Inside the Model 3 Ramp That Nearly Broke Tesla

On the morning of March 31, 2016, people lined up outside Tesla stores to put down money on a car none of them had seen. At some stores more than a hundred people were waiting before the doors opened. The Model 3 would not be unveiled until that evening, at Tesla's design studio in Hawthorne, California, but reservations opened that day with a refundable $1,000 deposit, in stores and online.

The response was larger than anything Tesla had handled. More than 180,000 reservations came in within 24 hours of opening. Within a week the company said it held about 325,000, more than three times the number of Model S sedans it had sold through the end of 2015. Tesla had promised first deliveries in 2017, and each of those deposits was a customer waiting for a car from a production system that did not yet exist.

The first deliveries came on schedule, at least on paper. On the evening of July 28, 2017, Tesla held a handover event at the Fremont factory and gave the first 30 production Model 3 cars to their owners. By Musk's count Tesla had built 50 cars at that point, and the other 20 were kept for testing. Musk drove onto the stage in a red Model 3 and laid out the details buyers had been waiting for: a Standard Range car starting at $35,000 with 220 miles of range, and a Long Range version at $44,000 rated for 310 miles.

He also warned what was coming. Musk said Tesla faced at least six months of what he called manufacturing hell. The plan was steep all the same: about 100 cars in August, 1,500 in September and 20,000 in December.

The plan broke almost immediately. When Tesla reported its third-quarter numbers in October 2017, it had built 260 Model 3 cars, not the 1,500 it had promised, and it blamed production bottlenecks. Musk described the situation as production hell and placed it around the eighth circle.

The worst constraint was not in Fremont at all. It was at Gigafactory 1 in Nevada, on the line that packed battery cells into modules. Tesla said the combined complexity of the module design and its automated assembly process had taken longer to bring up to speed than expected, and Panasonic's chief executive confirmed the battery bottleneck. In January 2018, Tesla employees told CNBC that parts of the pack process still were not automated and that batteries had been built partly by hand as recently as mid-December, with workers borrowed from suppliers to help with manual assembly.

The spring of 2018 brought a rare public admission. By the beginning of April, Musk had taken direct control of Model 3 production. On April 13, replying on Twitter to a Wall Street Journal reporter, he wrote that excessive automation at Tesla was a mistake, his own mistake, and added a line that became the headline of the week: humans are underrated. In interviews he described a complicated network of conveyor belts at Fremont that had not worked, and said Tesla had torn it out.

Musk was also, by his own description, living at the plant. In an April 2018 interview at Fremont with Gayle King of CBS This Morning, he showed her the couch in a conference room where he slept when the work was intense, and said that on one recent night he had slept on the floor because the couch was too narrow. King checked with employees, who confirmed it. The segment prompted a YouTube creator to start a GoFundMe to buy Musk a new couch, and the campaign raised more than $18,000, which went to charity.

Removing automation was not enough to reach the target of 5,000 Model 3 cars a week. Tesla needed another general assembly line, and it did not have a building for one. So it put up a tent. At Fremont, crews erected a Sprung structure, a type of engineered tent strong enough to be used permanently, and filled it with a new line built largely from spare parts. Tesla dates the first Model 3 from that line to June 8, 2018, and on June 16 Musk announced on Twitter that the company had built an entire new general assembly line in about three weeks.

The new line was called GA4. Tesla said its main Model 3 line, GA3, could reach 5,000 a week on its own, and that GA4 was there to get to that rate sooner and then push past it. GA4 relied mostly on people rather than robots, while engineers kept working to fix the automated lines inside the main factory. During one high-output week in July 2018, Tesla said GA4 had built about 20 percent of all Model 3 cars.

The deadline Tesla had set for itself was the end of the second quarter. In the last seven days of June 2018, Fremont built 5,031 Model 3 cars along with 1,913 Model S and Model X vehicles. Tesla's total output for the quarter was 53,339 vehicles, 55 percent more than in the first quarter and the most in its history to that point.

One good week was not yet a steady rate. Tesla reported that it repeated a week of roughly 5,000 Model 3 cars several times in July, and set its next goal at 6,000 a week by late August. The plan from July 2017 had called for 20,000 cars in December, roughly 5,000 a week. That rate arrived about six months late.

The payoff showed up in the next quarter. For the third quarter of 2018, Tesla reported GAAP net income of $312 million on revenue of $6.82 billion. The Model 3 was the best-selling car in the United States by revenue that quarter and fifth by unit volume, and Tesla said its gross margin on the car was above 20 percent. Cash on hand rose by $731 million, with $881 million of free cash flow.

The costs were real too. A year later, in 2019, workers who had staffed the GA4 tent described to CNBC the pressure they had been under to hit Model 3 production goals. The tent, built as a temporary measure, was still assembling Model 3 cars a year after the crisis. By December 2018, Forbes was already framing the next test: Tesla had survived manufacturing hell, and keeping production steady and profitable was the harder part.

The Model 3 ramp is often told as a story about one executive sleeping on a factory floor. The record shows something broader: battery engineers working through a module line that would not run, supplier workers helping build packs by hand, crews putting up a building and a production line in weeks, and assembly workers in a tent turning out one Model 3 in five during a peak week in July 2018.