Elon Musk says the new Tesla Model 3 sedan design was pencils-down and completed as of last summer. But documents filed by the automaker this week with the Securities and Exchange Commission sure make it seem like the sedan’s design is still in flux, and industry sources say the timeline to move the Model 3 to production by this July is a stretch, given Tesla doesn’t even have a beta prototype completed yet.
We expect that the next performance milestone to be achieved will be the successful completion of the Model 3 Beta Prototype, which would be achieved upon the determination by our Board of Directors that an eligible prototype has been completed.
Candidates for such prototype are among the vehicles that we are currently building as part of our ongoing testing of our Model 3 vehicle design and manufacturing processes.
Emphasis mine. Last summer numerous “alpha” prototypes of the Model 3 were spotted in various places, but if this filing is to believed, the more advanced beta prototypes aren’t yet finished ahead of the target date.
Tesla’s stock has been taking hits ever since last week, when the company announced its fourth quarter earnings, and a bearish Goldman Sachs analyst threw more shade on the company’s ambitious production timeline, saying he had “near-term oriented” concerns “with respect to operational execution on the Model 3 launch, an unproven solar business, and cash needs.”
It’s now March, and though math isn’t my strong suit, I can deduce that July is four months away. Is that a too-short timeframe to complete building a beta prototype and move into production? Sure sounds like it, according to two industry sources.
A source at a competing manufacturer spoke who spoke to Jalopnik anonymously said, “In order to do it safely, it can’t be done that way.”
Typically, the source said, it takes six to seven months to complete the process of testing beta prototypes, and in that timeframe, “anything that might’ve been missed in validation” is addressed. If you wanted to shorten the timeframe, the source said, you could cut corners, but that’s potentially risky.
“[Tesla] might make a few thousand for employees at first—early adopters— then fix the problems later like they’ve done in the past,” the source said.
An insider at another automaker echoed the half-year timeframe to go from beta to production, saying that “sounds about right.” Asked if Tesla’s timeline its setting for itself is overly-optimistic, the source said: “the short answer is no.”
“The more nuanced answer is, it depends,” the source went on. “It depends on what they have already with the car, how far they’ve developed it, it depends on how aggressive they want to be about getting it to market, quality notwithstanding.”
Tesla could forego “a lot of the systems in place to guarantee quality”—that is, durability testing, and PPAP’ing, a verification process of sorts used in the automotive supply chain to measure quality and reliability standards.
“Everything is done virtually, and all they have to do is bolt one together, and they’re ready to go,” the source said. “Who knows, maybe they just skip the prototype phase altogether, and you just go straight from prototype to production. Their fans are so rabid to get one, and their early fans might be willing to put up with delays and quality issues.”
As to whether the design is “pencils down,” Musk may have said that was the case last year, but Reuters reported that it’s undergoing continued tweaks. A spokesperson couldn’t say whether the design is indeed finished, but reiterated Musk’s comments.
The company says the Model 3's design is going to lend itself to high-volume production in an efficient manner, and suppliers have aggressive timelines to meet. Musk has said Tesla aims to produce 500,000 vehicles starting next year.
In the 2016 first quarter investor call, Musk said the production date is contingent on a “quite aggressive” target date internally and with suppliers.
“It is worth explaining how manufacturing a complex object with several thousand unique components actually works, and what dates are relevant,” Musk said. “In order to achieve volume production of a car, a new car with several thousand unique items, you actually have to set a target date internally and with suppliers that is quite aggressive. And that is the date that has to be taken seriously.”
He continued: “Now, will we actually be able to achieve volume production on July 1 next year? Of course, not. The reason is that even if 99 percent of the internally produced items and supplier items are available on July 1, we still cannot produce the car because you cannot produce a car that is missing 1 percent of its component.”
“Nonetheless, we need to both internally and with suppliers take that date seriously, and there needs to be some penalties for anyone internally or externally who does not meet that timeframe,” he went on. “This has to be the case, because there’s just no way that you have several thousand components, all of whom make it on a particular date.”
And, sure, Tesla’s not like traditional automakers. But the timeline is intense, something Musk has been fully-cognizant of, and he said it’s feasible because the Model 3's design is less-complicated than the Model S and X.
“The Model 3 is the first car Tesla is creating that is designed to be easy to make,” he said on the investor call last year. “This is really a fundamental difference.”
And maybe that’s the key, according to the second industry source we spoke to. Early Model S vehicles were “total shit” and, for instance, motors had to be replaced.
“If they’re looking to re-do that same process—one, satisfy promises that they’re delivering a car at a certain time; that’s all the investors want to see is revenue, then [home in] the quality and reliability, they’ll fix that after the fact,” the source said.
“Get it out, get going, give it to people highly tolerant of that just to say they were the first, and iron it out later.”
Additional reporting from Mike Ballaban
Correction: A previous version of this post referred to Tesla’s SEC document as a K-10 filing, when it’s actually a 10-K filing.