Tesla's big adjustment: the disaster brought by All in will be solved with another All in

Late LatePost

2024-04-17 09:58Posted on the official account of Beijing LatePost

Model Y and Model 3 will last at least another two years.

Text丨Li Zinan, He Qianming

Editor丨Huang Junjie Gong Fangyi

Until March of this year, several departments of Tesla were regularly discussing the mass production plans of the new project "NV91". For the employees involved, this is not only a job, but also a secret weapon to save their stocks.

A year ago, Tesla CEO Elon Musk announced at a shareholder meeting that an affordable car would be mass-produced by the end of 2024. He believes that this car alone will sell 2 million units a year, and it will propel Tesla to become a super car brand that surpasses Volkswagen and Toyota combined. According to information previously obtained by LatePost, the new car "NV91" has already entered the stage of mass production verification in the summer of 2023.

Tesla needs this product so much. The new Cybertruck, a sci-fi model, is difficult to produce, and it is expected that only 60,000 units will be built this year. The Model Y, the main sales force, has been on the market for 5 years, and sales have declined. In the first quarter of this year, the S&P 500 jumped 10%, while Tesla's stock fell by one-third.

The blindfolded car is "NV91". Source: Tesla Master plan 3.

Tesla's Chinese partners in the industry chain have also been looking forward to it for a long time. In the past two years, dozens of core suppliers have taken Tesla's intended orders to recruit people to build factories in Mexico, waiting for the completion of Tesla's Mexico factory.

According to the plan, the Mexico factory tailored for the "NV91" will be smaller and more efficient than Tesla's Shanghai factory, which will reduce the price of Tesla's main product from $35,000 (about 250,000 yuan) to $25,000 (180,000 yuan) for the Model 3. Musk has long believed that the only reason preventing consumers from buying Tesla cars is that Tesla cars are not cheap enough, and the solution is to use new materials and manufacturing methods to improve production efficiency.

But the Mexican plant was soon delayed. Several Tesla suppliers told LatePost in the middle of last year that the start of production of the new factory was delayed until the first quarter of 2025. Tesla's every leapfrog product has been seriously delayed, so suppliers are not too worried. At the time, many suppliers blamed the lack of local infrastructure in Mexico as slowing down progress.

On April 5 of this year, Reuters reported that Tesla's top management had canceled the "NV91" program in February without telling employees and suppliers. Musk was quick to accuse Reuters of spreading fake news on his social network X. But Tesla's grassroots managers never received any more information about the project, and there was no suspension, cancellation, or execution, and they could only track the progress of the project and their own future through what Musk called "fake news".

On Saturday, Tesla employees saw the news of the company's imminent layoffs on an anonymous external social media. Based on their experience, they will know who will be laid off in a month's time. But on Monday morning, they received an all-staff letter from Musk about layoffs.

In his all-hands letter, Musk said that Tesla had "conducted a thorough review of the organization" before laying off employees. However, many Tesla employees contacted by "LatePost" said that the layoffs were very hurried, without any handover or notice. "Layoffs are like random picks, and a lot of high-performing, long-serving employees are also being laid off," he said.

A Texas factory engineer who was preparing for a business trip received an email notifying him of his layoff within minutes of seeing the letter from all employees, and he didn't know how to hand over the computer and how to return the computer. Another engineer at the Texas plant found out he had been laid off because he couldn't open his door card at work, and he had attended a discussion on a new project a day earlier.

"I don't understand. Those loss-making car companies didn't lay off big layoffs, we made so much profit in a year, we cut 20%. One of the engineers who was laid off told LatePost. Only Tesla and BYD are currently profitable among the world's BEV-based auto companies.

Based on Tesla's headcount at the end of 2023, this round of layoffs will affect about 14,000 people. Some departments have laid off well more than 10 percent of their workforce, with the two engineers estimating that Tesla's battery division has cut nearly 30 percent of its workforce. Phoenix.com reported that some departments of Tesla in China have laid off more than 30% of their employees.

Chinese suppliers saw bad signs earlier than Tesla employees. LatePost has learned that the Mexican factory has been postponed to 2026 at the beginning of the year. Now the supplier can no longer expect this plan to be carried out in this way, but their plant has been completed.

Tesla's employees, suppliers, shareholders, and Musk himself have all paid a huge price for Tesla's disastrous start to the year.

In 2022, Musk raised $46.5 billion to buy Twitter, a significant proportion of which was obtained by Musk pledging shares. According to Tesla's filings, as of the end of March 2023, Musk pledged 58% of his shares in exchange for cash, totaling 238 million shares worth more than $40 billion.

In the six months that Musk pushed for the Twitter deal, Tesla's stock price peaked at $384 and as low as $198 — also about 22% higher than it is now. If Tesla's stock price continues to fall sharply, and Musk is unable to make up the money to the institution that accepts the mortgage, his pledged shares may be forced to sell, entering a vicious circle. "Any such sale could result in a further decline in our share price. Tesla's annual report document reads.

The problems that put a company in trouble basically come from mistakes made many years ago.

Cybertruck is in production hell again, Model 3 and Model Y sales are falling, and new affordable cars may be abandoned...... All this is just the result of a disaster. The causes of the catastrophe all occurred five years ago.

The problem was planted in 2019

In 2019, Tesla came out of the Model 3 production capacity crisis and made a profit in the third quarter. It sells EVs with good enough range for $35,000 to make ordinary consumers start to accept EVs.

A few months later, engineers from Tesla and die-casting machine maker LK worked all night at the Shanghai factory. There are no windows in the workshop, and engineers often work selflessly until after midnight, leaving a lot of waste in the factory. They spent half a year conquering the cross-era one-piece die-casting body, reducing the cost of a single vehicle by 5,000 yuan, helping the Model Y become the best-selling model in the world three years later.

When everything went well, Musk began to solve his heart problem, "boredom", and released the Cybertruck, a pickup truck with an all-stainless steel body.

Cybertruck vs. Model Y Comparison Chart Source: YouTube.

According to "Musk's Biography", when the Cyberturck was finalized, there were also executives within Tesla who questioned why such a futuristic design was used for the pickup. Musk said that it doesn't matter if anyone buys it, anyway, he "doesn't want to make a traditional, boring pickup truck, and you can do it again at any time when you want to do this kind of thing." ”

The Cybertruck was the beginning of this catastrophe for Tesla. The cool price is that Tesla can't make the body with traditional processes. The body of the mainstream car is made of aluminum alloy, and the aluminum alloy panel is pressed by a fixed mold and formed at one time. The stainless steel panels are too hard and need to be laser cut, then bent, and then welded into a car shell.

The accuracy of the new process was so low that even Marques Brownlee, YouTube's No. 1 tech blogger, received a finger-thick gap in the joints of the new car.

To make matters worse, the Cybertruck was delayed by 3 years, and mass production delivery was not until the end of last year. An engineer at the Texas plant told LatePost that it would take 23 years for all scheduled owners to get their hands on new trucks that can't build 200 new trucks a day, deliver less than 70,000 in a year, and tell LatePost.

"We dug our own grave with the Cybertruck, and it has a lot of bells and whistles," Musk said at the Q3 2023 earnings conference.

Tesla's ordeal was exacerbated by the 4680 battery prepared for the Cybertruck and affordable cars in 2020.

The 4680 battery is at the heart of Tesla's massive expansion plans. Catching up with the impact of the epidemic on the supply chain, batteries accounted for more than 40% of the cost of electric vehicles at that time, and the production capacity was insufficient. So Tesla is pinning its hopes on reinventing the battery structure and removing the most time-consuming part of it.

Tesla was initially very optimistic about the progress of the 4680 battery, believing that mass production could be achieved in 2021. If the plan is realized as scheduled, Tesla will have batteries with better performance and cost than CATL, BYD and other companies.

Due to engineering difficulties, this battery has not been mass-produced until now. According to people familiar with the matter, the current production efficiency of 4680 cells is only 1/3 of what is expected, the energy density is 20% lower than expected, and the cost is much higher than Musk's requirements. At the same time, CATL and BYD's improved lithium iron phosphate prices are lower, manufacturing is faster, and the energy density gap is narrowing. Coupled with the collapse in lithium material prices and the overcapacity of China's battery industry, 4680 is no longer meaningful.

"LatePost" exclusively learned that Tesla began discussions at the end of last year to switch to lithium iron phosphate batteries from CATL and LG in affordable cars. LG then invested a lot of resources and expects to mass-produce lithium iron phosphate batteries in the second half of next year. CATL partnered with Tesla to build a lithium iron phosphate battery plant in Nevada earlier this year.

These changes may mean that the 4680 battery program has failed in stages.

Hours before Musk announced the layoffs, Drew Baglino, Tesla's vice president of powertrain and energy business, who is responsible for the mass production of 4680 batteries, announced his departure. According to Electrek, several of Baglino's subordinates have also been fired.

Several engineers on the project have expressed pessimism about the 4680 battery project to LatePost. Some people started writing resumes to look for jobs at the beginning of this year, and some people didn't believe that the 4680 battery could be mass-produced when they joined the company.

"The problem with Tesla is not that there are too many people, but that there are too few people. An engineer summed up the delay in the 4680 battery project. "LatePost" learned that the 4680 battery R&D team has only about 100 people, and the staffing of Chinese battery companies generally exceeds 1000 people for mass production tasks of similar difficulty and scale. And they work 1.5 times as many hours per week as Tesla engineers.

Musk abhors all inefficiency, believing that middle managers are the key cause of inefficiency. In his early years, he said in an internal Tesla email that most companies rely on managers to pass on information from layers to layers, which is "a very stupid behavior." He asked Tesla employees not to care about their direct leaders, and if they can solve problems quickly, they can directly communicate with the vice presidents of other departments and himself.

"A lot of Tesla's mid-level management has been on the job for less than 2 years. They are either geniuses and are promoted in less than 2 years, or they are fired. An engineer said.

This culture has made Tesla extremely efficient, with Tesla's FSD (Self-Driving) team of just over 120 engineers, compared to competitors who generally need teams of hundreds or even more than 2,000 people, and the product is not as good as FSD. When Musk bought Twitter, some senior FSD engineers also helped review the code to determine who to lay.

But that culture has made it difficult for Tesla to break through some of the manufacturing challenges that require a lot of repetitive work, and it doesn't have the manpower to develop other models during the three years that the Cybertruck has been delayed.

Tesla is still only able to rely on the Model 3, which has been sold for eight years, and the Model Y, which has been sold for five years, and Tesla recently denied that the facelifted Model Y was originally planned to be launched in the middle of this year. In the first quarter of this year, Tesla's deliveries fell 8.5% from last year, the first decline in nearly 15 quarters.

LatePost learned that at the end of last year, Tesla's orders to some suppliers only increased by 20% compared to 2023, the lowest in history. But by the first quarter of this year, Tesla had cut its purchase orders again. A multinational battery supplier was asked by Tesla to reduce its supply.

After this round of adjustments, the Model Y and Model 3 will continue to last for another two years.

All in 带来的灾难，用再一次 All in 解决

Following Reuters' report on Tesla's cancellation of "NV91" in early April, Musk announced on social media that he would release a robotaxis (Robotaxi) on August 8.

Musk's attitude towards autonomous driving has a direct impact on Tesla's new car planning. According to "Musk's Biography", when Tesla planned a new model in 2021, Musk insisted that the next car should remove the side mirrors, pedals and steering wheel. It wasn't until late 2022 that he was persuaded by Tesla's executives to approve the mass production of a smaller, more affordable Volkswagen model than the Model 3.

But Musk still firmly believes that the unmanned taxi will disrupt the entire industry, not only freeing people from the heavy driving work, but also eliminating the reason why people have to buy a car to the greatest extent. In Musk's vision, it will be like the current ride-hailing, when you want to use the car, you can always summon a driverless taxi, it will take you to your destination, and then go to pick up the next passenger. He believes that Tesla will become a $10 trillion company with a market capitalization of robotaxis, and requires a push for new car design and a new factory to be compatible with both cars: an assembly line that produces affordable cars, which can also be used to produce driverless taxis.

Executives are more worried about the progress of autonomous driving and hope for transitional products. They and many analysts at the time agreed that a direct-to-consumer, affordable model could replicate the miracle of the Model Y and help Tesla seize the biggest opportunity in the wave of vehicle electrification.

With market growth slower and competitors catching up faster, Tesla is showing signs of fatigue. Tesla is still hesitant to make a $25,000 affordable car, and the Chinese rival's product has dropped to about $10,000. Musk himself admits that "without trade barriers, Chinese electric vehicle companies can destroy most of the world's competitors." ”

The slow progress of self-driving technology led Musk to change his tune in the second half of 2022 that "achieving full self-driving is harder than expected". But within a few months, OpenAI, which he had supported, released ChatGPT, which gave him new confidence. A month later, Tesla's self-driving engineer Dhaval Shroff showed Musk a new version of the self-driving system that was still envisioned, saying that "it's like ChatGPT, but for cars."

In traditional autonomous driving systems, people set the rules to guide the car. Tesla's new "end-to-end" autonomous driving is to collect millions or even tens of millions of drivers in complex road conditions, train models, and learn how to deal with complex road conditions. As a result, the new version of the autonomous driving system will "violate" traffic rules lightly, such as crossing a solid line, if necessary, depending on the actual situation.

It feels that in the future, Musk will ask the team to train the updated version of the autonomous driving model according to this. A year later, Tesla pushed the v12 version of FSD (Full Self-Driving System) on a large scale. Many car owners believe that the new system is more human-like: it recognizes roadblocks, understands pedestrian gestures, and is more relaxed when meeting cars on narrow roads. Even the areas that are not done well are very similar to those of human drivers, such as pulling over and often not paying attention to the curb, and scratching the wheels or tires.

According to Tesla's expectations, more computing power and more driving data can make a stronger autonomous driving system. A Tesla source told LatePost that the construction of Dojo, a data center for training large-scale self-driving models, has become Tesla's most important project since the second half of last year, and Musk announced this year that he will invest billions of dollars in it. Since April, Tesla has discounted FSD to get more people to subscribe to increase their training data.

Whether this route will help Musk quickly achieve the Robotaxi he envisions remains uncertain. At the beginning of April, Tesla removed the beta that it had been carrying since FSD and changed it to Supervised, reminding owners that they still need the driver to take over.

Philip Koopman, an assistant professor at Carnegie Mellon University who studies autonomous vehicle safety, said, "It's clear that FSD isn't perfect yet, and there's no strong evidence that it's completely driverless." ”

Given regulatory issues and the level of technology, some Tesla investors and analysts believe that Tesla's bet on full self-driving is much riskier than continuing to build affordable cars.

But if Musk is not such an extreme adventurous person, he will not support SpaceX to build rockets with half the price, and it is likely that he will not be able to subvert a lot of car manufacturing processes and build the once highly competitive Model 3 and Model Y, pointing the way for the entire electric vehicle industry. This risk appetite is what made Tesla what it is today.

Tesla doesn't have many people who can influence Musk's decision. The five executives who were involved in convincing Musk to prioritize the production of affordable cars have now left three.

Walter Isaacson, the author of "Elon Musk's Biography," describes Musk as a game-addicted, drama-seeking man who creates new challenges if he doesn't have enough challenges to keep him fighting.

Now, Tesla is back in his familiar Hard mode.

Image source: Visual China

View original image 188K

• 

• 

• 

•