A new Henry Ford: Elon Musk and his Model S
Musk wants to roll out half a million electric cars a year from his Californian factory. His Model S is named to honour his hero
Wednesday 17 July 2013
Elon Musk inspired Robert Downey Jnr’s portrayal of the billionaire industrialist Tony Stark in the Iron Man films. The role model for Mr Musk, a billionaire industrialist for real, appears to be Henry Ford.
The Ford founder’s mastery of mass production made the Model T the first affordable car, revolutionising transportation. Mr Musk, who named Tesla Motors’ saloon the Model S as a nod to Henry’s car, sees himself similarly as an engineer, a tinkerer, a nitty-gritty entrepreneur.
“I don’t spend my time pontificating about high-concept things. I spend my time solving engineering and manufacturing problems,” says Mr Musk, 42. “Have you seen my desk? It’s right there in the middle of the factory,” he adds, pointing to a drab workspace beside the Model S line. “It doesn’t look like Tony Stark’s office.”
Decade-old Tesla is an automotive phenomenon, with an industry-leading share price surge that erupted on the heels of its first quarterly profit, a rave Model S review by Consumer Reports magazine and rushed repayment of the Energy Department loan that got the company’s factory into operation. Beyond this year’s goal of selling 21,000 electric cars, Mr Musk wants one day to make half a million battery-powered vehicles a year at California’s only car-assembly plant.
Tesla’s initial struggle to reach a production pace of 400 cars a week led it to miss a 5,000-car sales goal last year for the $69,900 (£46,000) Model S. The company’s fourth-quarter loss widened after it added temporary workers and resolved supplier snags. That output level has since been surpassed, and “not trivially”, Mr Musk says.
“At this point, making 400 cars a week actually feels like a walk in the park, whereas it was a nightmare in Q4,” he says.
Shares of Tesla, which is based in Palo Alto, California, have more than tripled this year amid its profitable quarter. That profit included a one-time benefit from repaying the US loan early. Without it, Tesla earned less than half a cent per share.
The carmaker may report a second-quarter loss of 18 cents a share, according to the average of 12 analysts’ estimates compiled by Bloomberg. Mr Musk also runs the rocket maker Space Exploration Technologies, known as SpaceX, and is chairman of the solar-power provider SolarCity.
Gains for Tesla and SolarCity shares, along with expanding SpaceX business, have swelled his fortune to $6.9bn, according to the Bloomberg Billionaires Index.
By late 2014, Tesla’s goal is to make 800 cars a week, before starting Model X electric sport-utility vehicle production. The cavernous factory has 3,000 employees, including 2,000 assembly workers, with two daily production shifts.
Pristine in early 2012, it is now filled with activity. A once-spotless white floor bears smudges from accelerating production. Mr Musk reckons 40 per cent of the facility’s five million sq ft is now used to assemble cars, electric motors and battery packs, and for parts storage. Overtime and temporary labour costs are falling as workers hone assembly skills. Tesla is also making “nuanced” changes to the Model S to trim production time, cost and weight, Mr Musk says.
Some practices, such as high-strength boron-steel inserts in the side pillars secured with “aerospace-grade bolts”, were “way overkill”, he adds. They are being replaced with lighter, cheaper and easier-to-assemble aluminium reinforcements that maintain a five-star US crash rating. Engineers will slice the Model S’s weight by as much as 80lb by the year end.
Tesla’s facility is highly self-contained compared with most large car plants. It stamps its own aluminium body panels and chassis parts, moulds plastic components and dashboards and die-casts metal components.
“I’m not aware of other plants that do their own die-casting,” says Michael Robinet, managing director of the consultancy IHS Automotive in Northville, Michigan, who studies assembly practices. “That’s very difficult to do on site.”
Tyres, glass and stereo speakers are among the few things the plant doesn’t make itself. “We’re quite vertically integrated,” Mr Musk says. “We’re closer to the way Ford did it than Ford is now.”
“Tesla is really bucking the trend,” Mr Robinet says. “It will be difficult for them to gain economies of scale as they expand if they don’t work more closely with the supply base.”
Tesla straddles technology and cars. Its entrance into the Nasdaq 100 index this month demonstrates its tech-industry credentials.
Bill Ford, great-grandson of Henry Ford and executive chairman of Ford, says managing the flow of parts will be a challenge as Tesla grows.
“I love their technology,” Mr Ford said at a recent conference in Beverly Hills. “They need to be mindful as they scale up that running a car company is different than running a technology company. Some of the mundane pieces, like supply-chain management and keeping dealerships stocked with parts, aren’t very sexy, but they are very real.”
Most suppliers of parts and materials for Model S were hassle-free, Mr Musk says. About 5 per cent were “slightly problematic; 3 or 4 per cent were problematic; and 1 or 2 per cent of them were a nightmare”.
“We still have a lot to learn and can get a lot better, but I think we’re pretty good at this point managing the supply chain for tens of thousands of units a year,” he adds. “We’re going to really have to step things up.”
Paypal payout: How musk clicked on eBay
South Africa-born Elon Musk’s best-known venture is not his electric cars, but PayPal, the payment system used by millions of eBayers. The payment system was actually created by a group of entrepreneurs behind a tech outfit called Confinity. Mr Musk merged his firm X.com with theirs and quickly honed in on PayPal’s vast potential, building it up to the point where it was bought out by eBay in 2002 for $1.5bn. His share of the spoils: $150m.
He taught himself computer programming, selling his first game at the age of 12. Compaq’s AltaVista web search arm bought his first serious business, Zip2, for more than $300m.
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