Tesla’s future hangs on its ability to deliver the Model 3

Production, distribution, sales network. These are all the things traditional auto manufacturers have and Tesla doesn’t. To be clear, it has all these things, but they only resemble major automakers in scale if viewed through the wrong side of binoculars.



As Volkswagen prepares to press the pedal to the metal and accelerate electric car production (and they are not alone), Elon Musk’s Tesla struggles to fulfill Model 3 production promises.



Personally, I love how Tesla CEO Elon Musk disrupted the auto industry and its a massive, clubby, Byzantine structure that’s purpose-built to keep outsiders out. Apple took a long look at the auto industry and responded with a resounding “nope.” Sure, Apple will one day produce more aggressive in-car technology and, perhaps, an entire self-driving car system like Google’s Waymo program, but they will not produce and sell a traditional car.



What Musk has already accomplished with Tesla cannot be understated. He changed the industry. He forced traditional auto manufacturers to take electric cars seriously. Especially those manufacturers who make high margins on luxury cars.



Before Tesla, electric was synonymous with economy. Early electric rides weren’t much to look at and offered little in the way of extras, high-end features or intelligence. Speed and range were also major issues.



Going back to the first Roadster, but really starting with the Model S, Tesla became synonymous with luxury and performance. If you’ve ever driven a Model S, the first thing to come to mind is not compromise.



People wanted a Tesla’s even when they had to wait for them. And wait for them they did.



But all that waiting is finally catching up with Musk and Tesla.



As Volkswagen prepares to deliver an electric lineup by 2025 with 100 manufacturing plants at its disposal, the 16 plants it plans to build just for electric vehicles, and a vast supply of Chinese and Samsung batteries at the ready, the clock is ticking for Tesla.



When I test drove the Model 3 in July, Musk predicted production hell for his more affordable sedan. Fewer words have been more prescient. The problem is, that hell has not abated. Model 3 delivery continues to drag.



In Q4 of last year, Tesla delivered just over 1,500 Model 3s (it did produce almost 30K Model S and Model X cars). Yet, the company still believes it can ramp up to 10,000 a week sometime this year. And it’s critical they do since they have hundreds of thousands of pre-orders.



I’m not one to bet against Elon Musk. He creates fantastic technologies and usually delivers. His Boring company is digging a people-mover tunnel near his SpaceX and Tesla operations. He launched a new Tesla Semi Business that could turn into a cash cow for his business. He’s building a massive battery factory (the aptly-named Gigafactory). His SpaceX company is literally leading the world in space technology.

Musk’s SpaceX accomplishments are particularly impressive. Yet they are in no way prologue to similar accomplishments at Tesla. Space X’s doesn’t have to deliver a half million rockets. It launches one or two a month and does its best to reuse them.

Tesla builds ostensibly less complex and risky technology, but must do it at a daunting scale. I worry that even if Tesla does finally catch up on Model 3 production, it will only after competitors have effectively launched their multi-tiered electric lines that include not just economy cars, but more affordable luxury models that benefit from their own production, distribution and retail efficiencies.



There is, of course, a way around this, a path that lets Tesla live on and thrive: Sale.



Elon Musk should sell Tesla to GM, Chrysler, or Ford. Apple could afford Tesla, but, as I said, I don’t think it wants to be in that business. Plus, one Apple Exec recently said we shouldn’t expect any major acquisitions from the company.

Any of the major auto manufacturers could transform a few or more factories into Tesla plants. In the meantime, Musk could maintain control of all his battery manufacturing facilities and sell batteries to all the electric car manufacturers including Volkswagen.

The stumbling block here could be Tesla’s impressive market value, which puts it beyond that of current car companies. That, however, may change if Tesla doesn’t hit production goals by the middle of this year.



I do not expect Musk to like this idea or sell. In fact, I’m sure he’ll hate it. He’s stubborn about proving people wrong and has a track record of doing so. This is one battle, though, I don’t think he can win. Success has a way of exposing the limits of production. If you can’t turn a corner on it quickly, that success will become indistinguishable from failure.