Tesla is doubling down on an ambitious new vehicle assembly process that the electric carmaker says could slash production costs for its future models by as much as 50%.
The promised manufacturing overhaul, dubbed “unboxing,” aims to dramatically reduce complexity and wasted effort compared to conventional automobile assembly lines pioneered by Henry Ford over a century ago.
The stakes are high for Tesla (TSLA) as the company is facing intensifying competition from legacy automakers and an onslaught of affordable electric vehicles (EVs) from Chinese upstarts, namely BYD.
Tesla has already cut prices on its lineup multiple times this year, fueling speculation that demand is slowing amid economic pressures.
Now the company is racing to develop a $25,000 mass-market electric vehicle that CEO Elon Musk has pledged will help Tesla maintain its edge and further accelerate the global shift to sustainable transportation.
Central to hitting that highly-anticipated price target is successfully implementing Tesla’s radical new “unboxed” assembly system.
The Assembly Line Reimagined
“If we’re going to scale the way we want to do, we have to rethink manufacturing again”, Lars Moravy, Tesla’s vice president of vehicle engineering, told investors at the company’s investor day in March.
Most automakers still utilize an assembly process pioneered by Henry Ford in 1913 for the iconic Model T. Large vehicle frames are built up component by component, with doors installed and removed again to allow interior outfitting. Massive paint shops are required to treat the entire body as a single piece.
In contrast, Tesla’s unboxed assembly method envisions building vehicles more like snapping together Lego bricks. Instead of a linear assembly line, production is spread across parallel work areas that assemble other elements simultaneously.
When the primary components are completed, everything comes together in an accelerated “unboxing” step at the end.
All of the car’s parts are assembled once and painted as needed.
By eliminating redundant steps like installing and removing doors or painting entire vehicle frames, Tesla engineers estimate that they can reduce the overall cost required to assemble a vehicle by over 40%.
That would allow the company to build far smaller and cheaper factories. “This will increase the adoption and scale of EVs, much more than they are now”, commented Jeremy Johnson, a Tesla enthusiast who writes for Torque News.
Cutting Edge Gigacasting Advances Need to be Implemented Across the Board
A key enabler of the unboxing approach is Tesla’s pioneering work on massive casting machines that can produce entire multi-piece underbody segments from massive single molded aluminum casts.
While the company already deploys this “gigacasting” technique to build the front and rear underbodies for vehicles like the popular Model Y, it is pushing to further integrate the process to reduce costs.
The goal is to eventually cast entire underbody platforms as unified, full-vehicle frames in one piece using either slow-fill or advanced 3D sand-printing mold techniques.
“If Tesla can figure out the last steps, it could be key to speeding up its assembly line process”, Bloomberg’s Dana Hull commented.
By reducing the number of separate components and welds in each vehicle by hundreds or even thousands of pieces, gigacasting offers a pathway to substantial cost reductions while also enhancing structural performance.
“Tesla needs to make another step change in cost. The Model Y had hundreds of parts deleted with giga castings and structural battery packs”, Johnson noted. “The constraints become part of the solution here.”
Skepticism Over Lofty Savings Claims
Not everyone is convinced Tesla can deliver on its lofty cost-cutting promises in the near term. Bloomberg Intelligence estimates that the unboxed manufacturing process would reduce expenditures by only around a third compared to Tesla’s ambitious 50% target.
“The problem is that investors haven’t heard many details about how Tesla has progressed”, Hull emphasized in her article about the new unboxed method.
Other experts like Mathew Vachaparampil, CEO of automotive benchmarking firm Caresoft, are more optimistic based on digital simulations and modeling of Tesla’s plans.
“Our engineers spent 200,000 hours building a digital replica of Tesla’s unboxed platform. They found that Musk’s ambitions are technically possible, and would make huge financial sense if achieved”, Vachaparampil told Bloomberg’s Hull. Even if Tesla is overestimating the cost cutting potential, these techniques could be nothing short of game-changers in the EV industry.
Tesla’s Next Ambitious Goal: Launch a $25,000 Electric Car
Accomplishing major manufacturing efficiencies is critical for Tesla to hit the widely-anticipated $25,000 price target for its next-generation compact EV. While unofficial specifications are still under wraps, most analysts expect that the hotly-anticipated model will have the size of the existing Model 3 but 30% to 40% less expensive (likely around $25k, not including tax credits).
Some reports indicate that Tesla aims to begin production of the mass-market model, codenamed “Project Redwood” by mid-2025. The car is viewed as pivotal for allowing Tesla to fend off the twin threats of increasing competition from Chinese players like BYD and slowing sales of its higher-end offerings.
“Crucial to the Tesla’s viability is a radical new production process that could save as much as 50% in build costs and speed up production times”, said UK automotive publication Autocar.
“The ‘unboxed’ process essentially revolves around reducing the amount of work done at each stage of the production line, avoiding any unnecessary movement or disassembly of the car or its components during its journey down the production line.”, the industry-focused magazine highlights.
In addition to implementing new assembly methods, Tesla is aggressively working to develop next-generation EV batteries and motors without expensive rare earth materials. It is also expected to incorporate structural battery packs more deeply into the compact vehicle to reduce complexity.
“No powertrain details have been revealed for the Model 2, but it is likely to follow Tesla’s other models and be offered in single- and dual-motor versions, with the potential for high-performance versions to be introduced later on.”, Autocar reporters emphasized.
Tesla Faces a Critical Transition Period
Musk has been vague about providing specific launch dates for both the $25,000 EV program and the new unboxed assembly process. However, he told investors in January that the company was “very far along” on the new vehicle and manufacturing system.
Musk recently touted that his company created “a revolutionary manufacturing system” that is “far more advanced than any automotive manufacturing system in the world, by a significant margin”.
The CEO’s optimism is understandable given the urgency and stakes involved. Major research firms like Gartner now predict that new entrants to the EV market will reach cost parity with traditional internal combustion engine vehicles by 2027, thanks to innovations like gigacasting.
“New OEM incumbents want to heavily redefine the status quo in automotive”, commented Pedro Pacheco from Gartner’s VP of Research. “They brought new innovations that simplify production costs such as centralized vehicle architecture or the introduction of Gigacastings that help reduce manufacturing cost and assembly time, which legacy automakers had no choice to adopt to survive.”
At the same time, analysts caution that there will likely be a shakeout among the dozens of EV startups that have emerged over the past decade to challenge Tesla’s dominance. EV makers like Lucid, which is losing about $227,000 per car, may soon fall apart if EV demand doesn’t ramp up and production costs don’t fall.
As many as 15 percent of the electric vehicle (EV) makers founded in the last decade could either go bankrupt or be bought out by 2027, as market competition continues to increase, predicted Gartner’s Pacheco.
If it can execute its ambitious next-generation initiatives like the unboxed assembly platform and deliver on the affordable $25,000 car, Tesla should find itself in a prime position to maintain its leadership in the rapidly evolving EV market.
However, failing to realize these audacious cost reductions could put its business in a vulnerable position to challengers from all fronts.
For Tesla, the path ahead represents both an existential risk from disruptive Chinese competitors and a golden opportunity to cement its hard-earned status as the world’s preeminent electric vehicle manufacturer.