Tesla Motors Inc’s (NASDAQ:TSLA) production line issues are a thing of the past if Global Equities Research is to be believed. Their analyst, Trip Chowdhry, has noted that over the years, Tesla has gained considerable experience with its vehicles and improved its supply chain and production line accordingly. Tesla has also made some smart decision in terms of the design for the Model 3. All these factors are likely to help the company roll out its Model 3 on time and meet the demand for its first mass market targeted vehicle.
Chowdhry points out that the company has the experience with its Roadster, Model S and the Model X that has led to 16% institutional learning of how to operate in the automotive segment. Tesla has had over 16 years of exposure to help it improve its product line which has seen a range of products roll out with varying success in bridging the supply-demand gap. The company has also learnt to outsource its work and reduce in-house production.
Tesla’s Model X and its luxurious make showed the company its limitations and has led to a decision to use steel rather than lightweight aluminum to make the production process smother. Not only is steel the cheaper material but it significantly cuts down production costs and problems. Steel workers are more commonplace than those for aluminum for starters and due to this, the compensation paid is also half since the process is less skill intensive. In addition, users will benefit from the fact that steel parts are more easily replaced after denting, making repairs easier and cheaper on the production line and for end consumers.
The combination of these factors will provide tailwinds for Tesla in improving its supply and lead to help bridge the gap for the company’s Model 3 supply and demand in the market.