Tesla reported third-quarter earnings on Tuesday. They company lost slightly more per share than analysts expected, but revenue met expectations and the company didn’t revise its delivery numbers for the year. It still expects to delivery between 17,000 and 19,000, according to a statement.
In the same statement, Tesla made an interesting admission:
Model S production and deliveries are on track to achieve our initial Q4 plan. The primary limiting factor to higher Q4 deliveries is the near term ramp of Model X production, with the biggest constraint being the supply of components related to the second row monopost seats. To eliminate these supply constraints and achieve a better overall outcome, we have brought manufacturing of these seats in-house. In addition we, and some of our other Model X suppliers, are still ramping up and fine-tuning production. These factors add uncertainty to our build plans during Q4, but we feel emphasising quality is the right decision for our customers.
In other words, if you can’t get it done, do it yourself.
The Model X is Tesla recently launched SUV, and prior to its debit, CEO Elon Musk admitted that what he termed “sculptural” back seats were causing some issues with production.
The Model X launched on schedule in late September, but clearly the situation with the seats was bad enough to prompt Tesla to take the unusual step of in-sourcing manufacturing.
Seats are a component that automakers typically have developed by a supplier, although much of the design work may be done by an OEM’s own staff.
Is this a good thing for Tesla?
It depends. The startup electric car maker has defied critics simply by continuing to exist. But as it grows, clear problems with its manufacturing processes are coming to light. This is still an automaker building one car in one factory. And that factory is in Northern California, pretty far from the automaking strongholds of the Midwest and the South, where the bulk of the US supply chain if located.
Tesla needs to get the Model X right, so if it wants to build its own seats, that’s probably a logical decision. But it does add to the work that Tesla has to do in the future.
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