Tesla: Manufacturing Process Advantage

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What are value-add activities and nonvalue-add activities?

In car manufacturing, you see a lot of up and down; you see a lot of turning and movement that adds no value. It's just moving. Elon scrutinized the details of those movements and directed his trusted people for any new factory layouts to ensure that nonvalue-add works were minimized. This was one of the key factors. He always insisted at Tesla that the strategy was to have a dense factory with a reduced footprint because footprint is a direct factor to capex. If you can save one square foot, you will save on HVAC, lighting, and everything in the factory. One square foot means a lot.

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That’s awesome. How do the others do that?

The others, honestly, I think the other companies have a best practice based on their previous projects. None of those companies have been building one factory per year. Many of them have factories that have been established for years – Ford, GM, and even Toyota – and they keep doing the same thing. I'm pretty sure none of those factories, before Tesla, even thought about the volume efficiency of the space.

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Can you repeat the figures you gave?

When more people work and add value to a car at the same footprint, you increase the performance. If you look at any car factory that's going to make 30 or 40 cars per hour, which is a very average standard, they end up with around 150 to 200 stations. Two hundred stations mean 200 times a six meter long by 12-meter-wide bit of station. Working with the people's density and utilizing the height of the building, we reduced the number of stations from 150-200 to 80-90 stations for the same capacity.

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