Tesla’s Second Gear

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Of the former NUMMI suppliers, many companies just disappeared, almost overnight. Some—like Plastikon Industries Inc., an injection-molding company based in Hayward—managed to adapt and survive the changeover, but they are rare exceptions. Tesla has repeatedly said it works with “over 200 suppliers,” but that’s still a fraction of the thousand that NUMMI used. The suppliers that Tesla does employ are pretty far-flung, from Michigan to Germany.

[contextly_sidebar id=”4543a99dea7bcdbe594bcee9c2e3344b”]Production problems are only part of the long-term challenge. The company must build sales, service and refueling networks in order to compete. Under questioning from Dougherty’s James on the most recent conference call, Musk said he remained confident that the company would one day produce a “high-volume affordable car” that would sell for around $35,000 and achieve a range of about 200 miles between re-fueling. But, he noted, production at that threshold brings another significant challenge: to produce anywhere on the order of 500,000 cars a year, battery production volumes have to increase substantially.

“When you do the math, saying, ‘How many batteries do you need? What is the cell-fabrication capability, the raw materials or the elements?’ It is really quite a large number in order to ultimately feed a factory that is producing 500,000 vehicles a year. We start exceeding the entire laptop industry by a decent margin,” Musk said. New factories to produce the batteries would need to be built, and the science surrounding the raw materials improved. “I see a fairly clear path to that vehicle,” Musk said, though he gave no timeline or other detail.

As far as American manufacturing goes, is Tesla a sign of things to come? “It’s a lot of particulars that mean it makes sense for Tesla, but I don’t think it’s a trend for manufacturing in general,” said Ana Orozco, a senior economist for IHS Global Insight. California’s credits for zero-emission vehicles are a boon for Tesla but wouldn’t benefit most companies. High wages are a particular issue. “Very high-tech, high-skilled manufacturing has some advantage in the Bay Area, but other than that, because of the high cost, there’s no competitive advantage,” she said.

Even then, manufacturing automation has replaced American workers in droves even as American output has soared. That trend shows absolutely no signs of abating: Speaking to Wired magazine, Tesla manufacturing honcho Passin said, “We want to push the boundary of what can be done by robots versus humans … [I]t’s a constant evolution. This Tesla factory is the future of the U.S.A. and the world. We are building the future here.”

“The potential is very significant,” Musk told analysts. “But I don’t want to overpromise.”

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Photography courtesy of Tesla Motors

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