One of Henry Ford’s famous sayings was that you could have the Model T in any color you would like – as long as it was black! Roughly 100 years later, however, Tesla (NASDAQ: TSLA), the supposedly innovative car company headed by Elon Musk, is about to offer about as many options to the initial purchasers of the mass market Model 3 when the first models roll off the assembly line for probably the first six months of “production.”
The reason that I put the word production in quotation marks in the preceding sentence is that with anything Tesla related, Musk’s creative use of words apart from their usual meanings in general and within the automotive industry which the company is actually in, often stretches what are commonly understood connotations of such words. For most companies, the start of production for a new vehicle would come after extensive testing of pilot vehicles that have already been produced for at least six to nine months and after fully installing and configuring new production equipment and assembly lines for producing a full range of configurations that customers may desire.
For Tesla, however, the first so-called “release candidates” were only produced in March. Although there was some reaction to my article yesterday about why there weren’t any of those release candidates available for even a close review at last week’s “VIP event” hosted by Tesla – much less even being able to sit in one of those release candidate or possibly humoring the throng by even allowing a few of them to be a passenger on test drives that were taking place at the Fremont plant at the same time – the reality is that if none of those vehicles are available for viewing, those vehicles are not “release candidates” but are merely test cars going through testing before final vehicle configurations and production specs are finalized.
Is the Model 3 really ready for production?
The fact that what have currently been described as “release candidates” are largely being seen doing laps around the Tesla test track is also a telling signal that confirms what I am describing. While Musk at the Shareholders’ Meeting yesterday said that the first Model 3 will be released in “late-July, ” if the current number of Model 3s in existence (a vehicle that has supposedly been produced since early-March with “near production tooling”) are still doing laps around the test track, that is because final suspension and braking specs have not yet been set.
As such, I can’t even imagine what Tesla is planning to “release” in late July as if suspension and brake specs have not yet been set – the parts of which would all have to be fully qualified and then ordered and delivered (which would take months) – I would contend that the first Model 3s available in July are essentially a “pre-alpha” version of the vehicle and will continue to be so for at least two months after that.
Although I guess the initial customers taking Model 3 deliveries will at least be somewhat better off than Model T customers in that they will have a choice of colors, customer configuration choices have now been confirmed by Musk that they will be very limited for the foreseeable future (quoted passages are from the Seeking Alpha transcript of the Annual Meeting):
“So initially, the Model 3 configurators, it’s kind of going to be like what color do you want and what size of wheels do you want. That’s basically going to be the configurator. And then we will show what other – what other versions are coming later as soon as we get configuration right, but they – and with the timeline associated with each configuration. For example, we were going to start off with dual motor. But that’s like wait a second, we just doubled the probability of something going wrong if we got two motors, because there are two different motor architectures. One motor is optimized for highway travel and one is optimized for stop and go traffic, which is great for maximizing your mileage in city and maximizing your highway – your mileage on the freeway and having incredible acceleration. But it’s too much complexity right off the bat. So we will just be single motor to begin with and then we will have the dual motor config, if we are lucky, toward the end of this year or more likely early next. So we’re too much about the configurator, because you really had to decide what color do you want and what size of the wheels. That’s basically it for the initial production.”
I think the final sentence in that segment is all you really need to know about the irresponsibility of Musk and Tesla and how flawed the Model 3 production readiness is at this point. Musk himself describes that the dual motor option is optimal for best performance but effectively – because Tesla’s immature manufacturing operations are not able to produce that configuration (without “doubling the probability of something going wrong” – which are Musk’s words, not mine) – that option will not be available to Model 3 purchasers for probably at least six months and possibly longer given Tesla’s inconsistent ability to release products and features on a consistent schedule (just look back at the recent horribly botched transition to AP 2.0).
I would also guess that the “stripped down” version of the Model 3 will also probably eventually have a similar value depreciation curve as the Nissan Leaf where earlier versions lost 80 percent of their value three years after initial purchase. In today’s world where even “fake news” spreads instantly and is accepted as fact, the likely rapid depreciation of initial Model 3s will be well publicized and will probably affect future demand for both the Model 3 and other future Tesla vehicles.