Elon Musk now admits that Tesla nearly died last summer. The sidelined CEO told Axios on HBO that “the company was bleeding money like crazy” during the Model 3 production ramp up. Musk added that “a person should not work as hard” as he did during that time period. It was “very painful,” he told interviewers. When asked what he meant, Musk replied that “it hurts my brain and my heart” (Axios, 2018).
One might plausibly give Musk credit for his belated candor, but Truth About Cars commentator redrum (2018) noted that, “Whether you like him or not, it’s pretty clear that Musk is an unreliable narrator on the state of Tesla, and this statement should be taken with the same grain of salt as everything else he says.”
Musk arguably should have kept his mouth shut and let new CEO Robyn Denholm begin to build her public standing — and rebuild public confidence in Tesla. In early November Denholm replaced Musk in response to a settlement with the Securities and Exchange Commission, which accused Musk of manipulating Tesla’s stock price. Musk’s Axios interview could be an indication that he can’t accept the role of second fiddle — even if it jeopardizes the future of the company he has worked so hard to build.
Compare Tesla’s very public psychodrama with Rivian’s below-radar development. The Detroit-based start-up has been around for almost a decade but has not sought the limelight until this week, when it unveiled near-production-ready prototypes of a full-sized truck and SUV. Company spokespeople have assured the press that stable financing has already been secured and a factory is well on its way to starting production.
As a case in point, McLaren alumnus Mark Vinnels is assisting with “virtual production” exercises at Rivian’s Normal, Illinois assembly plant, which was purchased in November 2015. The facility was previously used by Mitsubishi.
“We’ve got enough detail now to discuss and explain with the manufacturing guys exactly how this vehicle will come together on a component level,” Vinnels told Teslarati reporter Christian Prenzler (2018). “So we start with pretty much the first component, for us its some of the components on the body-in-white and we build up exactly how it (will) be built in the production line.”
Whether Rivian will have a smoother launch than the Model 3 is still unknown, but the automaker’s early discussion of this decidedly unsexy topic suggests that it has learned from Tesla’s mistakes.
Another area where Rivian sounds like it is being more strategic is in its growth strategy. The company has been vague on production goals but has suggested that it will begin by producing tens of thousands of units per year with the intent to eventually reach its plant’s capacity, which has been estimated to be above 300,000 units (Prenzler, 2018).
Rivian appears to be avoiding Tesla’s mistake of announcing hopelessly ambitious production targets that — surprise! — keep on being missed. For example, in May 2016 Tesla told stockholders that it planned to build a total of 500,000 units in 2018 (Bary, 2017). As of the end of October, Tesla has sold under 135,000 units in the 2018 calendar year (.
In addition, Rivian shows potential in achieving greater economies of scale than Tesla because it is reportedly basing all of its products on one flexible platform. In addition to a just-announced truck and SUV, the automaker is developing four other products (Prenzler, 2018).
This is in contrast to Tesla, whose Model 3 is based upon a more compact platform than the Model S and X. Meanwhile, the Model X shares only 30 percent of its components with the S, down from the originally planned 60 percent (Wikipedia, 2018). Then there is a hyperactive frenzy of supposedly forthcoming models, which include an SUV variant of the Model 3 as well as a roadster, minibus, pickup and semi truck (Lambert, 2017).
I question whether Tesla has the financial capacity to bring to market so many vehicles while keeping its existing line competitive. But even if Tesla could, will enough of an emphasis be placed on component sharing that the automaker can generate sustainable profits? Or will Tesla succumb to the same problem that plagued almost all of the American independents in the 1950s, which overextended themselves with more platforms and models than they could profitably field?
Tesla and Rivian: A rematch of Kaiser and Frazer?
Rivian and Tesla have substantially different strategies. This may be partly grounded in timing — Rivian has to some degree had the luxury of learning from Tesla. Yet Rivian’s management culture also appears to be wired differently. Whereas Musk has a highly visible and swashbuckling style, Rivian CEO R. J. Scaringe has adopted a quieter, more methodical and team-oriented approach.
As discussed further here, Musk has similarities to ship-building tycoon Henry J. Kaiser, who after World War II decided to make a name for himself in the American auto industry. Like Musk, Kaiser thought big, spent freely and was dismissive of conventional wisdom. Perhaps most dangerously, when business conditions deteriorated, Kaiser proved to be too arrogant to trim his ambitions.
Long-time auto industry executive Joe Frazer teamed up with Kaiser in 1945 to form the Kaiser-Frazer Corporation. Thus began a titanic internal battle between a blue-sky outsider and a nuts-and-bolts car guy. Kaiser ultimately won the power struggle — in 1949 Frazer stepped aside from any substantive involvement with the automaker. However, Frazer proved to be prescient in arguing that an expansion plan championed by Kaiser would be a colossal mistake (Langworth, 1975).
Scaringe doesn’t come from the auto industry — he launched Rivian right after finishing his graduate studies at MIT (Walsworth, 2018a). However, his strategic sensibility appears to be much more grounded in the conventional wisdom of how to build a successful automaker than Musk’s. Because of this, Ravian may have a better chance of long-term survival than the mercurial Tesla.
That said, Musk deserves at least some credit for a charismatic leadership style which has inspired strong loyalty. As a case in point, the comments about the above video are dominated by expressions of support for him. If these are real people rather than Tesla p.r. hacks, that’s pretty impressive (albeit tinged with a cult-like hero worship).
For example, ikarustigger (2018) stated, “Could someone take the peace nobel price away from Obama and give it to Elon Musk. He is the only one in US who really earns it. Electric cars are one important step away from oil and war. There is no single other person on this planet, fighting for that with all and everything that he has.”
This quote illustrates how Tesla and Musk are to electric cars what the Prius was — and to some degree still is — to hybrids. However, as more automakers — established and new — bring out their entries, Tesla will increasingly have to share the limelight. This began to happen earlier this year, when Jaguar’s I-Pace was introduced to widespread acclaim.
Much can happen between now and when Rivian is scheduled to deliver its first products in 2021 (Walsworth, 2018b). But for now, Scaringe and company hold out the potential of building a no-drama, street-savvy version of Tesla. That could prove to be particularly good positioning if the Muskateers continue to falter.
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RE:SOURCES
- Axios; 2018. “How Tesla nearly died: Elon Musk’s long nights.” Axios on HBO. Posted November 26; accessed November 27.
- Bary, Emily; 2107. “A History of Model 3 Promises.” Barron’s. Posted October 3; accessed November 27, 2018.
- ikarustigger; 2018. Commentator in “How Tesla nearly died: Elon Musk’s long nights.” Axios on HBO. Posted November 26; accessed November 27.
Lambert, Fred; 2017. “Tesla has 8 new vehicle programs in the works: an updated look at its planned lineup.” Electrek. Posted April 14; accessed November 27, 2018.- Langworth, Richard M.; 1975. Kaiser-Frazer: The Last Onslaught on Detroit. Princeton Publishing, Princeton, NJ.
- Prenzler, Christian; 2018. “Inside Rivian’s plan to challenge Detroit and electrify the American truck & SUV.” Teslarati. Posted November 20; accessed November 27.
- redrum; 2018. Commentator in “Video: Musk Admits Tesla Almost Died Over the Summer.” The Truth About Cars. Posted November 26; accessed November 27.
- Walsworth, Jack; 2018a. “Rivian Automotive’s electric pickup breaks cover.” Automotive News (subscription required). Posted November 26; accessed November 26.
- ——; 2018b. “Rivian begins to build out portfolio with electric SUV.” Automotive News (subscription required). Posted November 27; accessed November 27.
- Wikipedia; 2018. “Tesla Model X.” Page last modified November 22; accessed November 27.
PHOTOGRAPHY:
- Rivian Automotive photos
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