The industry shift from combustion to electric power has prompted a radical rethink about how the cars themselves are actually built at volume, with a focus on efficiency and cost-saving.
“EVs changed everything,” said Joerg Reger, managing director of Swiss giant ABB’s automotive robotics division, which supplies manufacturing robots globally.
“Two years ago, all the focus was all about optimising the final assembly. But then EVs came and now everybody is looking here to fix the big problems instead of looking at fine-tuning.”
The factory has become a key focal point for cost saving among car companies to bring down the high price of EVs. It’s also one the car makers can directly control, as opposed to batteries, for which the cost is largely set by a combination of raw material prices and suppliers.
Car makers are reviewing every aspect of their production to counter the productivity of the Chinese and the cost-effectiveness of Tesla.
“The key to growing EV sales is to make EVs more affordable in the west,” Neil Beveridge, analyst at the bank Bernstein, wrote in a report on Chinese EV manufacturing. “One way would be to import more low-cost electric vehicles from China, but this is political suicide for countries with a substantial legacy auto industry. The other way is to lower manufacturing costs.”
Car makers globally are grasping the scale of the problem.
“The automotive industry is now entering an era of transformation, a change in the game where survival is at stake,” said Kazuaki Shingo, head of production at Toyota.
Shingo was speaking at a recent demonstration of production innovation at the company, many of which follow Tesla’s lead.
Tesla’s relentless focus on bringing down the cost of building its cars has allowed it to reduce the sticker price of the Model 3 and Model Y, driving sales and forcing traditional car makers to follow suit, whether or not they have the same margin head room to match the pricing.
Tesla outlined its expertise earlier this year in a deep-dive investor day, in which it bragged of the cost saving it has achieved.
Chief financial officer Zach Kirkhorn told the audience in Texas that the company had taken 30% of the cost out of building the Model 3 since 2018. “Cost reduction is deeply ingrained in our culture,” he said.
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