11 ms·

Analysts argue that over-automation is to blame for Tesla problems

116 points by kristianp 9y ago

cjoelrun 9y ago
Hopefully he can generalize their automation developments. Seems like this would have to be a bigger play then just the Model 3 at this point.
John_KZ 9y ago
Sometimes optimization is not the optimal solution. They should have optimized their optimization methods first. Or should they?
- baking 9y ago
  Someone doesn't like your comment, but when I searched to find context for a quote from the article, I found this expanded paragraph from the Bernstein Research report: "What is the inspiration behind Tesla's automation? Tesla has bought German robots and a German automation company (Grohmann). But the German OEMs – traditionally the most enthusiastic proponents of automation – have actually been rowing back on it in recent years. The best producers – still the Japanese - try to limit automation. It is expensive and is statistically inversely correlated to quality. One tenet of lean production is “stabilise the process, and only then automate”. If you automate first, you get automated errors. We believe Tesla may be learning this to its cost." https://ftalphaville.ft.com/2018/03/28/1522248619000/No-one-needs-to-buy-Tesla--redux/ https://ftalphaville.ft.com/2018/03/28/1522248619000/No-one-...
  - jacquesm 9y ago
    The Grohmann acquisition was mostly botched, they got far less out of that than they would have if they had properly managed that. https://www.theverge.com/2017/4/27/15457472/tesla-grohmann-engineering-germany-ousted-elon-musk https://www.theverge.com/2017/4/27/15457472/tesla-grohmann-e... Couple that with a couple of Tesla bigshots walking when they heard Elons plans for fixing the Model 3 production schedule and you can see why things are not looking all that rosy right now. https://www.google.com/search?q=tesla+execs+leaving https://www.google.com/search?q=tesla+execs+leaving
princeb 9y ago
well maybe tesla really thinks the existing automation research is outdated and maybe they think it will massively pay off. but they surely must recognize that there are learning pains involved in this especially when it sounds like no other auto manufacturer is involved in this level of process automation, there's no one with relevant knowledge to simply poach, and therefore the cost of learning has to be borne completely by tesla... for what kind of improvement over tried-and-true existing processes in the short and medium term? for a new auto company that by many accounts is running out of money, this is a silly gamble to take. it might be a good bet 10 years down the road when Tesla is pumping out 1m autos/yr in line with BMW and MB but not right now when they are bleeding cash out of every orifice and failing to make deliveries. sounds like one of those sad stories where the engineers fell in love with the stack and forgot about the product.
- IBM 9y ago
  >sounds like one of those sad stories where the engineers fell in love with the stack and forgot about the product. Sounds like Steve Jobs... in 1986. https://www.youtube.com/watch?v=dSj6kvv7_Sg https://www.youtube.com/watch?v=dSj6kvv7_Sg
csours 9y ago
My previous comment on this subject (reproduced below): https://news.ycombinator.com/item?id=16614247 https://news.ycombinator.com/item?id=16614247 ---- Disclaimer up front: I work for a Tesla competitor. Tesla is making several very interesting bets on the Model 3. Bet 1: Model 3 mix - Tesla is betting that the ratio of expensive, high-content Model 3s to cheap, low-content Model 3s will be sufficient to make enough money to offset investments and pay back loans. It will not be sufficient to make a small profit on each Model 3 sold given the debt load that Tesla has accrued, so they will want to sell a good ratio of expensive Model 3s. If it takes to long to produce the cheaper Model 3s, Tesla will lose some potential customers. Many investors are looking at that "top line" right now - the number of customers and potential customers. If the top line moves too much, investors may get spooked. Bet 2: Vertical Integration - Most automakers rely on a web of parts suppliers, who are under enormous pressure to reduce costs, but Tesla produces most of its components in-house. The contract with an external parts suppliers ensures that the supplier is responsible for any re-work or replacement of defective parts. This allows the automaker to concentrate on internal production issues. Tesla's bet is that internal production of parts will lead to better and cheaper components. This has not worked for any other automaker. Traditional OEMs shoot for a mix of components where the internally produced components are part of the company's core competence: Body Shells, Engines, Transmissions - and externally produced components may be generic - switches, latches, seats, frames, tires, wheels, etc. If Tesla spends too much capital on component manufacturing, they will be inefficient and investors pressure them. Additionally and probably more importantly, if Tesla is not able to spend the time and attention to iterate on cost and quality of these parts, it will also lose this bet. Personal opinion: I think Tesla has learned the wrong lesson from previous dealings with suppliers. For instance, the original Roadster was designed with a two speed transmission. A supplier claimed they could make it, but it never really worked. Tesla learned the lesson that suppliers are stupid and suck at making new things - I think they should have learned that lesson that it is really really hard to make new things. Bet 3: Automation - But first a detour - There are 3 main areas of auto assembly, and most manufacturers have already fully or almost fully automated 2 of them: Body Shop (welding and assembly of the body shell) and Paint Shop. The 3rd area is General Assembly. General Assembly is the bloody, thorny, devilish poster child for multiple single points of failure. A high feature vehicle may have on the order of 1000 assembly stations (aka footprints) in General Assembly. The Model 3 is designed with much lower complexity in mind, and may only have 100 footprints. If and when any of those 100 footprints has an equipment failure or parts issue, ALL 100 stop running in a short amount of time. Human assembly workers are rather resilient and can figure out a multitude of small issues on each and every operation. This may allow for a hypothetical variation of 5% in non-critical parts. Automated assembly may only allow for a 1% variation. Additionally, automated assembly only runs well when EVERYTHING is designed for automation. That is not impossible, but it is expensive and time consuming. --- Most importantly, these three bets are linked: If not enough base models are sold, the cost of design and equipment spending will be excessive on a per vehicle basis. If internally produced parts are too far out of spec, you have strong negative impacts on automation. If automation fails, you cannot produce enough vehicles at a low enough price to satisfy your low-end customers. But, if Tesla wins all three bets, they win big time.
et2o 9y ago
Just a short time ago there were negative headlines about Tesla parts being built by hand [1]. https://www.google.com/amp/s/www.wsj.com/amp/articles/behind-teslas-production-delays-parts-of-model-3-were-being-made-by-hand-1507321057 https://www.google.com/amp/s/www.wsj.com/amp/articles/behind...
- 3327 9y ago
  wallstreet analysts don't know jack shit and come out with statements whenever the wind blows their way from the woodwork. Wallstreet is short Tesla, bonds are trading new lows... Goodluck - so basically you are shorting the guy that is landing fucking rockets back down on this planet? great thesis. I will take the other side of that bet.
  - hueving 9y ago
    >I will take the other side of that bet The stock ticker is TSLA, all you have to do is load up. No need for chest thumping.
    - Hydraulix989 9y ago
      I already bought in. "Overusing automation" is a new one.
      - Hydraulix989 9y ago
        Check the price now ;)
  - jcranmer 9y ago
    What does landing rockets have to do with building cars?
    - hndamien 9y ago
      What does it have to do with automation...? Quite a lot.
j15e 9y ago
Optimistically, those over-the-industry-ratio of line investments in automation will be profitable after more models are introduced for the mainstream audience. Other car makers take no risk in the short term by not investing to automate more final assembly. But 2 times more is not like 10 times more. It is very probable that Tesla will get to have lower production cost & better capacity than other car makers in just a few more years. Yeah I know they may need more cash very soon and are way under their targeted rate, but Musk still has lot of money in the bank I think? I always think of Tesla of a company with a more long-term vision than other car makers. I think analysts sometimes just want a lower the price so they can get more of it.
- kristianp 9y ago
  I don't think Musk has that much money in the bank. I think most of his net worth is in his Tesla shares.
- erk__ 9y ago
  There is a reason most big car makers have not been selling electric cars yet, it is not very profitable, they believe that around 2020 batteries are becoming cheap enough to sell them. And if those companies can produce more and cheaper cars than Tesla they are going to have a problem.
  - ggm 9y ago
    There are only four or five significant old school car manufacturers and India and China bought some technology and are ramping up. The complex non linear investment decisions they have to make are just that: complex. If Tata or somebody succeeds in stealing mindshare and then market share leaving their run until after 2020 could turn out to be as suicidal as investing in cocaine to make the Delorean
natch 9y ago
Automation pays off over time. I'm rooting for them.
buvanshak 9y ago
Yea. I wouldn't be surprised if this was Tesla's PR itself. Make a bunch of people say you can't do something and then do it. 10x the PR and the you have successfully projected the illusion of capable of doing the impossible in front of the naive public...Worked well for Elon till now..
- kgwgk 9y ago
  It didn’t work so well for Theranos.
  - buvanshak 9y ago
    Well, of course, you should have some sort of assurance that you ll be able to pull it. The PR tactics is just to give 10x PR when you actually do it... And I think Theranos did much more than make people say what they are doing is not really feasible...
  - paulie_a 9y ago
    Theranos was a completely bullshit and fraudulent product
oneman 9y ago
LOL. Analysts are correct, but musk is more correct! (intuition!) Its like uno, automations not perfect yet, gaps in process, missing feedback signals and other signals on various fails. Solution! Densify all of the problems and hundred dollar hour guys in your super factory, raise TC, phase transition to factories making factories as a service, earth conquered, again. We are just getting to the full spectrum buildup, next.. red alert, its a tank rush!
- photogrammetry 9y ago
  Go away and never return.
OrganicMSG 9y ago
> But while all that exotic capital might allow Tesla to remove 5 workers, it will then need to hire a skilled engineer to manage, programme and maintain robots for $100 an hour (our estimate of a robotic engineers’ hourly rate). These analysts, what are they analysts in?
- baking 9y ago
  More context: "Let's say there are 10 hours of labour in final assembly (the part of the production line where parts, interiors and the powertrain are installed in a painted bodyshell). In a regular plant, final assembly typically has less than 5% of tasks automated. If Tesla attempts to automate 50% of these tasks, it could cut out 5 or so hours of labour. This might save $150 per car (assuming wage rates, all in, of $30 per worker, per hour). "But while all that exotic capital might allow Tesla to remove 5 workers, it will then need to hire a skilled engineer to manage, programme and maintain robots for $100 an hour (our estimate of a robotic engineers' hourly rate). "So the net labour saving may be only $50 per unit. Yet putting the automation into the plant seems to involve an apparent capital cost that's $4,000 higher per unit of capacity than for a normal plant. If the product is built for 7 years, that's over US$550 of additional depreciation per unit built. It's hard to see an economic case even if somehow the Fremont Model 3 line can be made to work. So why exactly has Tesla taken this route? It's unclear." http://www.businessinsider.com/tesla-robots-are-killing-it-2018-3?r=UK&IR=T http://www.businessinsider.com/tesla-robots-are-killing-it-2...
  - tokipin 9y ago
    The point is that that skilled engineer can manage and maintain robots across many factories. That's an aspect of Musk's "the machine that builds the machine" goal. It does have a high up front cost, but the long term advantage is real. Namely the ability to print factories, roughly speaking. Tesla is aiming for production volumes that are much higher than any current automaker.
    - jacobush 9y ago
      I think he is preparing for automatad factories on Mars.
ENGNR 9y ago
One benefit of automation they also failed to consider is customization. All sorts of exotic designs, configurations, adjustments and test iterations could be made. Hopefully with a standard base so they can be repaired or swapped out later, but the less human training that's required to get an assembly line up the faster you can change and improve it Another aspect is potentially repairs itself. If every part can be added by a machine, they could later be removed and swapped out as part of the maintenance cycle too
- URSpider94 9y ago
  Those don’t make much sense. Programming an automated line to build a car (or any other product) in a different way is a tremendous amount of work, since all of the motions have to be exactly right. Usually customization weighs heavily in the favor of humans, who can adapt much more easily to parts that are different. Also, an automated production line isn’t going to be any use for repairing cars, all it can do is bolt them together. These aren’t some kind of AI robots. They are mechatronics that are programmed to follow very specific toolpaths. Reprogramming them by even a few millimeters is a monumental task, and to test them, you have to try to build a car ...
  - ENGNR 9y ago
    Do you know this for a fact? They already have advanced computer vision, for a new facility surely they'd be building this in at least partially
z92 9y ago
I heard the same thing in the 80-90s. Toyota has over automated and is spending more on robots, than it would have, had they used manual labour.
- csours 9y ago
  The funny thing about that is that GM (and others) assumed Toyota had more automation than GM in the 80s, but Toyota had LESS automation! Toyota simply used their people more effectively.
  - jmalicki 9y ago
    In other words, they did have more automation! Of managers and MBAs, not of line workers.
  - curun1r 9y ago
    One of the things I remember from the plant tour at the facility in Toyota City was being impressed with the logistics they had to enable a heterogenous assembly line. One car rolled off every minute, but they were different models with different options. Most of the assembly steps were performed by humans, but all the parts needed for each step, which differed based on model/options, always arrived at the right station at the right time. There was a massive computer-controlled overhead distribution system that shuttled parts (including large/heavy parts like engines) around the factory that was damn impressive. With as many steps as were needed to assemble a car, that system was at least as impressive as the robotic welding arms and other fully-mechanized assembly steps. Automation isn't necessarily just about replacing people. It can also be used to make the people you have a lot more productive.
- sjm-lbm 9y ago
  I thought it was generally accepted that one of the problems with GM in the 1980s is that they spent too much on automation, whereas Toyota and other competitors spent more on just building better cars. For instance: http://www.autonews.com/article/20080914/OEM02/309149956/a-shopping-spree-in-the-80s http://www.autonews.com/article/20080914/OEM02/309149956/a-s... "GM number crunchers had pegged the investments in EDS, Hughes and Fanuc at $40 million in the long run. Instead, they cost $66 billion. In the end, GM's plants were no more efficient, and sales plummeted as money was spent on conglomeration rather than developing products Americans wanted to buy."
oneman 9y ago
Imagine, LOL, this headline (now or >) "Slump in automation developments" almost as joked out as "Useful home robot, that while remaining totally and completely useful, is totally unable to kill the shit out of you by meerly having a series of unfortunate electric field states rise in its transistorized brain nugget" yeh laff
hosh 9y ago
With the cash crunch, this is going to be interesting to watch Tesla try to thread the eye of the needle. I can easily see building out and proving the final assembly automation being related to Elon Musk's Mars colonization ambitions.
thisisit 9y ago
Original and expanded story here: http://www.businessinsider.com/tesla-robots-are-killing-it-2018-3 http://www.businessinsider.com/tesla-robots-are-killing-it-2... Can we please replace the link with this article? It answers why the analyst think Tesla's way of doing things is an issue: > the Japanese, try to limit automation because it "is expensive and is statistically inversely correlated to quality." Their approach is to get the process right first, then bring in the robots — the opposite of Musk's. And, a hypothetical but expansive example on why Tesla's automation strategy might not achieve the desired cost savings.
- kristianp 9y ago
  Yes, sorry I should have used the original link.
- Johnny555 9y ago
  the Japanese, try to limit automation because it "is expensive and is statistically inversely correlated to quality." Their approach is to get the process right first, then bring in the robots — the opposite of Musk's. Of course, they use Japanese workers, which have a completely different work ethic than American workers. I say that having worked in an American assembly line (not automotive though). I haven't worked in Japan myself, but the attention to detail of Japanese workers in even the most menial of jobs is amazing.
  - exelius 9y ago
    From what I’ve seen, Musk has actually been flying Japanese engineers into the Gigafactory (no joke!) They literally have their own buses going back and forth to the airport.
    - modeless 9y ago
      It's no secret that the gigafactory is a partnership with Panasonic.
      - 9y ago
throwaway84742 9y ago
Hmm, who do I trust, the guy who figured out how to land rockets onto a barge, or some “analyst” desk jockey who has been consistently wrong his entire career? Tough question. I think I’ll go with the rocket guy. He has a pretty good track record.
- dx034 9y ago
  But SpaceX builds very complex machines at a low rate, whereas Tesla tries to build less complex machines at a very high rate. I'm not sure if knowledge is transferable.
  - qubex 9y ago
    This is an interesting juxtaposition, but I’m not (really) sure it’s true. Is a rocket, even one with an advanced control system such as those designed by SpaceX, really ‘simpler’ than an electric vehicle? We certainly think in those terms, because rockets are exotic to our experience whereas cars are experientially mundane for most of us, but I don’t think the facts of the matter are that clear cut.
    - ggm 9y ago
      Werner von Braun had to crash hundreds into London and Antwerp to learn how not to crash them at white sands and Cape Canaveral
      - wongarsu 9y ago
        And how does that compare to the development of early combustion or electric engines? I'm not so sure about electric cars, but I would judge a rocket to be less complex than an ICE car. Rockets just have much more spectacular failure modes and are more expensive due to size.
    - regularfry 9y ago
      There was a point in the early 2000s (and I don't know how long it persisted for) when ESA had a very hard time hiring rocket scientists because they were all being slurped up by car manufacturers to work on drive-by-wire systems.
dotsh 9y ago
Great thing about Elon is that he believes in everything so much he is probably laughing reading those articles. I understand that myself, would lough too. There will be no future without 100% automation and for me this is the best bet you can make. We have so many areas of life that need to be automated and someone has to be first. Companies that have ancient roots are too unreformable and don't want to change what already works well for them, which is why BMW is lagging behind, despite the fact that it can produce millions of cars a year. People will go crazy, say that he lost everything, he is stupid, etc... But he will not give a f%#k just to return with double power and hit like no other.
- jacquesm 9y ago
  The devil is in the details. Automation is all about part variance, if they can't control that it will be a huge problem. Humans are flexible, robots much less so.
exelius 9y ago
Is it just me, or is there suddenly a lot of media backlash against the wunderkind of yesteryear? Holmes, Zuckerberg, Musk — all sold impossible visions but they were just crazy enough to think they could pull them off because they were trying something new. Was the whole innovation economy all snake oil? How many of the “Unicorns” will be left in the middle of the next decade?
- deleted 9y ago
  [deleted]
- deleted 9y ago
  [deleted]
- lnsru 9y ago
  Not sure if Holmes belongs to this list. Social network is a great thing and you can buy Musk’s car and see rockets launched and landed.
- jacquesm 9y ago
  Holmes and Zuckerberg are not even in the same league as Musk. The first is a fraud, the second the sneaky CEO of one of the worst online entities (a perfect example of a fish rotting from the head) the third a visionary that tends to deliver long shots with alarming regularity. If Tesla gets its house in order it will survive and prosper, if it can't get its house in order Musk's personal brand will definitely be damaged, let's hope that SpaceX won't end up suffering from that.
amarant 9y ago
It's funny how exactly everything Tesla does deserves a scandalous sounding headline..a couple of weeks ago they didn't have enough automation, now they're overusing it..
- carlmr 9y ago
  You can't make money on stocks that don't move. You can make money on stocks rising or falling.
reacweb 9y ago
My 2p guess: maybe traditional automakers have a very good, experienced and cheap workforce where Tesla has many very smart and costly engineers. Focusing on what makes Tesla different instead of mimicking concurrence is risky, bold, but also very ambitious and promising (sorry for my bad english, I hope you see what I mean).
- shasheene 9y ago
  Your English is fine, except I think you meant 'competitors', not 'concurrence'
  - muthdra 9y ago
    Yes. In portuguese, "[the] concurrence" is also a false-cognate for "[all the] competitors".
snvzz 9y ago
An example of: No pain, no gain.
kgc 9y ago
One thing this article fails to consider, is with more automation, there are fewer human limitations. For example, if a human is able to perhaps join a weld per minute, it's possible a machine could go 10x that speed.
- sdrothrock 9y ago
  Or make mistakes at 10x the speed. If it were as simple as being able to perfectly replicate a skilled human and do everything 10x faster, then this should really be simple. The fact that automation is so problematic suggests to me that there are a lot more variables and problems.
  - kgc 9y ago
    I would argue that they are not simply repeating the same motions over and over again, but adjusting with real time feedback, making the speed and error rates dynamic rather than static numbers.
qaq 9y ago
There is running theme of Tesla "not knowing" specifics of mass producing cars. The head of prod for Tesla Peter Hochholdinger was at Audi for 20 years. He led the manufacturing programs of the Audi A4, A5 and Q5 vehicles.
- dingaling 9y ago
  Modern Audi production is an interesting example of horizontal integration which might not map cleanly to Tesla. Chassis, drivetrains and minor parts-bin components are developed group-wide by VAG. Putting them together in the desired pattern and adding premium components and materials is what makes an Audi. All Audi A, Q and TT models are examples of this. They are built in shared plants with other VAG models which use the same platform. Even the R8 has a shared platform. In contrast AFAIK Tesla does everything bespoke without the advantages of volume and standardisation.
  - qaq 9y ago
    I would imaging Peter is aware of this difference and they are trying to mitigate the risks.
cm2187 9y ago
This is a rule that can been extended and which in my opinion is the main objection to "AI will replace [insert any profession here]". Even if you have sufficient data to train an algorithm, you still need AI experts who understand the domain (another big obstacle) and the cost of these AI experts creating and maintaining the algorithm needs to be less than the cost of the workers who's jobs you want to automate.
Proven 9y ago
Based on the number of cars they churn out, that doesn’t seem to be the case. They’ll end up acquired by a Tier 3 car maker from China...
lmilcin 9y ago
In my expierience with automation the last mile to full automation is biggest hurdles for little rewards. But when you finally reach 100% new possibilieties open that are just not available if your process is even in a very small part manual. I believe Tesla set their eyes on a bigger prize.
antpls 9y ago
Meta-comment : I personally don't trust any information coming from businessinsider / wsj / theverge. Everytime I open one of their articles, I feel like it wasn't really worth reading. I only read the HN comments. At the end of the day, it's always tiring to analyze their articles to get the truth from the buzz and ove-generalization eg "the robot are killing Tesla". They are probably good starters for discussions on HN. By the way, the title on HN is way better than the actual title of the article.
neo4sure 9y ago
Didn't someone tel musk he cant reuse rockets and that was a silly and expensive idea. I wonder where those guys are hiding now?

116 points by kristianp 9y ago

Hopefully he can generalize their automation developments. Seems like this would have to be a bigger play then just the Model 3 at this point.

John_KZ 9y ago

Sometimes optimization is not the optimal solution. They should have optimized their optimization methods first. Or should they?

baking 9y ago
Someone doesn't like your comment, but when I searched to find context for a quote from the article, I found this expanded paragraph from the Bernstein Research report: "What is the inspiration behind Tesla's automation? Tesla has bought German robots and a German automation company (Grohmann). But the German OEMs – traditionally the most enthusiastic proponents of automation – have actually been rowing back on it in recent years. The best producers – still the Japanese - try to limit automation. It is expensive and is statistically inversely correlated to quality. One tenet of lean production is “stabilise the process, and only then automate”. If you automate first, you get automated errors. We believe Tesla may be learning this to its cost." https://ftalphaville.ft.com/2018/03/28/1522248619000/No-one-needs-to-buy-Tesla--redux/ https://ftalphaville.ft.com/2018/03/28/1522248619000/No-one-...
- jacquesm 9y ago
  The Grohmann acquisition was mostly botched, they got far less out of that than they would have if they had properly managed that. https://www.theverge.com/2017/4/27/15457472/tesla-grohmann-engineering-germany-ousted-elon-musk https://www.theverge.com/2017/4/27/15457472/tesla-grohmann-e... Couple that with a couple of Tesla bigshots walking when they heard Elons plans for fixing the Model 3 production schedule and you can see why things are not looking all that rosy right now. https://www.google.com/search?q=tesla+execs+leaving https://www.google.com/search?q=tesla+execs+leaving

princeb 9y ago

well maybe tesla really thinks the existing automation research is outdated and maybe they think it will massively pay off. but they surely must recognize that there are learning pains involved in this especially when it sounds like no other auto manufacturer is involved in this level of process automation, there's no one with relevant knowledge to simply poach, and therefore the cost of learning has to be borne completely by tesla... for what kind of improvement over tried-and-true existing processes in the short and medium term? for a new auto company that by many accounts is running out of money, this is a silly gamble to take. it might be a good bet 10 years down the road when Tesla is pumping out 1m autos/yr in line with BMW and MB but not right now when they are bleeding cash out of every orifice and failing to make deliveries. sounds like one of those sad stories where the engineers fell in love with the stack and forgot about the product.

IBM 9y ago
>sounds like one of those sad stories where the engineers fell in love with the stack and forgot about the product. Sounds like Steve Jobs... in 1986. https://www.youtube.com/watch?v=dSj6kvv7_Sg https://www.youtube.com/watch?v=dSj6kvv7_Sg

csours 9y ago

My previous comment on this subject (reproduced below): https://news.ycombinator.com/item?id=16614247 https://news.ycombinator.com/item?id=16614247 ---- Disclaimer up front: I work for a Tesla competitor. Tesla is making several very interesting bets on the Model 3. Bet 1: Model 3 mix - Tesla is betting that the ratio of expensive, high-content Model 3s to cheap, low-content Model 3s will be sufficient to make enough money to offset investments and pay back loans. It will not be sufficient to make a small profit on each Model 3 sold given the debt load that Tesla has accrued, so they will want to sell a good ratio of expensive Model 3s. If it takes to long to produce the cheaper Model 3s, Tesla will lose some potential customers. Many investors are looking at that "top line" right now - the number of customers and potential customers. If the top line moves too much, investors may get spooked. Bet 2: Vertical Integration - Most automakers rely on a web of parts suppliers, who are under enormous pressure to reduce costs, but Tesla produces most of its components in-house. The contract with an external parts suppliers ensures that the supplier is responsible for any re-work or replacement of defective parts. This allows the automaker to concentrate on internal production issues. Tesla's bet is that internal production of parts will lead to better and cheaper components. This has not worked for any other automaker. Traditional OEMs shoot for a mix of components where the internally produced components are part of the company's core competence: Body Shells, Engines, Transmissions - and externally produced components may be generic - switches, latches, seats, frames, tires, wheels, etc. If Tesla spends too much capital on component manufacturing, they will be inefficient and investors pressure them. Additionally and probably more importantly, if Tesla is not able to spend the time and attention to iterate on cost and quality of these parts, it will also lose this bet. Personal opinion: I think Tesla has learned the wrong lesson from previous dealings with suppliers. For instance, the original Roadster was designed with a two speed transmission. A supplier claimed they could make it, but it never really worked. Tesla learned the lesson that suppliers are stupid and suck at making new things - I think they should have learned that lesson that it is really really hard to make new things. Bet 3: Automation - But first a detour - There are 3 main areas of auto assembly, and most manufacturers have already fully or almost fully automated 2 of them: Body Shop (welding and assembly of the body shell) and Paint Shop. The 3rd area is General Assembly. General Assembly is the bloody, thorny, devilish poster child for multiple single points of failure. A high feature vehicle may have on the order of 1000 assembly stations (aka footprints) in General Assembly. The Model 3 is designed with much lower complexity in mind, and may only have 100 footprints. If and when any of those 100 footprints has an equipment failure or parts issue, ALL 100 stop running in a short amount of time. Human assembly workers are rather resilient and can figure out a multitude of small issues on each and every operation. This may allow for a hypothetical variation of 5% in non-critical parts. Automated assembly may only allow for a 1% variation. Additionally, automated assembly only runs well when EVERYTHING is designed for automation. That is not impossible, but it is expensive and time consuming. --- Most importantly, these three bets are linked: If not enough base models are sold, the cost of design and equipment spending will be excessive on a per vehicle basis. If internally produced parts are too far out of spec, you have strong negative impacts on automation. If automation fails, you cannot produce enough vehicles at a low enough price to satisfy your low-end customers. But, if Tesla wins all three bets, they win big time.

et2o 9y ago

Just a short time ago there were negative headlines about Tesla parts being built by hand [1]. https://www.google.com/amp/s/www.wsj.com/amp/articles/behind-teslas-production-delays-parts-of-model-3-were-being-made-by-hand-1507321057 https://www.google.com/amp/s/www.wsj.com/amp/articles/behind...

3327 9y ago
wallstreet analysts don't know jack shit and come out with statements whenever the wind blows their way from the woodwork. Wallstreet is short Tesla, bonds are trading new lows... Goodluck - so basically you are shorting the guy that is landing fucking rockets back down on this planet? great thesis. I will take the other side of that bet.
- hueving 9y ago
  >I will take the other side of that bet The stock ticker is TSLA, all you have to do is load up. No need for chest thumping.
  - Hydraulix989 9y ago
    I already bought in. "Overusing automation" is a new one.
    - Hydraulix989 9y ago
      Check the price now ;)
- jcranmer 9y ago
  What does landing rockets have to do with building cars?
  - hndamien 9y ago
    What does it have to do with automation...? Quite a lot.

j15e 9y ago

Optimistically, those over-the-industry-ratio of line investments in automation will be profitable after more models are introduced for the mainstream audience. Other car makers take no risk in the short term by not investing to automate more final assembly. But 2 times more is not like 10 times more. It is very probable that Tesla will get to have lower production cost & better capacity than other car makers in just a few more years. Yeah I know they may need more cash very soon and are way under their targeted rate, but Musk still has lot of money in the bank I think? I always think of Tesla of a company with a more long-term vision than other car makers. I think analysts sometimes just want a lower the price so they can get more of it.

kristianp 9y ago
I don't think Musk has that much money in the bank. I think most of his net worth is in his Tesla shares.
erk__ 9y ago
There is a reason most big car makers have not been selling electric cars yet, it is not very profitable, they believe that around 2020 batteries are becoming cheap enough to sell them. And if those companies can produce more and cheaper cars than Tesla they are going to have a problem.
- ggm 9y ago
  There are only four or five significant old school car manufacturers and India and China bought some technology and are ramping up. The complex non linear investment decisions they have to make are just that: complex. If Tata or somebody succeeds in stealing mindshare and then market share leaving their run until after 2020 could turn out to be as suicidal as investing in cocaine to make the Delorean

natch 9y ago

Automation pays off over time. I'm rooting for them.

buvanshak 9y ago

Yea. I wouldn't be surprised if this was Tesla's PR itself. Make a bunch of people say you can't do something and then do it. 10x the PR and the you have successfully projected the illusion of capable of doing the impossible in front of the naive public...Worked well for Elon till now..

kgwgk 9y ago
It didn’t work so well for Theranos.
- buvanshak 9y ago
  Well, of course, you should have some sort of assurance that you ll be able to pull it. The PR tactics is just to give 10x PR when you actually do it... And I think Theranos did much more than make people say what they are doing is not really feasible...
- paulie_a 9y ago
  Theranos was a completely bullshit and fraudulent product

oneman 9y ago

LOL. Analysts are correct, but musk is more correct! (intuition!) Its like uno, automations not perfect yet, gaps in process, missing feedback signals and other signals on various fails. Solution! Densify all of the problems and hundred dollar hour guys in your super factory, raise TC, phase transition to factories making factories as a service, earth conquered, again. We are just getting to the full spectrum buildup, next.. red alert, its a tank rush!

photogrammetry 9y ago
Go away and never return.

OrganicMSG 9y ago

> But while all that exotic capital might allow Tesla to remove 5 workers, it will then need to hire a skilled engineer to manage, programme and maintain robots for $100 an hour (our estimate of a robotic engineers’ hourly rate). These analysts, what are they analysts in?

baking 9y ago
More context: "Let's say there are 10 hours of labour in final assembly (the part of the production line where parts, interiors and the powertrain are installed in a painted bodyshell). In a regular plant, final assembly typically has less than 5% of tasks automated. If Tesla attempts to automate 50% of these tasks, it could cut out 5 or so hours of labour. This might save $150 per car (assuming wage rates, all in, of $30 per worker, per hour). "But while all that exotic capital might allow Tesla to remove 5 workers, it will then need to hire a skilled engineer to manage, programme and maintain robots for $100 an hour (our estimate of a robotic engineers' hourly rate). "So the net labour saving may be only $50 per unit. Yet putting the automation into the plant seems to involve an apparent capital cost that's $4,000 higher per unit of capacity than for a normal plant. If the product is built for 7 years, that's over US$550 of additional depreciation per unit built. It's hard to see an economic case even if somehow the Fremont Model 3 line can be made to work. So why exactly has Tesla taken this route? It's unclear." http://www.businessinsider.com/tesla-robots-are-killing-it-2018-3?r=UK&IR=T http://www.businessinsider.com/tesla-robots-are-killing-it-2...
- tokipin 9y ago
  The point is that that skilled engineer can manage and maintain robots across many factories. That's an aspect of Musk's "the machine that builds the machine" goal. It does have a high up front cost, but the long term advantage is real. Namely the ability to print factories, roughly speaking. Tesla is aiming for production volumes that are much higher than any current automaker.
  - jacobush 9y ago
    I think he is preparing for automatad factories on Mars.

ENGNR 9y ago

One benefit of automation they also failed to consider is customization. All sorts of exotic designs, configurations, adjustments and test iterations could be made. Hopefully with a standard base so they can be repaired or swapped out later, but the less human training that's required to get an assembly line up the faster you can change and improve it Another aspect is potentially repairs itself. If every part can be added by a machine, they could later be removed and swapped out as part of the maintenance cycle too

URSpider94 9y ago
Those don’t make much sense. Programming an automated line to build a car (or any other product) in a different way is a tremendous amount of work, since all of the motions have to be exactly right. Usually customization weighs heavily in the favor of humans, who can adapt much more easily to parts that are different. Also, an automated production line isn’t going to be any use for repairing cars, all it can do is bolt them together. These aren’t some kind of AI robots. They are mechatronics that are programmed to follow very specific toolpaths. Reprogramming them by even a few millimeters is a monumental task, and to test them, you have to try to build a car ...
- ENGNR 9y ago
  Do you know this for a fact? They already have advanced computer vision, for a new facility surely they'd be building this in at least partially

z92 9y ago

I heard the same thing in the 80-90s. Toyota has over automated and is spending more on robots, than it would have, had they used manual labour.

csours 9y ago
The funny thing about that is that GM (and others) assumed Toyota had more automation than GM in the 80s, but Toyota had LESS automation! Toyota simply used their people more effectively.
- jmalicki 9y ago
  In other words, they did have more automation! Of managers and MBAs, not of line workers.
- curun1r 9y ago
  One of the things I remember from the plant tour at the facility in Toyota City was being impressed with the logistics they had to enable a heterogenous assembly line. One car rolled off every minute, but they were different models with different options. Most of the assembly steps were performed by humans, but all the parts needed for each step, which differed based on model/options, always arrived at the right station at the right time. There was a massive computer-controlled overhead distribution system that shuttled parts (including large/heavy parts like engines) around the factory that was damn impressive. With as many steps as were needed to assemble a car, that system was at least as impressive as the robotic welding arms and other fully-mechanized assembly steps. Automation isn't necessarily just about replacing people. It can also be used to make the people you have a lot more productive.
sjm-lbm 9y ago
I thought it was generally accepted that one of the problems with GM in the 1980s is that they spent too much on automation, whereas Toyota and other competitors spent more on just building better cars. For instance: http://www.autonews.com/article/20080914/OEM02/309149956/a-shopping-spree-in-the-80s http://www.autonews.com/article/20080914/OEM02/309149956/a-s... "GM number crunchers had pegged the investments in EDS, Hughes and Fanuc at $40 million in the long run. Instead, they cost $66 billion. In the end, GM's plants were no more efficient, and sales plummeted as money was spent on conglomeration rather than developing products Americans wanted to buy."

oneman 9y ago

Imagine, LOL, this headline (now or >) "Slump in automation developments" almost as joked out as "Useful home robot, that while remaining totally and completely useful, is totally unable to kill the shit out of you by meerly having a series of unfortunate electric field states rise in its transistorized brain nugget" yeh laff

hosh 9y ago

With the cash crunch, this is going to be interesting to watch Tesla try to thread the eye of the needle. I can easily see building out and proving the final assembly automation being related to Elon Musk's Mars colonization ambitions.

thisisit 9y ago

Original and expanded story here: http://www.businessinsider.com/tesla-robots-are-killing-it-2018-3 http://www.businessinsider.com/tesla-robots-are-killing-it-2... Can we please replace the link with this article? It answers why the analyst think Tesla's way of doing things is an issue: > the Japanese, try to limit automation because it "is expensive and is statistically inversely correlated to quality." Their approach is to get the process right first, then bring in the robots — the opposite of Musk's. And, a hypothetical but expansive example on why Tesla's automation strategy might not achieve the desired cost savings.

kristianp 9y ago
Yes, sorry I should have used the original link.
Johnny555 9y ago
the Japanese, try to limit automation because it "is expensive and is statistically inversely correlated to quality." Their approach is to get the process right first, then bring in the robots — the opposite of Musk's. Of course, they use Japanese workers, which have a completely different work ethic than American workers. I say that having worked in an American assembly line (not automotive though). I haven't worked in Japan myself, but the attention to detail of Japanese workers in even the most menial of jobs is amazing.
- exelius 9y ago
  From what I’ve seen, Musk has actually been flying Japanese engineers into the Gigafactory (no joke!) They literally have their own buses going back and forth to the airport.
  - modeless 9y ago
    It's no secret that the gigafactory is a partnership with Panasonic.
    - 9y ago

throwaway84742 9y ago

Hmm, who do I trust, the guy who figured out how to land rockets onto a barge, or some “analyst” desk jockey who has been consistently wrong his entire career? Tough question. I think I’ll go with the rocket guy. He has a pretty good track record.

dx034 9y ago
But SpaceX builds very complex machines at a low rate, whereas Tesla tries to build less complex machines at a very high rate. I'm not sure if knowledge is transferable.
- qubex 9y ago
  This is an interesting juxtaposition, but I’m not (really) sure it’s true. Is a rocket, even one with an advanced control system such as those designed by SpaceX, really ‘simpler’ than an electric vehicle? We certainly think in those terms, because rockets are exotic to our experience whereas cars are experientially mundane for most of us, but I don’t think the facts of the matter are that clear cut.
  - ggm 9y ago
    Werner von Braun had to crash hundreds into London and Antwerp to learn how not to crash them at white sands and Cape Canaveral
    - wongarsu 9y ago
      And how does that compare to the development of early combustion or electric engines? I'm not so sure about electric cars, but I would judge a rocket to be less complex than an ICE car. Rockets just have much more spectacular failure modes and are more expensive due to size.
  - regularfry 9y ago
    There was a point in the early 2000s (and I don't know how long it persisted for) when ESA had a very hard time hiring rocket scientists because they were all being slurped up by car manufacturers to work on drive-by-wire systems.

dotsh 9y ago

Great thing about Elon is that he believes in everything so much he is probably laughing reading those articles. I understand that myself, would lough too. There will be no future without 100% automation and for me this is the best bet you can make. We have so many areas of life that need to be automated and someone has to be first. Companies that have ancient roots are too unreformable and don't want to change what already works well for them, which is why BMW is lagging behind, despite the fact that it can produce millions of cars a year. People will go crazy, say that he lost everything, he is stupid, etc... But he will not give a f%#k just to return with double power and hit like no other.

jacquesm 9y ago
The devil is in the details. Automation is all about part variance, if they can't control that it will be a huge problem. Humans are flexible, robots much less so.

exelius 9y ago

Is it just me, or is there suddenly a lot of media backlash against the wunderkind of yesteryear? Holmes, Zuckerberg, Musk — all sold impossible visions but they were just crazy enough to think they could pull them off because they were trying something new. Was the whole innovation economy all snake oil? How many of the “Unicorns” will be left in the middle of the next decade?

deleted 9y ago
[deleted]
deleted 9y ago
[deleted]
lnsru 9y ago
Not sure if Holmes belongs to this list. Social network is a great thing and you can buy Musk’s car and see rockets launched and landed.
jacquesm 9y ago
Holmes and Zuckerberg are not even in the same league as Musk. The first is a fraud, the second the sneaky CEO of one of the worst online entities (a perfect example of a fish rotting from the head) the third a visionary that tends to deliver long shots with alarming regularity. If Tesla gets its house in order it will survive and prosper, if it can't get its house in order Musk's personal brand will definitely be damaged, let's hope that SpaceX won't end up suffering from that.

amarant 9y ago

It's funny how exactly everything Tesla does deserves a scandalous sounding headline..a couple of weeks ago they didn't have enough automation, now they're overusing it..

carlmr 9y ago
You can't make money on stocks that don't move. You can make money on stocks rising or falling.

reacweb 9y ago

My 2p guess: maybe traditional automakers have a very good, experienced and cheap workforce where Tesla has many very smart and costly engineers. Focusing on what makes Tesla different instead of mimicking concurrence is risky, bold, but also very ambitious and promising (sorry for my bad english, I hope you see what I mean).

shasheene 9y ago
Your English is fine, except I think you meant 'competitors', not 'concurrence'
- muthdra 9y ago
  Yes. In portuguese, "[the] concurrence" is also a false-cognate for "[all the] competitors".

snvzz 9y ago

An example of: No pain, no gain.

kgc 9y ago

One thing this article fails to consider, is with more automation, there are fewer human limitations. For example, if a human is able to perhaps join a weld per minute, it's possible a machine could go 10x that speed.

sdrothrock 9y ago
Or make mistakes at 10x the speed. If it were as simple as being able to perfectly replicate a skilled human and do everything 10x faster, then this should really be simple. The fact that automation is so problematic suggests to me that there are a lot more variables and problems.
- kgc 9y ago
  I would argue that they are not simply repeating the same motions over and over again, but adjusting with real time feedback, making the speed and error rates dynamic rather than static numbers.

qaq 9y ago

There is running theme of Tesla "not knowing" specifics of mass producing cars. The head of prod for Tesla Peter Hochholdinger was at Audi for 20 years. He led the manufacturing programs of the Audi A4, A5 and Q5 vehicles.

dingaling 9y ago
Modern Audi production is an interesting example of horizontal integration which might not map cleanly to Tesla. Chassis, drivetrains and minor parts-bin components are developed group-wide by VAG. Putting them together in the desired pattern and adding premium components and materials is what makes an Audi. All Audi A, Q and TT models are examples of this. They are built in shared plants with other VAG models which use the same platform. Even the R8 has a shared platform. In contrast AFAIK Tesla does everything bespoke without the advantages of volume and standardisation.
- qaq 9y ago
  I would imaging Peter is aware of this difference and they are trying to mitigate the risks.

cm2187 9y ago

This is a rule that can been extended and which in my opinion is the main objection to "AI will replace [insert any profession here]". Even if you have sufficient data to train an algorithm, you still need AI experts who understand the domain (another big obstacle) and the cost of these AI experts creating and maintaining the algorithm needs to be less than the cost of the workers who's jobs you want to automate.

Proven 9y ago

Based on the number of cars they churn out, that doesn’t seem to be the case. They’ll end up acquired by a Tier 3 car maker from China...

lmilcin 9y ago

In my expierience with automation the last mile to full automation is biggest hurdles for little rewards. But when you finally reach 100% new possibilieties open that are just not available if your process is even in a very small part manual. I believe Tesla set their eyes on a bigger prize.

antpls 9y ago

Meta-comment : I personally don't trust any information coming from businessinsider / wsj / theverge. Everytime I open one of their articles, I feel like it wasn't really worth reading. I only read the HN comments. At the end of the day, it's always tiring to analyze their articles to get the truth from the buzz and ove-generalization eg "the robot are killing Tesla". They are probably good starters for discussions on HN. By the way, the title on HN is way better than the actual title of the article.

neo4sure 9y ago

Didn't someone tel musk he cant reuse rockets and that was a silly and expensive idea. I wonder where those guys are hiding now?