Why The Gigafactory Is Tesla's Most Important Invention!
Let’s talk about what a Tesla GigaFactory actually does. Obviously the surface level answer is that it makes cars - yes, we all know that. But there are many ways to make a car, and the path that Tesla is choosing to take with their particular manufacturing process is obviously working out for them on a much higher level than the paths taken by their competition.
But what is it that set’s Tesla apart? How do they continue to accelerate while their peers crumble under the weight of simply manufacturing their product? I’m going to propose that the secret is in Tesla’s process, not their product. And we’ll get into some reasons why Tesla’s greatest invention is not the model S Plaid or the 4680 battery cell or Full Self Driving, but the actual GigaFactory itself.
A Game of Numbers
We can simply look at the numbers to see the story of Tesla’s success. In the first quarter of 2022, the company again set a record for highest number of vehicles delivered, now reaching over 310,000 cars - that’s a 69% increase over the number of vehicles they delivered over the same time period in 2021. And Tesla has done this at the same time that every other automaker on the planet is seeing their productivity drop. In the United States, new vehicle sales are down 12% overall, fueled by a significant drop in productivity from the country's largest domestic automakers - GM saw a 20% drop in vehicle deliveries compared to this time last year. And that extends to international automakers as well, Nissan down 30%, Honda down 23%.
So, it’s no secret that Tesla has something special that sets them apart in terms of being able to get a product into their customer’s driveway. And we know it’s definitely not the product itself - electric vehicles have proven themselves to be spectacularly difficult to manufacture - just look at the competition… Lucid and Rivian burst out of the gates in 2021 as American startups with genuinely amazing products that in some ways even put Tesla’s vehicles to shame. However both of these companies very quickly faltered when it came to product manufacturing.
On February 28th, Lucid had to announce to their shareholders that they had only managed to deliver 300 copies of the Air Dream Edition to customers in the time since the vehicle officially rolled out on October 30th 2021 - less than 100 deliveries per month. This prompted the company to reduce their production estimates for 2022 down from 20,000 cars to just 12,000 cars.
Similar story over at Rivian. While they were able to achieve higher production numbers, by mid March the company said they had built about 1,500 vehicles so far in 2022 - they’re still falling drastically short of expectations, having to inform shareholders that they’re delivery predictions for 2022 are now cut down by half to just 25,000 electric trucks and SUVs.
Now, I hear what you’re saying, those are brand new companies, not a fair comparison. And that is true. So let’s draw some lines against the most established of establishment dinosaur companies, Ford Motors. Ford does actually make a reasonable amount of electric cars, in February the company revealed that they sold 2,370 Mustang Mach Es in January 2022. And that in their most successful month, February 2021, the company got 3,739 units into customer driveways. So Ford definitely can wield a higher production rate than a startup like Rivian with their 100 year head start. But it’s still not a massive number of cars, and it’s nowhere near the demand level for the Mach E, which is currently hitting prospective buyers with a wait time of about 20-30 weeks or maybe more.
So hopefully that brings light to my point that it doesn’t matter if you’re the new hotness or old as shit, making electric cars at high volumes is a very difficult thing to do. So why can Tesla do it so well?
The Machine That Builds The Machine
A lot of this success just has to do with the way Elon Musk thinks, he often talks about this mental strategy called ‘first principles’. It’s basically the idea that you start every new project from scratch and build from the roots, the basic fundamentals of the project inform every decision. That sounds obvious, but it’s not often the way that people approach things. We rely on the common knowledge, the things that are just known to be true even if we don’t know why. Or we reason by analogy, essentially taking what someone else is doing and putting our own spin on it to form a new idea.
An example of where Tesla failed to implement first principles was with their first plant in Fremont California. The company reasoned by analogy, they needed to make cars so they bought a car factory which they would then put their own spin on. That worked out in the early stages, but in the long run we end up with the abject chaos that is the current day Fremont plant, with production lines in tents and car parts in the parking lot.
Luckily Elon and his team smartened up pretty fast. By 2013 the idea of the GigaFactory was born - Tesla reasoned that if all of their cars run on batteries, and batteries are the most difficult part to source, then they should build a whole factory for the specific purpose of manufacturing their own batteries. Starting from the roots.
The GigaFactory in Nevada began mass production of 2170 cells in January 2017. The Tesla Model 3 began first deliveries in July 2017. Tesla kept the horse in front of the cart. That sounds easy, but it’s clearly not. Because companies like GM have been trying to build electric cars for years, and they’re still talking about finishing their battery plant in 2024 - that’s the cart before the horse and that’s the reason this company can’t even deliver 500 electric cars in the first quarter 2022.
Anyway, around the same time that Tesla were building the Model 3 in a tent, Elon Musk hit some kind of an epiphany that there has to be a better way to do this. In his mind, Elon imagined a kind of massive, alien dreadnought production facility, like an inhuman machine that builds other machines in a fully automated process. If all humans just suddenly died, the dreadnought factory would just keep on spitting out cars without us until it ran out of materials to make them with. Elon has said that we can think of Giga Shanghai as a kind of version zero point five of the Alien Dreadnought idea. If we go back to that video from last summer released by Tesla, it does show a lot of automation with the factory, everything is in a constant state of motion and they make use of time lapse video to speed everything up and give it that appearance of an ant colony or something.
But we’ve now got our first taste of Alien Dreadnought version one point oh - and that’s Giga Berlin and Giga Texas.
Yes, the last however many minutes was just foreplay so we could use a gratuitous amount of clips from this Giga Berlin FPV drone video. It’s so dope.
But fancy camera work aside, this is a first person view inside the new and improved alien dreadnaught. Is the process fully automated yet? No. But we can see just how much work these machines are doing and how quickly the vehicle comes together when the manufacturing process itself is created with first principles thinking.
The Giga Press scene is really a great example of this. Every other car maker builds their frames by connecting together dozens of smaller parts that are pre-formed using multiple stamping and casting machines and then welded together and even glued together in some cases to form one larger piece of the frame. And the reason that everyone does that is because that’s just the way that it’s always been done, it’s the common knowledge.
Tesla has reduced this process down to just two giant machines and one human person whose job is I guess to poke the molten aluminum with a large stick? Whatever he’s doing looks like an interesting way to spend the day. Anyway, the entire rear quarter of the Model Y frame is casted from solid aluminum alloy, and then plucked from the mold by a giant robot arm, which then hands it off to a small army of additional robots who go about assembling these large castings and stampings into a fully formed Model Y body. And this process is happening hundreds of times per day. In a few months from now it will be thousands of times per day.
And Giga Texas dwarfs Giga Berlin, it’s gigantic - we haven’t even seen that factory line in action yet but we know that it’s going to be at least as impressive, if not more so. Volkswagen CEO Herbert Diess is one of the smartest people in the automotive industry right now, and he’s smart enough to be terrified of Giga Texas. Diess wrote in a LinkedIn post last month, “Elon’s new factory - he calls it ‘the machine that produces the machine’ is impressive: 1.2km long, 400m wide: all under one roof, no logistics from cell production to the final assembly. Once up and running it will very likely set some new benchmarks. I am so happy that we decided on a new plant for Wolfsburg. Without that - we have no chance to compete.”
That’s the real beauty of Giga Texas, it is everything under one roof. Even Giga Berlin will be producing their battery cells in a separate factory that is still on the same grounds as the vehicle production line, but not in the same building. Giga Texas takes all of the best things from every Tesla factory: the cell manufacturing of Nevada, the massive capacity of Shanghai, the automation of Berlin and the company headquarters and logistics support of Fremont and rolls it all together into one monster that is purpose built from the ground up for building Teslas, not just building cars, building Tesla cars in the Tesla way - not imitating, only innovating, always maximizing for efficiency.
That’s how you consistently grow your productivity by 50% - 100% year over year in the electric car game. You can’t use the tools of the past to build the cars of the future in the same way that you can’t use a hammer to fix a laptop. Just doesn’t work.
So, hopefully that’s been an informative look into the process behind Tesla’s manufacturing and shed some light onto why they flourish while the competition falters. And obviously comparing Tesla to their American rivals is not much of a fair fight - Tesla compared to Chinese EV makers is a much more even match, but that gets a lot more complicated - maybe we’ll get into that some day in the future.
