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Tesla's Goals for Model 3 Output Questioned by Suppliers: Reuters

Tesla's Goals for Model 3 Output Questioned by Suppliers: Reuters
The planned acceleration of the launch of high-volume production of its Model 3 to 2018 by Tesla Motors inc has been termed as being potentially difficult to achieve and potentially costly by supplier executives and industry consultants. This announcement has also surprised parts makers of the company, reported Reuters.  
Several supplier industry executives familiar with the plans of Tesla said that the company has told suppliers the company was doubling its original production projections to 100,000 Model 3s in 2017 and 400,000 in 2018 in the past three months Reuters reports.
Tesla did not break out target volumes for the Model 3 and details on Model 3 production projections have not been reported previously.
Tesla has said it would begin customer deliveries in late 2017 and has taken 373,000 orders for the Model 3 - which has a starting price of $35,000, about half its Model S. On earlier models, customers waited months for delivery and the company has made no promises for this one also.
Due to "tremendous demand,"  the company planned a 10-fold increase over the 50,000 vehicles it made in 2015 and planned to boost total production, including the existing Model S and Model X crossover, to 500,000 in 2018 - two years earlier than its original target, the Chief Executive Elon Musk told analysts on an April call.
While accepting that the goal set by Tesla may be unrealistic for some, Musk said Tesla has told suppliers to prepare for Model 3 production tests in July 2017. However he said that to reach production goals, it was necessary to set an "aggressive" target.
"Now, will we actually be able to achieve volume production on July 1 next year? Of course not," he told analysts.
"The reason is that even if 99 percent of the internally produced items and supplier items are available on July 1, we still cannot produce the car because you cannot produce a car that is missing 1 percent of its components,” he said.
The company would be helped in achieving its goals because of the Model 3's simpler design, new production hires and enthusiastic suppliers, Musk said. Tesla would bring more parts production in-house than traditional automakers typically do and would drop suppliers that could not meet deadlines, he said. He did not specify how much or which parts.
"It's very important for us to have the ability to produce almost any part on the car at will because it alleviates risk with suppliers," Musk told analysts.
The acceleration would be helped by the fewer parts that are required to assemble Model 3, Tesla says. While the typical automobile with a combustion engine like the Model S which has more than 8,000 parts, Tesla says the Model 3 features 6,000 to 7,000 unique components.
Fresh bids for parts and machinery is still being solicited by the company, said representatives from several of companies that have received them.
There would be requirement for more stamping, welding and assembly machinery that "could take up to 18 months to order and install," said automaking consultant Ron Harbour of Oliver Wyman.
Plans by Musk to make parts in-house can be more expensive and distracting even as it can minimize risks of delivery.
A Detroit-based supplier sales executive told Reuters that a surge in product launches coming from established automakers has created a high demand for machinery and tooling and Tesla's production push comes amidst such an industry situation.

Christopher J. Mitchell

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