Inability of its Production Capacity to Meet Increasing Demand: Tesla

Final Project – Tesla
Introduction
Right now more and more people attach great importance to environmental protection, instead of traditional gasoline and diesel vehicles they prefer to use plug-in hybrids and battery-electric vehicles. According to IEA (2021) in 2020, there were over 10 million electric cars in the world, an increase of 43% compared to 2019. Although the market share of electric cars is only 1%, it is the future. The leading enterprise in the electric vehicle industry is Tesla and no one doubts that it is a successful company. Nevertheless, many issues appear during the development of Tesla and some of them are very serious. In the report, we will first talk about the background of Tesla and a brief introduction of its CEO Elon Musk because he affects Tesla a lot. Secondly, we will talk about what issues Tesla is facing, what causes these issues, what are the impacts, and why these issues are serious. Lastly, we will give our recommendations and the reasons to support our decisions.
Tesla is an American electric car manufacturer and clean energy company, it was founded in 2003 by Martin Eberhard and Marc Tarpenning. In 2021 Tesla becomes the largest electric car manufacturer and the first company to sell 1 million electric cars globally. The main business of Tesla can be divided into two parts. The first part is about selling electric vehicles. Just like what we talked about above Tesla now is the largest electric car manufacturer. The second part is about battery energy storage. Tesla uses its advanced technology of battery storage and solar power to create a subsidiary called Tesla Energy and now Tesla Energy is one of the largest suppliers of battery energy storage systems in the world.
Like Pauline Meyer (2018) says the organizational structure of Tesla is functional or you can call it U-Form. This organizational structure is very traditional, it divides the company into different departments and each department is directly managed by senior level. In U-form companies, they use centralization to manage the incorporation, the whole company is controlled by a central group. There are six departments in Tesla, the first one is Chairman & Chief Executive Officer. They have the top positions in the functional structure, for Chairman he can manage the board members, and for the CEO he can manage the senior executives. The second one is Finance. This department helps the company manage the money, handle the accounts and make plans for expenditure. The third one is Technology. For companies like Tesla, technology is very important because they need to use new technologies to compete with other rivals. This department’s job is improving battery tech, upgrading the software of Tesla’s vehicles, and developing the technology of full self-driving which is called Autopilot. The fourth one is Global Sales and Service. This department’s job is providing after-sales service and sales all over the world. Tesla’s Global sales is a very important business, for example in 2020 it sold 137000 electric vehicles in China and 206000 in the USA. The fifth one is Engineering. For engineers, their job is to design the vehicle. Because all models of Tesla’s cars are battery-electric, their designs are way different from gasoline cars like they do not have engines, they spend a lot of time to create the model for Tesla. The last one is Legal. This department needs to deal with legal disputes. Also, Tesla used to have a public relations department, but they dissolved it in 2020. Tesla now owns 7 factories all over the world, 4 in the United States, 1 in the Netherlands, 1 in Germany, and 1 in China.
In February 2004, Elon Musk invested 6.5 million US dollars and became the largest shareholder of the company, and has served as CEO since 2008. Musk graduated from the University of Pennsylvania and dropped out of Stanford. Before he invested in Tesla he founded web software company Zip2 and online financial service company X.com which later became PayPal. Because of takeovers, he became a billionaire. Elon Musk is a genius, he helps plan the launch of a series of electric cars. They look so fashionable and this is one of the main reasons why Tesla becomes popular. Just like what we talk about above Tesla is controlled by a small group of people, this means that most decisions of what Tesla does are made by Musk, the company’s successes inseparable from him. Nevertheless, Elon Musk is also a maverick, this made him very popular on social media but for many employees, they do not feel comfortable with him. Many former employees complain that he is not easy to work with, he always asks them to do better. Not only that, many employees tell others they are only allowed to do things Elon Musk asks them to do and he does not like to hear opinions from other people. On the other hand, his characteristics cause a lot of trouble and this is one of the main reasons why Tesla faces these issues.
Problem
Since the invention of the assembly line, manufacturing has continued to improve its capacity for production. Robots and automation have slowly been pushing the human worker out of the factory. Tesla is well known for its automated production. Although Tesla is a successful company it still has some problems and the most serious problem Tesla faces is the lack of production capacity. Elon Musk believes that highly automated is trending, which means all the processes in a factory are set by a fixed order. He says Tesla's production systems are, for the most part, already over 75 percent automated (Aregay, 2020). Musk makes the work environment of Tesla’s factories fully controlled by computers. In the factory all work is done by robots and AI such as assembling vehicles, no human is needed there. Currently, the only two areas of the production line which are mostly manual are general assembly and wire harnesses. Although automated production is efficient, it can be a problem in fast production. Musk also agreed that, even though robots are helpful, "excessive automation at Tesla was a mistake." He continued to add, "Humans are underrated” (Aregay, 2020). In addition, Tesla could not rely mainly on technology and AI to do all the complex work. Right now humans are still much better than AI at doing complicated tasks and making decisions when facing accidents. The result of totally using AI is underproduced. For example, Tesla used to estimate that in 2018 it would produce 5000 Model 3 each week and it failed. These automated factories only produced less than half of the estimate. This made Elon Musk admit that it was too early to rely on excessive automation. The probability of small errors and unforeseen situations is proportional to the complexity of the process, especially when the process takes place in the physical world (Buchel, 2018).
Tesla’s lack of production capacity problem leads to customer dissatisfaction. Some Tesla customers are experiencing waits of weeks or months for their cars, and Tesla’s promised delivery dates keep slipping (Kolodny, 2021). Even Musk had to take direct control of the production line and pulling all-nighters and napping at the factory to overcome the issue.
Lack of transparency is also part of the main problem. Customers are upset that Tesla does not have enough information to answer their questions precisely. The higher-ups’ management at the Tesla factory does not give any authority to speak to the press regarding this matter. According to several employees, one of the reasons why Tesla cannot handle all the issues is due to the ...