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Tesla Going At 'Warp Speed,' But Lags In Race To Produce Mass Market Electric Cars

Nov 30, 2017
Originally published on December 1, 2017 10:30 am

You can see how different Tesla is from the rest of the car companies at a place like the LA Auto Show. At the Tesla booth, there's no glitz, or models leaning seductively. But it's swamped during a showing for journalists.

One of three Tesla car models on display at the show is the Model 3, aimed at the mass market. It's not only the car that's supposed to take Tesla mainstream but also the one to bring it to profitability.

But CEO Elon Musk's company has missed its production goals, and analysts wonder whether he's spreading himself too thin.

Rebecca Lindland, a senior analyst with Kelly Blue Book who is an admitted fan of Tesla and Musk, says the company's marketing plan is its bold vision.

"Nothing Tesla does is normal," she says. That's part of the appeal of the company. "[Musk] pushes people to think further and faster, and we need people like that."

Musk and Tesla have innovated many aspects of making cars and batteries. And its Model S is considered one of the best cars of the century.

But the Model 3, the new car Tesla is trying to build, is the company's make-or-break product: It's the company's promise of an affordable electric car.

Yet, the Model 3 has fallen far short of production targets, and Tesla's battery factory has been having trouble with production.

So is it possible for one man to: revolutionize the auto industry and commercial trucking, send people to Mars, create a Hyperloop and innovate the solar panel industry?

"Well, for a normal company the answer would probably be no," says Jeremy Anwyl with Trucks.com. But, he adds, "Tesla is anything but normal, largely because of just the force of personality."

He says Musk is able to take his various companies into places others just couldn't venture. The cult of personality around Musk allows him to raise capital easily and excite investors in a way that other CEOs can't.

The ability to so quickly get money from capital markets comes with risk. "If the market ever lost just a little bit of confidence ... the ability to continue to finance the operations of the organization could get a lot, lot harder," Anwyl says.

Musk predicted this summer that the Model 3 would put Tesla through "production hell." But other car companies like Toyota, General Motors and Volkswagen don't face such difficulties.

Jeffrey Osborne, a stock analyst with Cowen, says the big automakers don't just build cars and trucks efficiently, they build assembly lines and car plants efficiently.

For Osborne, one of the analysts who's been bearish on Tesla, now is the worst time for Tesla to be having rudimentary assembly line problems.

He points to the turnover rate of top managers. Musk is "a tough guy to work for and you know it's a company that's going warp speed. I just wish he'd pause and pay attention to the Model 3," Osborne says.

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ROBERT SIEGEL, HOST:

The electric car maker Tesla and its CEO, Elon Musk, are racing to build a car for the masses. The Model 3 is the one that's supposed to take Tesla mainstream and make it profitable. The company says it will turn out thousands of vehicles every week. So far, it has produced just a few hundred in nearly six months, and competitors are turning up the heat. NPR's Sonari Glinton has more from the LA Auto Show.

SONARI GLINTON, BYLINE: You can see here just how different Tesla is. Tesla only has one car on display. There's no glitz, no models - just a car and a few folks handing out brochures.

REBECCA LINDLAND: Even if they're not in the booth, they're around the booth like a magnet. The only other biggest one is Infinity over there, and they've got donuts that are on fire (laughter).

GLINTON: Who are you?

LINDLAND: Rebecca Lindland, executive analyst for Kelley Blue Book.

GLINTON: OK, she's being literal. They were actually cooking donuts with blowtorches.

UNIDENTIFIED WOMAN: Fire up.

UNIDENTIFIED MAN: Fire them up.

GLINTON: Anyway, Lindland is an admitted Tesla and Elon Musk fan.

LINDLAND: Nothing Tesla does is normal, so let's start there - I mean, which is part of the appeal. He pushes people to think further and faster, and we need people like that.

GLINTON: Elon Musk and Tesla have innovated almost every part of making the car - innovated battery making, even cars sales. And the Model S is almost universally considered one of the best vehicles of the century. But the Model 3, the new car Tesla's trying to build, is the company's make-or-break car. It's Tesla's promise of an affordable electric car. But right now the Model 3 has fallen way short of production goals. There have even been reports of workers putting the car together by hand. Meanwhile, Lindland says there are hundreds of thousands of customers who've put money down and are waiting for a Model 3. She's one of them.

LINDLAND: They have to stop over-promising and under-delivering. You've got to start producing cars and putting out realistic timelines. But don't say you're going to produce 5,000 in a month and produce a few hundred.

GLINTON: What makes Tesla different is the cult of personality around Elon Musk. Can you even name another car CEO? But here's Elon Musk sending rockets into space, and he wants to build a pneumatic tube between LA and San Francisco. Kids think he's cool. Listen to the crowd reaction in this clip of Musk anticipating the problems with the Model 3 from this summer.

(SOUNDBITE OF ARCHIVED RECORDING)

ELON MUSK: Terms of production, the - is how do we build a huge number of cars? I mean, if - and frankly, we're going to be in production hell. (Laughter) Welcome, welcome.

(LAUGHTER, CHEERING)

MUSK: Welcome to production hell.

GLINTON: But here's the thing. The other companies like Toyota, General Motors and Volkswagen are not in production hell. They don't just build cars and trucks. They build assembly lines efficiently. Volvo is going electric, and General Motors announced today a plan for commercial self-driving vehicles. Jeffrey Osborne is a stock analyst with Cowen. He says this is the worst time for Tesla to be having basic car assembly problems with things like welding.

JEFFREY OSBORNE: You know, the turnover in management's been pretty high. He's a tough guy to work for and it's a company that's going, you know, warp speed. We just wish they would, you know, take a pause, come up for fresh air, focus just on getting the Model 3 right.

GLINTON: Jean Jennings is a founding editor of Automobile Magazine. She says for all the excitement around Tesla, every single major car company is at this moment either designing or building electric and hybrid vehicles.

JEAN JENNINGS: Tesla's going to have a hard time when they're up against the rollouts of the electric vehicles from all the performance players - BMW, Porsche, Mercedes. I mean, they already have them, but it's going to get more and more and more - and Ferrari, even.

GLINTON: Now, that doesn't include competition from the companies pushing self-driving like Google. Jennings says Elon Musk reminds her of the swaggering auto executives of old.

JENNINGS: When a man presents himself with the ego as big as Los Angeles, when he takes a stumble - a public stumble, there are plenty of people waiting there, and it's not to pick him up.

GLINTON: Anyone that you talk to here will say Tesla eventually has to start making these cars. The question is when and how long consumers and Wall Street will wait. Sonari Glinton, NPR News, Los Angeles.

[POST-BROADCAST CORRECTION: In the audio, as in a previous Web version, we say Tesla had only one car on display at the LA Auto Show. In fact, the automaker is showing three car models at the show.]

(SOUNDBITE OF PAUL KALKBRENNER'S "AARON") Transcript provided by NPR, Copyright NPR.