned to injection molding machine presses to “gigacast” – or create gigantic molds – the front and rear of the vehicle. This eliminated the need for hundreds of parts and welds.

Other U.S. automakers are also trying to fend off the competitive threat from Chinese cars. Ford Motor Co. for example, is investigating a compact electric car that would use a cheaper battery.

“The concern is that the lower end of the auto market is not currently served by electric vehicles, but they will be served by China if the US does. companies can’t cut costs,” said Susan Helper, an economics professor at Case Western University who recently served as senior adviser for industrial strategy in the White House Office of Management and Budget.

But Musk’s company has an edge over legacy automakers when it comes to adapting to new, potentially cheaper production techniques. Tesla’s factories are newer than most, and some aren’t even under construction yet, so the company can more easily and cheaply adapt its facilities to state-of-the-art production methods.

That doesn’t mean it’s easy. The company has warned investors that it is “between two big waves of growth” as demand for the Model 3 and Y – both of which have been on the market for years – peaks. Tesla delivered 1.8 million cars last year, but wants to deliver 20 million cars by 2030. This requires much cheaper cars.

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