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Tesla Model 3’s supply chain will be ‘a bit easier’ than Model S, says Tesla’s former VP of Supply Chain

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The fact that Tesla’s production volumes are dwarfed by most established automakers is one of the main point used by the company’s detractors. It’s certainly true that Tesla’s annual production rate of about 100,000 is currently a drop in the bucket of the automotive industry, but nonetheless, its rapid growth is giving it enough credibility to strengthen its supply chain.

In a new interview, Tesla’s former Vice President of Supply Chain Management, Peter Carlsson, says that he expects the supply chain of the upcoming Model 3 to be “a bit easier” than the supply chains of the Model S and X, which he is credited of having built.

Carlsson joined Tesla in 2011 to lead the supply chain management group after having held similar roles at NXP Semiconductors and Sony Ericsson.

He led the group at Tesla during an important transition for the automaker going from the low-volume Roadster to the Model S, and later the Model X.

By the time he left Tesla in 2015, the company went from a production of a few hundred cars per year to ~50,000 cars.

He said in an interview the annual KPMG Automotive Executive Forum last week (via Automotive News):

“In those first years, we didn’t have the relationships nor the history of volumes with a large number of suppliers. We couldn’t always get the capacity commitments we needed. We had to earn their trust that we were going to do what we said we would.”

When it couldn’t secure parts from a supplier, the company integrated the product internally.

Carlsson explained how the Fremont factory played a role in that strategy:

“Choosing Fremont as the manufacturing plant for Model S was a choice between being really close to engineering but far from the big automotive supplier clusters. I think we made the right choice, due to how early we were in the technology cycle and the amount of engineering changes we executed. But it clearly added logistics cost and complexity.”

The executive has since left the company as it focuses on the production program of the upcoming Model 3 and others have taken over the leadership of the supply chain at Tesla, like former Apple exec Liam O’Connor and longtime IKEA exec Sascha Zahnd.

With over 400,000 reservations for the vehicle and a history of production growth, Tesla is having less difficulty convincing suppliers to work with them. Carlsson added:

“Things will get a bit easier. Tesla has resolved some issues through vertical integration — doing things internally. And with the launch of the Model 3, the volumes of the business will be more attractive, and I think we will see more suppliers relocate.”

Suppliers have already indicated that the Model 3 program is having an impact on them. A Japanese supplier explained how Tesla is pushing them to develop tools for mass production and the demand for the Model 3 is convincing suppliers to establish new production capacity around Fremont.

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