The Machine that Builds the Machine. Is this Tesla’s Competitive Advantage?
I bought Tesla stock in November 2018, when the company was valued at $53.5 billion. What convinced me to invest was what I considered to be the company’s breakthrough achievement then: learning to mass produce electric vehicles (EVs).
The Elon Musk biography by Walter Isaacson, confirms that the accelerant which drove the growth in Tesla’s valuation beginning in 2018 was the rapid production increase of its newly launched Model 3 sedan from 2,000 to 5,000 cars per week. When this occurred, Tesla became the world’s first and only mass producer of EVs, and its stock price soared. At that time, Tesla shifted from a niche EV-maker to a car company that could compete with any volume automaker.
The machine the builds the machine is the most important machine in the world - Elon Musk
Elon Musk has often commented that he wants Tesla to be better at manufacturing than any other company. Musk believes that manufacturing expertise is more important than the company’s vehicle hardware technology. Simple stated, “the machine that builds the machine is the most important machine in the world,” according to Musk.
In a recent TaaSMaster newsletter post, I wrote that even automakers like Toyota are concerned about Tesla’s manufacturing technology. The Toyota Production System is a manufacturing process that has been mimicked by every automaker in the world. Yet, there is growing evidence that Tesla is striving to be the best at manufacturing by halving production costs with a developing process it calls, unboxed manufacturing. Automotive News reported that Tesla’s manufacturing techniques will help the company develop a car from the ground up in 18 to 24 months versus the three to four years it takes other automakers.
Many Tesla supporters as well as detractors insist on valuing Tesla around sexy attributes like the EV deliveries, vehicle software integration, car hardware technology, battery engineering, new vehicle introductions like Cybertruck, and autonomous driving technology. But maybe it is the less glamorous aspect of manufacturing that might give Tesla a more enduring competitive advantage.
Note: I no longer own Tesla stock, selling all shares in May 2022.
For questions, feedback, article ideas, or story contributions, email: RMcAdory@TaaSMaster.com