Elon Musk and Tesla have reached a milestone less than six years after the launch of their first high-volume EV, the Model 3: Tesla is now a big car company with big car company challenges.
Exhibit A: Musk told the automaker’s shareholder meeting Tuesday that it is time for Tesla to consider advertising its vehicles. True, Musk now owns an ad-supported social media platform. But, this is the same Elon Musk who mocked legacy automakers for spending money on paid advertising.
Musk told shareholders Tesla is not immune from macroeconomic pressures that he foresees over the next year. Tesla’s rapid tweaking of prices in its major markets is a symptom of a company that no longer can take ever-higher levels of demand for granted.
Competitors are getting more numerous, and in some cases, closing the gap with Tesla’s aging offerings. In Europe, Hyundai’s stylish new Ioniq 6 sedan competes head-on with the Tesla Model 3. (Hyundai’s car offers more driving range.)
After price cuts in April, the cheapest Model 3 on Tesla’s German website is listed at 2,000 euros below the list price of an Ioniq 6. Hyundai Europe Chief Michael Cole told the Reuters Automotive Europe conference on Wednesday he does not want to make a “knee-jerk reaction” to Tesla pricing. But, anyone with a smartphone and basic web search skills will see how competitive the “Model 3” segment has become.
Musk and his executives are betting they can reopen Tesla’s lead with a revolutionary approach to building the next generation of vehicles.
Tesla’s proposed “unboxed” system for slashing vehicle assembly costs is either a revolutionary successor to the lean production/Toyota Production System manufacturing discipline that has dominated the auto industry for four decades – or a high-tech detour that will stick customers with vehicles that are costly or impossible to repair.
Depends on which industry executive or manufacturing expert you ask.
Tesla needs to be ambitious about reducing costs to support Musk’s decision to gun for sales volume by cutting – and sometimes raising – prices.
To that end, Musk this week instituted a hiring freeze in all but name, telling executives only he could approve new hires – and counseling subordinates to think carefully before asking him to do so.
At the same time, Reuters colleagues Aditya Kalra and Aditi Shah report Tesla has restarted talks with India about building vehicles there.
And in Shanghai, Tesla has applied for permits to expand its Shanghai operation to boost powertrain output to 1.75 million units a year and add space to produce a small number of pouch type battery cells. Tesla primarily uses cylindrical cells.
Musk is riding the accelerator and the brake at the same time: Cutting costs while investing in growth and new technology. Just like the CEOs at GM, Ford, Mercedes and BMW.