Tesla Inc. has generated a lot of excitement about producing its Model 3 sedan, its electric car “for the masses.” The Model 3 begins at $35,000, while other luxury models Tesla produces cost $80,000-plus. Production on the Model 3 only started in mid-2017, but there already were 500,000 reservations for the vehicle by February 2018.28 The challenge for Tesla was producing cars on a much bigger scale than it ever had before.
To meet this challenge, Tesla set an objective of producing 5,000 Model 3 sedans per week.29 Tesla missed this objective at the end of 2017 due to difficulties it encountered with automation and battery-pack assembly. It took longer than expected to install more than 1,000 robots in its Fremont, California, factory. Tesla also spent over $80 million on an automated warehouse system that did not initially run smoothly.
In January 2018, Tesla postponed its objective—for the second time—of producing 5,000 Model 3 sedans per week to the end of the second quarter of 2018. Tesla was described as “entering one of the most critical phases in its history, a make-or-break period.” 30 The company had to figure out how to increase production to meet its objective. If this objective wasn’t reached by the end of June 2018, there might not be enough cash to maintain its operations. Raising additional cash could be difficult if investors lost confidence in a company that had repeatedly missed its production targets.
As the objective deadline at the end of June 2018 drew near, Elon Musk (Tesla’s founder and CEO) had not left the Tesla factory in three days. He was sleeping on the floor under his desk. A temporary assembly line was created under a tent outdoors to help reach the production target.31 The hard work paid off! Tesla produced 5,031 Model 3 sedans in the final week of the second quarter of 2018. Nearly 18 percent of the 28,500 Model 3 sedans produced in the second quarter were made in the final week. Some questioned whether Tesla could sustain their progress toward their production objective in later quarters.32 Tesla proved they were up to the challenge during the third quarter of 2018 by meeting their target. Also, their Model 3 was listed in the top 10 sedans sold in the US and was the only electric car on the list.

DISCUSSION QUESTIONS
8-1. What factors made it difficult for Tesla to initially meet their stated objective of 5,000 Model 3 sedans per week? Explain why you think their stated objective should (or should not) have been different than it was.
8-2. What’s the downside for setting an ambitious production objective like Tesla did for the Model 3?
8-3. What do you think Tesla’s production staff felt about the 5,000-unit objective?
Would it have a positive or negative impact on morale? Explain.