One of the most popular cars ever produced could be Tesla’s Model 3. It represents an exceptional achievement on the part of the initiative of the company to introduce to the masses an electric vehicle (EV). The previous models of Tesla were excellent cars, but too pricey for most individuals to seriously consider purchasing one to replace their Chevy Malibu.
On the other hand, the Model 3 launched at a much more affordable $35,000, and the firm vowed to make 500,000 of them a year. According to founder and CEO Elon Musk, the pledge, it turns out, nearly bankrupted the company.
Musk was asked in a tweet about how close the company came during the Model 3 roll-out. In a reply, Musk stated:
It wasn’t the first time the firm was on the verge. In 2008, according to another tweet from Musk, the company was three days away from running out of money. The company secured $40 million in funding which prevented them from going under.
Although the Model S and Model X were very nice cars, it was the Model 3 that turned Tesla today from a high-profile niche car manufacturer into the most valuable car maker, worth more than General Motors, Ford, and Toyota combined.
However, getting there wasn’t easy. The company had significant problems ranging from vendors who “dropped the ball,” to issues with the large (and costly) automated assembly line of the company, to a massive recall, to difficulty delivering vehicles, the latter contributing to a loss of $700 million in the first quarter of 2019.
In 2019, Musk told analysts, “This was the most difficult logistics problem I have ever seen, and I have seen some tough ones.” The result was that the business was almost bankrupted by the ambitious Model 3.
As Tesla went from producing 25,000 vehicles a quarter in 2016 to 145,000 a quarter today, none of this should be a surprise. That’s a gap that’s impossible to quantify by numbers alone. Usually, the thing that worked when you started isn’t going to work on the same scale. As you ramp up production, the number of quality problems increases on an exponential scale, as Tesla’s experience shows.
Of course, the half-million preorders that the company got when it released the Model 3 possibly saved Tesla. At a time when the company needed it the most, those $1,000 deposits came in very handy.
Tesla announced its third straight profitable quarter recently. The company has begun to achieve its goals as it worked through its manufacturing issues and the Model 3 is now a major part of the reason why. It’s worth noting that it’s also the thing that made the business almost bankrupt.
The lesson here is that. Ambition, particularly for an entrepreneur, is wonderful. Just don’t lose sight of the fact that, as you evolve, your strategy has to change. Otherwise, the thing that you’re trying to build may just be the thing that’s bringing you down — or the thing that’s saving you.
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