Mass production is the hardest obstacle to any manufacturer, though this often goes under-appreciated. Every year, tens of thousands of ideas and prototypes are created but never make it to mass production.
Elon Musk, who turned out to be a visionary in several areas at once, joined the conversation with Kara Swisher.
Making a prototype, and then a copy, is the simplest step. The real difficulties begin when large-scale production begins, but the problem is that most people simply cannot figure it out. "Large scale manufacturing, especially of new technology, is somewhere between 1,000% and 10,000% harder than the prototype. I would really regard, at this point, prototypes as a trivial joke," Musk said.
The Tesla CEO, as a person who was able to achieve mass production of the company's products, understands well how much work goes into this. That is why he frequently expresses his appreciation of those who succeeded in this.
"So much respect for those doing high volume manufacturing. It's insanely hard, but you make a real thing that people value. My hat is off to you."
Tesla has been able to achieve volume manufacturing and now have sustainable, positive free cash flow—a truly exceptional achievement for a car maker.
Musk points out that hundreds of auto companies have been created in recent years, but the only companies that have not gone bankrupt are Ford and Tesla. "It is insanely difficult to reach volume production as a car company and not die," he says.
In order to break into the automotive market, a new company needs to make every possible effort, and even then will likely fail. That is why Tesla tasked itself with creating vehicles that are extremely compelling. And the company has been successful in doing just that.
Virtually any new technology has a high unit cost in the beginning before it can be optimized. Tesla's strategy was to first enter the upper market segment, where customers are willing to pay more, and then drive down the market as fast as possible to higher unit volume and lower prices with each successive model.
Now we see that in less than 20 years, the company has realized its goals and continues to move forward rapidly. The company's ultimate goal is to accelerate the world's transition to sustainable energy and, according to Musk (and common sense), there are only two limits to this: affordability and volume.
Tesla has revolutionized two of the largest industries in the world—energy and transportation. But in order to completely transform them, manufacturers have to make a colossal number of battery cells, which is currently the limiting factor. To speed up this process, they must reduce the cost of battery cells so that more people can afford them.
"The longer we take to transition to sustainable energy the greater the risk that we take. So Tesla should really be measured by how many years we accelerate the advent of sustainable energy," Musk says.
During Battery Day, Tesla unveiled new 4680 tabless cells that, thanks to a number of major advances, will be 56% $/kWh cheaper than the ones the company is currently producing. This is a dramatic breakthrough that will mark the beginning of a truly massive proliferation of EVs. Moreover, the company not only theoretically can do it in the future, new cells are already in cars that have been on the roads for several months.
Tesla, by making amazing EVs people love, practically single-handedly pushed other automakers towards electrification much sooner than would have otherwise been possible. This is a Herculean feat of which the company can already be very proud.
Yet even faster acceleration is needed. Fortunately, through Tesla’s latest innovations in battery tech and manufacturing—and via incredible products—a faster world transition to sustainable energy is possible. And it is looking more likely by the day.
Tesla's goal is not to become a market leader, but Tesla's goal is to achieve the world's transition to sustainable energy. "The sooner we transition to a sustainable energy future the better for the world," Musk says—and we could not agree more.
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