Tesla finds the drive towards mass production is a bumpy road
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When John Joyce, a 28-year-old Apple employee who lives in San Francisco, California, received his Tesla Model 3 shortly before Christmas, he was surprised that the delivery did not involve the company’s customary walk-throughs - where a customer is shown the car’s features and can check its quality.
He was told to email with any concerns. When Joyce did find a problem - a dent on the car’s right side - he emailed the same day. Two months later, the issue still hasn’t been fully resolved, despite phone calls, emails and a visit to a service centre.
Now, after two attempts at repair, the dent is almost gone but Joyce says his car’s paint finish is scratched and damaged.
“I’m definitely feeling frustrated,” he says.
“It’s been a long process and they haven’t been very clear about where I can go for more help.”
The Model 3, Tesla’s attempt to make a mass-market and affordable electric vehicle, has, by the public admission of Elon Musk, the chief executive, put it through several circles of hell.
Last summer, as Tesla was racing against time to hit production targets, Musk slept on the factory floor, a moment he called “manufacturing hell”.
As Tesla struggled to get the cars it did make to customers, even enlisting the help of volunteer owners, Musk said its problems had shifted to “delivery logistics hell”.
The next round for the company, may be customer service hell.
These teething problems are testament to the enormous undertaking of shifting from a boutique manufacturer of luxury cars to a provider of electric vehicles for the masses.
The Model 3 has resulted in the company going from selling just over 100,000 cars in 2017 to more than 240,000 last year, with more than 140,000 Model 3s now on the road in the US. By the end of this year, Musk recently said, his company will make 10,000 cars each week.
But pleasing customers may be difficult to juggle with turning a profit, which the carmaker did for the first time in two years at the end of 2018.
The Tesla 3 . Picture/AP
Tesla laid off 7per cent of staff in January, and said in its earnings report last month that “restructuring actions” were key to profitability.
Diehard fans are concerned. A series of YouTube videos from well-known vloggers, who are often both shareholders and owners, have urged the company to recognise the risk of disillusioning new Tesla owners.
In one, vlogger Kim, whose channel LikeTesla has documented her love of the brand since she got her first car two years ago, made a video called “The Straw That Can Topple Tesla!” in which she said the company was engaged in a delicate balancing act between pleasing Wall Street and pleasing its customers.
She said issues such as being left on hold for long periods and having delivery dates moved around were “all over the Facebook groups, they’re all over the forums”.
She added: “Frankly I’m just sick of telling people that Tesla’s customer service kind of sucks right now but just wait until you get your car, because you’ll love it.”
Tesla is a company with unusually dedicated customers. People buy their cars because they love the brand and believe in what it stands for, and they consistently top consumer satisfaction surveys. Nevertheless, failures could become a significant issue if they go unaddressed, says Carla Bailo, president and chief executive of the centre for automotive research, a non-profit group.
“That aura of Tesla being able to get away with, in my mind, so many things that no other automaker can get away with - it will become diminished if these kinds of issues continue to arise,” she says.
Buyers younger and less wealthy
Tesla’s newest customer base is younger and less wealthy compared to those who bought its previous, more expensive cars, the Model S and X, something that is only likely to become more true as the Model 3‘s price comes down.
The company is targeting a base price of $US35,000 ($NZ50,970) for the car, without taking into account tax credits and fuel savings. Currently the base model costs $NZ62,482.
Model 3 buyers are “not just less obsessive but they probably have less money [than the first Tesla customers] in general”, says Jessica Caldwell, the executive director of industry analysis at Edmunds, a site for consumer car buyers.
And with the company expanding into Europe and China, the logistics will only get more complicated.
Tesla’s unique business model, which cuts out independent dealers, means it must take responsibility for delivering and servicing hundreds of thousands of customers’ cars.
In the annual 10-K report, which came out last week, Tesla acknowledged that this was a risk to the business. Delays and problems, it says, could result in “damage to our brand and have a material adverse effect”.
In the earnings call last month Musk said improving service was a high priority for the company.
Caldwell’s colleague Ron Montoya, a senior consumer adviser at Edmunds, has been part of a team testing a Model 3 for the past year. He tells prospective Tesla customers to expect problems that you wouldn’t see with other automakers.
“You can see it’s a brand that has some issues and some growing pains in terms of quality, and in terms of service,” he says.
“You’re getting into a company that’s very early on in its lifetime.”
- The Sunday Telegraph
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