Tesla's Model 3 might be one of the most important cars ever built. It represents an extraordinary accomplishment on the part of the company's plan to
Tesla’s Model 3 might be one of the most important cars ever built. It represents an extraordinary accomplishment on the part of the company’s plan to bring an electric vehicle (EV) to the masses. Tesla’s previous models were exceptional vehicles, but too expensive for most people to seriously consider buying one to replace their Chevy Malibu.
The Model 3, on the other hand, debuted at a far more affordable $35,000, and the company promised to make 500,000 of them a year. That promise, it turns out, almost bankrupted the company, according to founder and CEO, Elon Musk.
In a tweet, Musk was asked how close the company came during the roll-out of the Model 3. In a response, Musk said:
Closest we got was about a month. The Model 3 ramp was extreme stress & pain for a long time — from mid 2017 to mid 2019. Production & logistics hell.
— Elon Musk (@elonmusk) November 3, 2020
It wasn’t the first time the company had been on the brink. In 2008, the company was three days from running out of money, according to another tweet from Musk. The company secured $40 million in financing to avoid going under.
While the Model S and Model X were very nice vehicles, it was the Model 3 that transformed Tesla from a high-profile niche automaker to the most valuable car company today, worth more than General Motors, Ford, and Toyota combined.
Getting there, however, wasn’t easy. The company had major issues ranging from suppliers that “dropped the ball,” to problems with the company’s massive (and expensive) automated assembly line, to a massive recall, to difficulty delivering vehicles, the latter which led to a $700 million loss in the first quarter of 2019.
“This was the most difficult logistics problem I have ever seen, and I have seen some tough ones,” Musk told analysts in 2019. The result was that the ambitious Model 3 almost bankrupted the company.
None of this should be a surprise as Tesla went from making 25,000 vehicles a quarter in 2016 to 145,000 a quarter today. That’s a difference that’s hard to measure simply by the numbers. The thing that worked when you started usually isn’t going to work the same at scale. The number of quality issues increases on an exponential scale as you ramp up production, as Tesla’s experience illustrates.
Of course, Tesla was probably saved by the half-million preorders the company received when it launched the Model 3. Those $1,000 deposits came in pretty handy at a time the company needed it most.
Recently, Tesla reported its third straight profitable quarter. As it worked through its production problems, the company has started to reach its goals and the Model 3 is now a large part of the reason why. It’s just worth remembering it’s also the thing that almost bankrupted the company.
That’s the lesson here. Ambition is great, especially for an entrepreneur. Just don’t lose sight of the fact that your plan has to change as you grow. Otherwise, the thing you’re trying to build could be just the thing that takes you under–or the thing that saves you.
This article is from Inc.com