Tesla might contract out Model 3 production in Europe

[Domenick]

Tesla Might Team With Magna For Model 3 Production In Europe

Fresh from the rumor mill comes speculation Tesla might contract with Magna for Model 3 production in Europe. While it may or may not be true, it strikes me as a good idea.

Using Magna would require a lot less expenditure, and transfer a lot of issues (HR, etc) and some amount of risk. Already, Magna has the contract to build the Jaguar i-Pace, so you'd expect they could manage good quality control.

What's the downside for Tesla? I'm not seeing any, but maybe I have blinders on.

 

[jelloslug]

Magna is a larger car company that most car companies. They could do a good job for Tesla.

 

[Pushmi-Pullyu]

What's the downside for Tesla? I'm not seeing any, but maybe I have blinders on.

Certainly an interesting idea!

I don't at all claim to have any special insight on this, but just off the top of my head, I see pros and cons:

Pros:
Tesla gets its European auto assembly up and running fast.

Magna Steyr has an established record for quality.

Tesla doesn't have to deal with training new employees, or deal with quality control issues; Magna deals with all that.

Cons:
This would be outsourcing everything to Magna for the European market, directly contrary to Tesla's general business strategy of vertical integration and in-sourcing as much as possible. If Tesla's business model is geared to in-sourcing, how well (or poorly) is 100% outsourcing for European sales going to work?

Paying Magna Steyr for assembly (and perhaps some parts manufacturing?) means Tesla would have to split its (gross) profits with that partner.

Tesla needs to master quality control on a high-speed assembly line, as most or all of the large older auto makers have done. Letting someone else do that may be a good short-term solution, but in the long run it's not going to give Tesla the experience and expertise it needs for improved quality control.