Tesla Model S Alpha buildEnlarge Photo
If you ever studied business at school or college, one of the first things you probably learned is about profit and loss.
In order to maximize your profits--and avoid making a loss--your aim is to maximize revenue while minimizing costs.
Someone at Tesla Motors was paying attention in class, as its factory in Fremont, California, is full of refurbished machinery and low-cost IKEA furniture--minimizing the cost of production.
According to Bloomberg, Tesla's vice president of manufacturing, Gilbert Passin, wanted to ensure that everything the company does has a good value return.
That means investing the money where it needs to be spent--but presumably not spending thousands on a fancy chair when a hundred dollar Ikea one will do the job equally well.
"The cost to set this up was very, very low compared to any new plant," explains Passin. The facility itself, tooled up to produce the imminent Tesla Model S, has previously seen Oldsmobiles, Buicks, Pontiacs and Chevys pass through its gates. Tesla has owned the plant since 2010.
It seems the company also took charge of the plant at the perfect time--its previous owners, a joint venture between GM and Toyota, had recently refurbished the plant, installing a new paint shop. That became another significant cost that Tesla avoided.
The factory space is particularly flexible, and the company is currently using only 20 percent of the site to build its Model S. The final inspection area uses bamboo flooring--because "it looks cool", according to Passin--and even features a short indoor test track, only possible thanks to the Tesla's zero-emissions vehicles.
Further cutting costs, the facility is designed to be self-contained, with everything required for the car built on-site rather than brought in from suppliers.
The cost-cutting and clever production methods should not only minimize costs for Tesla Motors--the company is expecting to turn a profit in 2013--but ensure that those costs won't be passed on to the consumer.
At $57,400 for the base Model S with 160 miles of range, the car is ideally placed to tackle its two main rivals in Tesla's eyes--the BMW 5-Series and Porsche's Panamera luxury sedan. Model S prices will rise to $105,400 for the 300-mile, 'Signature' edition.
Tesla expects to build around 5,000 cars this year at Fremont, and 20,000 in 2013. As the Model S is joined by the Model X crossover and "other projects", that could increase to 40,000 vehicles per year.
With the future of some electric car companies seemingly forever in the balance, it's refreshing to hear that Tesla takes cost-cutting seriously without compromising on its product.