Tesla as a Role Model: How Companies can Increase Their Productivity

With an impressive 40 percent increase in production in the last year alone, Tesla has achieved a stock market value that exceeds the valuation of all other automakers combined. This success cannot be diminished by the current media reports surrounding Musk. It is true that Tesla is planning to temporarily discontinue some of its 1,000 temporary workers. And whether he will even achieve his goal of doubling output is also up in the air. But that is not the crucial point. The impressive thing is that Elon Musk has managed to get a factory up and running at all that can produce so efficiently – if there are enough buyers for electric cars.

The success of the Texas-based electric car manufacturer is not only based on the expansion of its manufacturing capacities through new production facilities and giga-factories. Much more, Tesla’s triumph is based on impressive innovative strength in all areas of the company. In addition to the success of the world’s best-selling electric car, the Model Y, Tesla is also setting standards in the efficient and rapid production of battery storage and photovoltaic systems.

Innovative production processes

Tesla has relied on innovative production processes such as injection molding from the very beginning. Just how groundbreaking these innovations are was recently expressed by the competition. After Toyota engineers disassembled the Tesla Model Y, there was high praise – and that from manufacturer Toyota, which has long been considered the market leader in production and efficiency. The “work of art” is even expected to serve as an inspiration for Toyota in the future – and thus for other manufacturers who have already announced their intention to rely on giga die casting.

However, the revolution goes far beyond that. Under the leadership of Elon Musk, the company has consistently implemented a leadership and decision-making culture that will make it difficult for the traditional automotive industry to keep pace for the foreseeable future. Tesla has abandoned traditional vehicle manufacturing paradigms in favor of a strategy that focuses on increasing production speed and actively engaging employees in continuous manufacturing improvement.

Focus on process flow and increased efficiency

Through a high degree of innovation, Tesla has gained an almost unsurpassable lead over the competition in terms of productivity, lead time and employee time per vehicle (HPV). A key component of this concept is Elon Musk’s first-principle thinking. This mindset reduces complex problems to their fundamental assumptions and principles, allowing decision makers to focus on innovative solutions and optimization of all production processes.

Tesla is pursuing a strategy of continuously reducing and simplifying individual vehicle parts and assemblies. By gradually reducing both automated and manual work content, not only is manufacturing quality steadily improved, but productivity (vehicles delivered per employee hour) is also continuously increased. One example of this is the switch to innovative aluminum die casting in the production of the underbody assembly, which allows the rear frame of the Model Y to be produced in a single component. This has saved 171 parts and more than 1600 welds compared with conventional production – a huge advantage in terms of efficiency gains and cost reductions.

Employees as a key success factor

Tesla, the pioneer among e-car manufacturers, specifically relies on the involvement of its employees in the entire improvement process. Instead of rigid decision-making through a consistently hierarchical management structure, the company encourages its workforce to identify waste and disruptive processes and to contribute their own ideas at any time. A key success factor here is the organization into so-called “full-stack teams”.

These self-organized groups of employees have all the necessary expertise, but can call in additional experts as needed and make decentralized decisions in any situation. This enables the teams to act quickly and flexibly without having to wait for releases or approvals from managers. This open management culture is still foreign to many German manufacturing companies.

Conclusion: A role model for German companies in production

Tesla serves as a valuable example to German companies of what is possible with innovative approaches to production. The innovative methods in production processes, continuous improvements and employee involvement are key success factors for the U.S. automaker. Through its decentralized management based on First Principle Thinking and the continuous simplification of processes, Tesla has achieved efficiencies and cost savings that have made it the world’s leading electric car manufacturer. Manufacturing companies that adopt these principles into their business model can become more competitive in the long run and secure a top spot in the changing manufacturing industry.

Thomas Schulz

is managing director at Lean Partners and an expert in lean production.