Tesla’s recently shifted forecast of achieving 500,000 Model S, X and 3 deliveries by 2018 sounded laughably absurd, but joining the circus will be Audi’s Peter Hochholdinger, juggler of production at the German automaker’s flagship manufacturing facility.
Hochholdinger is joining Tesla as Vice President of Vehicle Production, or VPVP, where he is expected to streamline and improve current production at the Fremont factory and develop a manufacturing program capable of reaching Tesla’s goal of churning out thousands of Model 3s by the end of next year. Man, that still sounds crazy.
It sounds crazy because at the end of last year, Tesla only managed to move 50,000 Model S and Model X units combined. The goal for this year, which Tesla reiterated in its first quarter earnings report this month, is to hit only 80,000 deliveries. Meeting the volume demand for the Model 3 as well as growing Model X sales and continuing to meet Model S demand by the end of 2017 would mean almost tripling deliveries in one year. That’s hard.
Meeting that goal is challenged by more than just expanding manufacturing space, as proven by the launch of the Model X. Tesla’s Falcon-Winged crossover was a development nightmare, with the production model being delayed over issues securing parts suppliers and getting the cool doors to function properly.
Now Tesla continues to suffer from quality issues with the Model X. Problems with the Autopilot feature malfunctioning, windows not rolling down due to ill-fitted trim pieces, a coating in the windshield that’s prone to causing double vision, and overall lackluster fit and finish for a $100,000 product severely damages the prospect of a flawless Model 3 launch.
Then there’s the issue of manufacturing capability. Beyond the issues of ramping up battery production from the Gigafactory without a hiccup, and finding parts suppliers to meet the rapid demand growth, Tesla needs to expand factory capability.
At the reveal event of the Model 3 in April, Elon Musk mentioned that the company’s Fremont-located factory was capable of 500,000 vehicles per year. A Tesla executive was later quoted claiming a capacity of 600,000 vehicles, but retracted the statement as an extremely odd slip-up. The problem is that the factory has the potential capacity, of which Tesla currently only prepared to use a fraction.
To expand factory operations would mean tooling up new production lines, which will cost a lot of money—more money than the millions in free cash received from around 400,000 Model 3 deposits at $1,000 each.
This is where Tesla’s move to hire Hochholdinger comes into frame. According to the statement from the company, Hochholdinger was “responsible for leading the production of Audi’s A4, A5 and Q5 vehicles, including 14 derivatives of those models,” and managed “production of about 400,000 vehicles annually at Audi.” The numbers match, but Tesla doesn’t have the organization of Audi.
Luckily, Tesla has the hardest problem solved; people want to buy its cars. They also have the real estate to produce the amount of cars they need to reach the 500,000-delivery forecast. Now they just need the capital and know-how to reach capacity, the latter of which Hochholdinger seems to have in spades.
Good luck, guy.