Analysis: Industry experts are divided over Tesla's new car-making method.

When Tesla Inc. (TSLA.O) unveiled its new vehicle assembly system in March, it immediately generated buzz and sparked a discussion among experts in the auto industry about whether CEO Elon Musk's so-called unboxed process is radical, revisionist, derivative, or all of the above.

 

Musk thinks that in order to produce more affordable - and profitable - electric vehicles in greater quantities, the company must fundamentally rethink traditional manufacturing techniques.
Investors have been anticipating Tesla, the most valuable automaker in the world, to reveal its coveted product: an electric car under $30,000. The cheapest Tesla currently starts at more than $40,000.

The unboxed assembly method is designed to help Tesla reach its high price objective.

One expert called the procedure "revolutionary," with the ability to displace the moving assembly line that has long been a staple of the auto industry. Others questioned whether a procedure that uses tried-and-true methods, like modular assembly, can help to significantly lower production costs.
When the new procedure was unveiled at Tesla's Investor Day on March 1, executives claimed it would make the company's upcoming vehicles "significantly simpler and more affordable."

According to officials, the unboxing procedure could reduce the factory's footprint by 40% and cut production costs in half. According to the business, the goal is to "build more vehicles at a lower cost."

When the system is installed in late 2024 at Tesla's new $5 billion plant in Monterrey, Mexico, where the company plans to build a new generation of sub-$30,000 EVs, the combination of new techniques won't be fully tested.

Numerous significant issues loom: What kind of effects will Tesla's method have on the entire auto industry? Will it make the widely imitated Toyota Production System obsolete? In addition, given Tesla's history of missed production deadlines and unsuccessful attempts to implement unproven technology, can Musk actually make his company's process function as promised?

Tesla did not immediately reply to requests for comment for this story.

Martin French, managing director at consulting firm Berylls which focuses on the industry's rapid shift to electric and smart mobility, wondered if Tesla's move might supplant decades-old lean manufacturing methods pioneered by industry kingpin Toyota Motor Corp (7203.T).

"I got the feeling when I watched the Tesla (presentation) that the Toyota Production System handbook has just been thrown up in the air and machine-gunned down," French said.

German researcher Jan-Philipp Büchler of the Free University of Dortmund, believes Tesla's new process is "revolutionary," adding: “This is much more than modular production ... It's eliminating steps that were standard, creating new patterns of working, increasing speed, reducing complexity.”

Tesla is still testing various elements of the system, including the use of large front and rear subassemblies built on single-piece underbody castings, which are then joined to a central structural battery pack. Body panels are painted separately, then joined together toward the end of the assembly process.

OUT WITH THE OLD?

Some manufacturing experts believe the unboxed process has the potential to reduce or eliminate familiar elements inside auto factories, including stamping, welding and painting unfinished car bodies and sending them down a long assembly line where seats, engines and other components are attached.

If everything works as planned, the unboxed process could rewrite the industry's standard playbook and practices. But Tesla has often fallen short of its ambitious targets, from the oft-delayed Cybertruck to its still-unfinished "Full Self Driving" software.

Lean gurus like James Womack and Hide Oba see key differences between the Toyota production way and Tesla's proposed overhaul.

At its core, the Tesla method "is an assembly process" while Toyota has developed a far broader and more comprehensive "production management system" that helps automakers run assembly processes and related operations more efficiently, said Womack, a professor at the Massachusetts Institute of Technology and co-author of "The Machine That Changed the World," the 1990 book on Toyota's lean production philosophy and methods.

A big risk cited by Oba, an independent lean-manufacturing consultant, is what he describes as the “rigidity” of the unboxed system. Oba worked previously for the Toyota Production System Support Center, a division that helps the automaker's suppliers and others implement TPS.

The Tesla process "won’t work unless production of these big, high-content unboxed vehicle modules are completely synchronized, and finished blocks arrive for a final put-together just-in-time,” he said.

Another question is whether Tesla can produce multiple vehicle models of different sizes and body styles on the same production line with the unboxed system.

“My guess is that’s next to impossible,” Oba said. That is because the way Tesla has sliced or "unboxed" the vehicle into several big blocks is so radical, and the dimensions of those blocks do not appear to offer much room for manufacturing variables.

“That could become a drag on the company’s overall efficiency since Tesla’s model lineup is sure to become more varied and complex” in the future, he said.