Silicon Valley is struggling to understand Tesla's Model 3 production problems — here's why (TSLA)

Tesla Factory

Tesla could be struggling to get the welding right with its Model 3 sedan.
The vehicle's production ramp has been delayed.
Tech investors are also struggling to understand the unique difficulties of building cars.

Tesla could be dealing with some new assembly line welding problems that are slowing down production of its Model 3 sedan, Automotive News reported on Monday.

The carmaker produced only 260 vehicles in the third-quarter; it expected to build 1,500 in September alone, ramping up to 20,000 a month by the end of the year.

According to AN's Katie Burke, "[b]ased on details in a Wall Street Journal report and in a video of the production line posted on Twitter by Tesla CEO Elon Musk, experts say the electric vehicle maker appears to be struggling with welding together a mostly steel vehicle, as opposed to the primarily aluminum bodies of the Model S and Model X."

That might sound bad, but it's to be expected. Tesla skipped a manufacturing prototyping stage for its Model 3 assembly line and now appears to be troubleshooting on the fly, hence Elon Musk's statements about being in "production hell."

car dealership dealers More critically, Burke's story contains a telling comment from a venture capitalist and "early Tesla investor," Mark Platshon, who emailed the reporter to tell her that as far as Model 3 delays go, Tesla is "being careful to get it right before shipping a lot."

I've added emphasis to shipping because that single word is symptomatic of why tech investors, like Platshon, are struggling to make sense of Tesla's problem.

Nobody in the car business talks about "shipping" cars as if they were smartphones or software. Cars are delivered or sold — if they're shipped, their put on actual ships and sent to foreign markets.

Tesla is a car company first

Silicon Valley has long sought to rebrand Tesla as a tech company rather than a car company. That fantasy is now colliding with the blocking-and-tackling aspect of Tesla as a serious automaker. Automotive News talked to a manufacturing expert who said that the Model 3 welds look like Tesla is having some issues switching from aluminum chassis to steels ones (its previous cars are aluminum).

Steel is cheaper, and the Model 3 is destined for the mass market, so Tesla has to go this route. And in any case it the company isn't likely to confirm that its welding process continues to be a work in progress.

But welding is a core aspect of building cars, one that the company needs to get right. In the auto industry, it's done precisely and rapidly, using million-dollar robots. It's also difficult and something that doesn't take well to beta-testing on production vehicles. And even though software runs the robots, it's nothing like debugging software code for the products and services that tech investors are more comfortable with.

The tech industry is taking a long time to figure this out, and that makes sense. Tesla is the first viable new carmaker that anyone has had the chance to invest in for decades.

And for the moment, it has time and can enjoy investor patience: Tesla stock is still up 65% in 2017.

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