What Does Automotive Disruption Look Like? Maybe It’s About Manufacturing Might.
Winning the race in the automotive sector may not go to the automaker with the best battery technology, or the lowest cost batteries, or even to the company solving autonomous driving. The future leader of the category could be the auto company able to disrupt the way cars are manufactured.
In 1913 Henry Ford disrupted the slow, labor-intensive vehicle manufacturing process with the introduction of the assembly line. Mr. Ford’s manufacturing methods helped reduce price of a Model T from $850 in 1908 to less than $300 by the mid-1920s. The Ford assembly line not only disrupted the car industry, it also was a significant contributor to the development of the Industrial Revolution.
While watching the Tesla Battery Day presentation in 2020, I was particularly struck by a topic presented by Elon Musk having nothing to do with batteries. Musk commented that “winning in the automotive sector will not be decided by vehicle technology.” He stated that he wanted Tesla to be “the best at manufacturing of any company on earth.” Musk also described why faster production speed and factory volumetric efficiency were critical to lowering vehicle costs.
AutoBlog recently reported, that Tesla has developed a process the company calls an “unboxed” approach to manufacturing. Using this technique, vehicle sub-assemblies are put together in dedicated stations simultaneously. Then these sub-assemblies are combined into a full vehicle at the end of the operation. Tesla believes this unboxed approach to manufacturing can reduce the footprint of an auto factory by 40% while reducing the expense of building the plant and increasing the speed it can be constructed. This “unboxed” production idea is part of increasing manufacturing volumetric efficiency described by Musk during that 2020 Battery Day event.
Many investors believe Tesla one day will be the most valuable company in the world. Some determine this value based on an inflated view of Elon Musk’s capability as CEO. Others value the company based on Tesla’s growth with EV sales. A few have substantial hopefulness around the introduction of a feature-complete Tesla full self-drive capability (FSD). Frankly, I find it difficult to imagine how any automaker ever will be more valuable than companies like Apple, Microsoft, or Nvidia.
However, being the most valuable company in the world is not correlated to the potential for Tesla to disrupt automotive manufacturing. In several ways, Tesla has already caused legacy automakers to rethink their approach to the vehicle sector. If the company effectively deploys their “unboxed” manufacturing process, Tesla’s most significant disruptive accomplishment might be around a better way to assemble automobiles.
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