Tesla's abandonment of the next generation of integrated die-casting: exploring the new trend of the business chess game
Tesla's recent announcement that it will abandon its next-generation integrated die-casting technology has sparked widespread attention and heated discussions in the industry. The integrated die-casting process is regarded as one of Tesla's core manufacturing technologies, which can greatly improve the rigidity of the body and reduce the weight of the body, and is considered to be an important part of Tesla's technological leadership. Tesla eventually chose to abandon this innovative process for the time being, and instead used the more traditional three-section body die-casting process. What was the reason behind this decision? What kind of business strategy adjustment does it mean? Let's find out.
Margin pressures are being put on by declining volumes and increased competition
Tesla's electric vehicle sales have been declining in recent years. According to the latest financial report data, Tesla's global deliveries in 2023 will be 1.36 million vehicles, a year-on-year decrease of 14%. In the Chinese market, Tesla has encountered severe challenges, and its market share has been continuously eroded by domestic brands. The electric vehicle products of traditional car companies are also constantly being launched, which has brought unprecedented competitive pressure to Tesla. Under the double blow of declining sales and increased competition, Tesla's profit margin remained low, reaching only 8.7% in 2023, down 3 percentage points from the previous year.
In response to the pressure on profits, Tesla had to adopt a series of austerity measures. At the end of 2023, Tesla announced a layoff of 7% of its workforce, and executives also left; At the same time, some after-sales service centers were closed and some R&D projects were suspended. These measures are far from enough, and Tesla must further reduce its manufacturing costs to truly turn the tide of the current situation. Although the integrated die casting 2.0 version is expected to further improve production efficiency, the huge investment in R&D and equipment will make it difficult to bring substantial cost savings to Tesla in the short term. Tesla has chosen to temporarily abandon this new technology, which is not yet fully mature, in order to alleviate the pressure on capital expenditure.
The technical problems of integrated die casting 2.0 are the main constraints
The integrated die-casting process was first proposed and applied by Tesla in 2018, which greatly reduces the welding process and improves production efficiency by die-casting the body shell and large structural parts together at one time. However, this process also has some drawbacks, such as limited size of die castings and difficult repairs. In order to solve these problems, Tesla has been working on the next generation of integrated die casting version 2.0.
The core of Integrated Die Casting 2.0 is the use of a larger 6000-ton hydraulic press, which allows the size of die castings to be larger, and the introduction of new vacuum-assisted die casting technology to improve the density and strength of die castings. There are still many problems in the practical application of these new technologies that have not been completely solved, such as the stability of the vacuum-assisted die casting process and the deformation control of large die castings, which require more R&D investment.
The 6,000-ton hydraulic press required for integrated die casting 2.0 is bulky, which puts forward higher requirements for factory layout and transportation. Tesla needed to replan and renovate its existing die casting shop, which is expected to cost billions of dollars. In the current situation of tight funds, it is obvious that Tesla can not afford such a huge investment. Tesla had to temporarily abandon Integrated Die Casting 2.0 to avoid the risk of excessive capital investment.
The strategy shifts to the development of autonomous driving technology
In addition to cost and technical reasons, Tesla's abandonment of integrated die casting 2.0 has an important strategic consideration: Tesla is shifting its focus from pursuing a significant increase in electric vehicle sales to developing autonomous driving technology.
Over the past few years, Tesla has made increasing EV production capacity and sales a top priority in order to dominate the EV space. This strategy is no longer sustainable in the current market environment. On the one hand, the electric vehicle products of traditional car companies continue to be launched, and Tesla's lead is rapidly shrinking; On the other hand, consumers' enthusiasm for electric vehicles is also gradually fading, and there is limited room for future growth.
Autonomous driving technology is seen as the future direction of the automotive industry. Although there is some controversy about Tesla's self-driving assistance system "Full Self-Driving", the overall technical strength is still in the lead. If the self-driving technology can be further improved and finally fully self-driving, it will bring a new profit growth point for Tesla.
Based on this consideration, Tesla has decided to temporarily slow down its significant innovation in manufacturing processes and instead focus its resources on the research and development of autonomous driving technology. Abandoning integrated die-casting 2.0 and adopting a more traditional and mature three-stage body die-casting process can not only save a lot of money, but also free up more R&D personnel to focus on autonomous driving technology. This is a strategic adjustment made by Tesla based on the actual situation, and in the future, Tesla will pay more attention to profits and technological innovation, rather than simply pursuing the expansion of sales scale.
Accelerate the development of low-cost models to meet diverse needs
In addition to autonomous driving technology, Tesla's abandonment of integrated die-casting 2.0 is also an important consideration to accelerate the development of affordable models to meet the needs of different consumer groups.
For a long time, Tesla's product line was too focused on high-end models, often priced at more than $40,000, which made Tesla's products largely unable to reach mainstream consumer groups. In order to further expand its market share, Tesla urgently needs to launch a truly affordable model priced in the $20,000 to $30,000 range to attract more consumers.
It will not be easy to achieve this goal. On the one hand, Tesla needs to carry out significant cost control on core components such as batteries and motors; On the other hand, it is also necessary to seek solutions to reduce costs and increase efficiency in the body manufacturing process. Although integrated die casting 2.0 is expected to further improve production efficiency, due to the huge upfront investment, it is difficult to bring substantial cost savings to Tesla's cheap models in the short term.
The traditional three-stage body die-casting process is adopted, although there are more processes and lower efficiency, but because the equipment and technology are very mature, the manufacturing cost will be lower, which is more conducive to controlling the price level of the whole vehicle. Tesla chose to temporarily abandon integrated die-casting 2.0 and adopt a three-stage die-casting process to speed up the process of developing low-cost models and meet the needs of mainstream consumer groups as soon as possible.
In the short term, Tesla will save a lot of capital expenditure
In addition to the above considerations, one of the most direct reasons for Tesla's abandonment of integrated die casting 2.0 is that this decision can save Tesla a lot of capital expenditure and alleviate the current financial pressure.
The rollout of the integrated die casting 2.0 process requires Tesla to introduce a large 6,000-ton hydraulic press in major factories around the world, and re-plan and renovate the die casting workshop, which is expected to cost billions of dollars. In the current environment of declining sales and declining profits, Tesla is obviously unable to afford such a huge capital investment.
If the traditional three-stage die casting process is continued, Tesla will only need to maintain its existing equipment and processes without large capital investment. In the short term, this can undoubtedly greatly reduce the financial pressure on Tesla and win more opportunities and time for future development.
In the long run, Tesla still needs to continue to innovate in its manufacturing process to maintain its competitive edge. But at present, in the case of tight funds, temporarily slowing down the promotion of integrated die casting 2.0 is obviously a more pragmatic and prudent choice.
A new trend in Tesla's business strategy
Tesla's abandonment of the next-generation integrated die-casting technology reflects that Tesla is undergoing a deep business strategy adjustment.
In the past, Tesla has made increasing EV production capacity and sales a top priority in order to dominate the EV space. In the current environment of declining sales and increased competition, this strategy is no longer sustainable. In order to cope with the pressure on margins, Tesla had to temporarily slow down its significant innovation in manufacturing processes and switch to a more traditional, well-established three-stage body die-casting process to cut expenses and accelerate the development of cheaper models.
Tesla has also adjusted its strategic focus, from simply pursuing the expansion of electric vehicle sales in the past to focusing more on profits and technological innovation, especially the development of autonomous driving technology. Abandoning integrated die-casting 2.0 can free up more resources for Tesla to focus on the research and development of autonomous driving technology.
This decision, while seemingly a step backwards, is actually a deliberate consideration made by Tesla based on the realities of the situation. In the current difficult times, Tesla has had to temporarily slow down its pace and survive first to gain time and opportunities for future development. Only after reversing the current predicament and regaining a foothold can Tesla truly have the strength to advance innovative technologies such as integrated die casting 2.0.
Tesla's move away from next-generation integrated die-casting technology signals a deep transformation of the electric vehicle giant from a pure pursuit of scale to a greater focus on profit and technological innovation. Although this transformation is tortuous and difficult, it is a necessary path for Tesla's long-term development. Only by adapting to market changes and adjusting its strategic direction in a timely manner can Tesla be invincible in the future competition.