BALAZS GARDI FOR BLOOMBERG BUSINESSWEEK
Muskwent home to sleep. The chief executive ofTesla
Inc.had been camping out at his electric carfactoryin
Fremont, Calif., for much of the past week. He’d been sleeping on a
couch, or under a desk, as part of a companywide push to get out of what
he calls “production hell” by manufacturing at least 5,000 of Tesla’s
new Model 3 sedans in a week. “I was wearing the same clothes for five
days,” Musk says in an interview withBloomberg
Businessweek. “My credibility, the credibility of the whole
team,” was at stake.
initially promised as many as 200,000 Model 3s by the end of 2017. To
get there he planned an unprecedented investment in factory robots,
calling the production line “the machine that builds the machine.” He’d
said it would look like “alien dreadnought”—a manufacturing process so
futuristic, unstoppable, and cost-effective that it would seem
hasn’t worked out that way. Tesla ended 2017 having made not quite 2,700
Model 3s. As of the end of June it had turned out about 41,000, and some
analysts express doubts about whether it will ever be able to show a
profit on the car, and Tesla hasn’t even started selling the $35,000
matters worse, Tesla has $10 billion in debt and suffered a credit
downgrade in March. It’s spent about a billion dollars more per quarter,
on average, than it has taken in over the past year, and the cost of a
recently announced factory in China is still unknown. Tesla is running
out of cash at a time when competition is heating up—Volkswagen,BMW,Daimler,
and others plan to release dozens of electric car models.
early June, at Tesla’s annual meeting, Musk tried to project calm, but
at times seemed close to tears. “This is like—I tell you—the most
excruciatingly hellish several months that I have ever had,” he said,
before noting that Tesla’s assembly lines were being further upgraded,
making the company “very likely” to hit the weekly goal of 5,000. He
also revealed he’d asked employees to build a third general assembly
line that would be “dramatically better than Lines 1 and 2.” That
sounded even more alien-dreadnoughty.
week later, Musk posted a picture of the new facility on Twitter. There
were no fancy robotic systems, nor fixed walls, even—just
a large tentoutside the factory built from
scrap from the other lines. The automotive world winced. “Insanity,”
said Max Warburton, an analyst with Sanford C. Bernstein & Co., in
an email to Bloomberg News. “I don’t think anyone’s seen anything like
this outside of the military trying to service vehicles in a war zone.”
tent sufficed. “I think we just became a real car company,” Musk wrote
1 email to employeesannouncing that Tesla had
made 5,031 Model 3s the previous week. Even so, it’s unclear whether
Musk has put Tesla on a path to lasting greatness or just staved off
collapse. The company is the most shorted U.S. stock, and a higher
percentage of Wall Street analysts give TSLA a sell rating than for all
but one stock on the S&P 500. The story of Tesla’s sprint to release
the Model 3, based on interviews with 20 members of Tesla’s design and
engineering teams, suppliers, and dozens of current and former workers,
is a case study in brilliant design and unbelievable hubris.
prize for Musk is enormous: If hegets
the Model 3 right, he will remake a trillion-dollar industry and
do more to reduce carbon emissions than any person on the planet. But it
may turn out that mass-producing cars is the one challenge that simply
early 2015, Musk convened a meeting of his top engineers in a windowless
conference room at the factory. There were 12 people, including experts
in batteries, design, chassis, interiors, body, drive systems, safety,
and thermodynamics. Musk had gathered them to figure out what the Model
3 would be.
the course of the meeting, the engineers filled a whiteboard with dozens
of requirements, including a range of at least 200 miles and an
affordable price. The last of these criteria made the project especially
daunting. Even scarier, Tesla would begin selling it in mid-2017, giving
the company 2 ½ years to design, test, and build a new vehicle, compared
with about five years at a traditional automaker.
a low-cost electric car is about maximizing range in every possible way.
For instance, Tesla’s designers added plastic covers, costing $1.50
each, to hide four pads on the underside of the car where a jack goes.
The decision reduced wind resistance and improved the car’s range by 3
miles. They also opted for four-piston monoblock caliper brakes, which
are usually reserved for more expensive cars. But since the brakes are
lightweight, they lower the car’s battery requirements and overall cost.
“Every single decision like that was put back into the context of an
electric car,” says Doug Field, a former Apple vice president Musk
recruited as a top engineer in 2013. In other words, electric cars
require new ways of thinking about cost and performance.
decreed that the Model 3 would have a single central screen for all
controls and information, which would both cut costs and allow Tesla to
push the front seats forward to allow for more rear legroom. Tesla’s
design chief, Franz von Holzhausen, spent the 2015 Christmas holiday
figuring out how to design a car interior without a traditional
declared he didn’t want visible air vents. “I don’t want to see any
holes,” von Holzhausen recalls him saying. Von Holzhausen paired
engineer Joseph Mardall with designer Peter Blades to figure that one
out. Blades’s sketch called for a recessed gap across the entire width
of the car from which the air would flow, with a long strip of wood
instead of the dash. Mardall pointed out that to make the approach work,
the entire ventilation system would need to be redesigned. “Are we
serious about this?” he recalls asking.
was serious, but a second problem soon appeared: The wooden strip, just
below the air gap, worked like an airplane wing, sucking cold air down
and shooting it into the driver’s lap. Mardall, an aerodynamics
specialist, proposed adding a second, hidden gap from which air would
shoot straight up, lifting the main blast of cold air above the piece of
wood and away from the driver’s crotch. “It was one of those eureka
moments,” Blades recalls, still in awe of the elegance of the solution.
“The spine still tingles.”
system Blades and Mardall designed combines all the components of a
standard HVAC system into a single basketball-size glob of molded
plastic tucked under the hood, which Tesla calls the Superbottle. The
glob is stamped with a logo of a bottle wearing a superhero cape.
and Mardall relay all this with pride. “I had to negotiate with my wife:
I’m going to do seven days a week for the next half-year,” Blades
recalls. “And that’s not just me—everybody’s wives or partners—it’s just
part of the story of Tesla. At this company if you don’t ask those silly
questions and ask to do something crazy, then it’s not really the right
place for you.”
such loyalty seems extreme, it’s partly the result of Musk’s reputation
for defying odds (and, some would say, common sense). He was mocked in
2002 when, as a 31-year-old software entrepreneur with no aerospace
training, he founded SpaceX. It now launches more rockets a year than
any other company.
a car isn’t rocket science; in some ways, it’s harder. Rockets can
essentially be built and checked by hand; a perfect car must come off
the production line every minute or so if you have any prayer of keeping
pace with the world’s leading manufacturers. Cars are composed of tens
of thousands of individual parts and have to withstand snow, potholes,
and highway speeds, performing flawlessly for years. They are the
largest purchase most people make besides a home, and they’re also
heavily regulated lethal weapons that contribute to more than a million
deaths each year.
a typical plant run byToyota
Motor Corp., widely seen as the most capable carmaker, a new car
requires about 30 hours of labor. Even with all the robots, Tesla spends
more than three times that number of hours on each car, says Michelle
Hill, a manufacturing expert at management consulting firm Oliver Wyman.
And Toyota would never, as Musk has, try a new manufacturing system and
all-new workforce on a never-before-built car. Successful carmaking is
“the orchestration of so many things that have to play together in
unison,” she says.
disregard for precedent, of course, is part of his appeal. In the weeks
before the March 2016 public unveiling of the Model 3 design, employees
took bets on how many prospective buyers would pay a refundable $1,000
deposit to reserve one. The most optimistic prediction was around
200,000; the actual number was twice that. Field recalls opening his
staff meeting the following week with a warning: “You are now working at
a different company,” he said. “Everything has changed.”
to one supplier, Tesla had said it expected to spend 28 months to reach
large-scale mass production, but after seeing demand for the car, Tesla
moved up the timeline by 15 months. It had previously said it would
build 500,000 cars per year by 2020, a goal skeptics called outlandish.
But in May 2016, Musk said the plan was to do that in 2018.
an unconventional move, Musk restructured Tesla, assigning the engineers
who designed the Model 3 to invent its manufacturing process. He put
Field in charge of the factory and gave him the budget to automate as
much of the car assembly as possible. Tesla bought two robotics
companies, Grohmann Engineering in Germany and Perbix in Minnesota.
Field’s team invented dozens of industrial processes. One involved a
tool called the golden wheel, an apparatus that automatically breaks in
suspensions and aligns cars in one step without humans.
generally rely on thousands ofsuppliers,
from windshield wiper makers to electronics manufacturers. But Musk has
long argued that the traditional supplier model led to cost overruns and
mediocrity. Starting in 2015, he told employees he wanted to make even
the thorniest parts of his supply chain in-house. In late 2015 he
appointed a recently hired car interiors expert, Steve MacManus, to
build a seat factory near the main plant in Fremont. Seat assembly is
labor-intensive and is outsourced by every major car company to the
lowest-paid workers they can find. “Your job is to get us out of seat
hell,” MacManus recalls Musk telling him during their first conversation
after he’d started.
so, in one area of MacManus’s Model 3 seat line, more than a dozen
robots rapidly piece together the front seats, including tiny motors,
hinges, heaters, and frames. Tesla claims this is the world’s first
front seat assembly line in which no humans are involved at all. The
plan is eventually to use Musk’s tunnel-digging venture, the Boring Co.,
to dig an underground passageway to bring seats to and from the main
Fremont factory, about 2 miles away. They already have a spot in mind.
keeps trying to bring other parts of Tesla’s supply chain in-house. In
to employeesthis spring, he also announced he
would fire all contractors and consultants unless a Tesla employee
personally vouched for them. “We’re going to scrub the barnacles,” he
said during the company’s earnings call in May. “It’s pretty crazy.
We’ve got barnacles on barnacles. So there’s going to be a lot of
critics, Musk’s description ofcontractorsas
parasitic crustaceans is revealing. He is maniacally committed to
Tesla’s mission of saving the world from global warming, but at times
Tesla has seemed to fall short of more prosaic obligations, such as
making sure its workers are safe. On Nov. 18, 2016, eight months before
Model 3 production began, a factory employee heard a scream coming from
just outside the main building at the Fremont plant. He saw a colleague,
quality-control lead Robert Limon, writhing on the blacktop and grabbing
at his leg, which was “bleeding like crazy,” the worker says. The
specifics of this incident haven’t been previously reported.
co-workers gathered around him. Someone used a belt to tie a tourniquet
around his leg. The witness, who declined to be named out of concern for
adverse consequences from Tesla, says management offered counseling for
people who had seen what happened—and the witness took the company up on
it, because it was traumatic.
later told this co-worker he’d been hit by a forklift driver who’d been
doing doughnuts on the property for fun. Limon didn’t respond to
requests for comment for this story, but according to people who saw and
spoke to him in the following days, and as depicted in photos seen byBloomberg
Businessweek, the injured leg was amputated.
says that both Limon and the forklift driver were fooling around in an
inappropriate way that isn’t representative of the automaker’s safety
culture. Afterward, Tesla says it fired the driver and held factorywide
safety meetings on each shift. The company suggests Tesla’s enemies
disclosed the episode to damage its reputation. “Nothing is more
important to us than the safety of our employees,” a spokesperson says.
“This is not to say that there aren’t real issues that need to be dealt
with at Tesla or that we’ve made no mistakes with any of the 40,000
people who work at our company.” The spokesperson says Tesla’s goal is
to “have the safest factory in the world by far.”
state agency Cal/OSHA, which fined Tesla $800 in connection with the
injury, described it as an ankle fracture. But agency documents show it
did not interview Limon. Tesla says it tried repeatedly to arrange an
interview. A few months later, Justine White, a Tesla safety official,
sent a resignation letter to Musk that was recentlyreportedby
the Center for Investigative Reporting. White said she had made
“repeated safety recommendations” about “informing employees of forklift
hazards in a timely manner after an employee’s lower leg was amputated
when run-over.” Tesla disputed White’s claims.
of current and former Fremont workers, many of whom requested anonymity,
say there’s a larger pattern in which a company hellbent on making lots
of cars tolerates unsafe conditions.A
2017 analysis by Worksafe Inc., a nonprofit, said that serious
injuries at Tesla’s plant in 2015 and 2016 were well above industry
averages. Tesla, which is a nonunion company that has been targeted by
the United Auto Workers, points out that Worksafe has ties to labor. It
says injury rates in 2017 fell 25 percent and were about the same as the
industry average. In June,Musk
saidTesla’s 2018 injury rates so far were 6
percent below the average, even as Model 3 production increased.
safety records were questioned again earlier this year when the Center
for Investigative Reporting reported that Tesla had misclassified
work-related injuries as personal medical issues, which made the plant
seem safer than it is.Tesla
was“an ideologically motivated attack by an extremist
organization,” but it retroactively added 13 injuries from 2017 to its
safety logs, according to asubsequent
article. Tesla says it routinely updates safety logs to ensure
important error that Tesla has made is simply ignoring the extensive
experience of the last 50 years in the auto industry,” says Harley
Shaiken, a University of California at Berkeley professor who chaired a
state commission thatwarned
againstthe 2010 closure of the Fremont plant,
which previously had been operated by Toyota and General Motors Co. as a
joint venture. Tesla sought, Shaiken continues, “to start from scratch
in a way that has resulted in meltdowns and near-meltdowns.”
says automation on the Model 3 line is making the factory safer. But
when robots break down, employees have to pick up the slack. For
instance, an enormously complex robotic conveyance system for bringing
parts to the line had to be removed, and teams of human workers wound up
doing the work. (Parts of the conveyance system, which had included 500
machines to lift parts, were used to build the new manual production
line under the tent.)
Tesla has about 10,000 workers at its Fremont plant. GM and Toyota had
less than half that and produced more than 400,000 cars at the plant’s
peak in 2006. Tesla argues that a larger workforce is justified given
that more of the car is manufactured in-house, but interviews with
workers suggest the company has stretched to ensure that there are
enough workers on the floor. Current and former employees describe
12-hour shifts as common, with some going as long as 16 hours.
battle exhaustion, employees drink copious amounts of Red Bull,
sometimes provided free by Tesla. New employees develop what’s known as
the “Tesla stare.” “They come in vibrant, energized,” says Mikey Catura,
a Tesla production associate. “And then a couple weeks go by, and you’ll
see them walking out of the building just staring out into space like
current employees say the pressure they felt to avoid delays forced them
to walk through raw sewage when it spilled onto the floor. Dennis Duran,
who works in the paint shop, says that one time when workers balked, he
and his peers were told, “Just walk through it. We have to keep the line
going.” Tesla says it’s not aware of managers telling employees to walk
through sewage and that plumbing issues have been handled promptly.
and many Tesla employees dispute that workers are unhappy or unsafe.
“There’s always going to be challenges from a safety standpoint and from
a production standpoint—that’s all manufacturing,” says Dexter Siga, who
started as a technician in 2011 and is now a manager. He adds that Tesla
has “had our fair share of challenges” as a young and rapidly growing
company, but it treats safety as “an overriding priority.”
his part, Musk says Tesla demands hard work, but that’s because it’s the
only way to survive as a U.S. car manufacturer. “I feel like I have a
great debt to the people of Tesla,” he says, his voice cracking with
emotion. “The reason I slept on the floor was not because I couldn’t go
across the road and be at a hotel. It was because I wanted my
circumstances to be worse than anyone else at the company. Whenever they
felt pain, I wanted mine to be worse.
know,” he continues, “at GM they’ve got a special elevator for
executives so they don’t have to mingle with anyone else.” (“Typical
Elon, deflecting from the real issue, which is the ability to
mass-produce at scale and with quality,” says GM spokesman Ray Wert.)
“My desk is the smallest in the factory, and I am barely there,” he
says. “The reason people in the paint shop were working their asses
off was because I was with them. I’m not in some ivory tower.”
July 2017, Musk delivered the first Model 3 sedans at a raucous party in
Fremont. The car was celebrated by reviewers (“Driving
Tesla’s Model 3 Changes Everything” was Bloomberg’s take), but it
was almost immediately apparent that Tesla could never deliver it in the
numbers Musk promised.
first problem involved the batteries. Tesla and Panasonic Corp., which
jointly operate a battery factory in Nevada, had designed cells that
were slightly larger than the standard 18650 cells used in previous
Teslas. The new batteries were better, but the automated manufacturing
line for packing thousands of them together didn’t work, and the task
had to be done by hand for a time. A new system, made by Grohmann, was
eventually built and flown in.
November, Musk told analysts he was “really depressed” but doing his
best to fix the battery-packing issue. Other problems emerged, and Tesla
had to shut down the Fremont plant for five days in February. In
retrospect, Musk says, trying to automate so much of Tesla’s factory at
once was overly ambitious. “We thought it would be good, but it was not
good,” he says. “We were huge idiots and didn’t know what we were
April, Musk took over manufacturing engineering personally. “I’m back to
sleeping at factory,” he tweeted. “Car biz is hell.” Field, who’d been
in charge of the factory, took a leave of absence the following month;
he later left the company. In mid-June, Tesla announced it waslaying
off 9 percent of its workforce, more than 3,000 people.
turned 47 in late June, during the final sprint to make 5,000 cars a
week. “First bday I’ve spent in the factory,” he tweeted, “but it’s
somehow the best.” On the Friday before the deadline, Musk seemed giddy
with excitement about what he expected would be a spike in Tesla’s stock
price. He tweeted a music video of the 1958 singleShort
Shorts, by the Royal Teens. On Sunday he announced that Tesla had
hit the milestone and proclaimed his love for his employees. Tesla’s
stock price gained 5 percent on Monday morning.
exuberance was gone by lunchtime, and Tesla’s stock finished the day
down 2 percent. It lost 7 percent on Tuesday. The “short burn of the
century” that Musk had predicted had failed to come to pass, as skeptics
pointed out that Tesla’s wild sprint would be unsustainable.
projected confidence during an interview withBusinessweekon
July 8. “The past year has been very difficult, but I feel like the
coming year is going to be really quite good,” he said. He still had
“one foot in hell.” He said manufacturing hell will be over in a month.
present, the Model 3 is selling more units in the U.S. than any
comparably priced midsize sedan, including those offered by
Mercedes-Benz, BMW, and Audi. It’s fast and fun to drive. When you stomp
the accelerator, the Model 3 stomps back, and Tesla’s designers tried to
replicate the feeling of instantaneous acceleration in every aspect of
the driving experience. “Point and shoot,” says Lars Moravy, Tesla’s
director of chassis dynamics. “There’s no overshoot, and there’s no
delay. That’s the essence of the electric motor and our name.”
course, quick acceleration isn’t unique to the Model 3; it’s true of all
electric cars. But the fact that there even is a market for these
vehicles is to a large extent Musk’s doing. He set out to teach the
world that consumers would pay for zero-emissions cars in huge numbers.
Whatever happens to Tesla, he’s succeeded in that. Tesla is, as Musk
says, “a real car company.” That’s glorious, and it’s also hell. —With