A twin-engined commercial prop aircraft has struck a drone for the first time in Canada, says Minister of Transport Marc Garneau. The Skyjet Beech King Air 100 was on approach to Jean Lesage International Airport in Québec City when it hit an unknown type of UAV. Garneau said that the drone was flying at around 1,500 feet, three miles from the airport -- 500 feet above the legal limit. The plane landed safely and sustained only minor damage, but "it could have been a lot more serious," he told the CBC.
Any aircraft in an ATC (air traffic control) area around airports must have clearance to be there, and drones aren't permitted above 90 meters (about 300 feet) in Canada, under penalty of a $3,000 fine. "It's important to note that aircraft are particularly vulnerable when on final approach coming in," said Garneau, a three-time space shuttle astronaut. "The pilot is concentrating on landing properly."
Governments around the world have struggled to balance passenger safety with the commercial needs of drone pilots. The US Federal Aeronautics Administration (FAA) recently released its own rules that require daylight or dusk operation within the pilot's line of sight. Commercial drone pilots must be at least 16 years old and need to pass an Aeronautical Knowledge Test before they can get their remote pilot certificate. Heights are limited to 400 feet, but the FAA has issued numerous waivers for that rule.
In Canada, the rules implemented in March of this year are even more strict -- drones must keep about 5.6 miles away from any airport or body of water where aircraft take off. Anyone found to have endangered an aircraft could be subject to a $25,000 fine. "When it comes to safety, I don't think anything is overkill," said Garneau at the time.
The system formerly known as Hurricane Ophelia is moving into Ireland on Monday, bringing "status red" weather throughout the day to the island. The Irish National Meteorological Service, Met Éireann, has warned that, "Violent and destructive gusts of 120 to 150km/h are forecast countrywide, and in excess of these values in some very exposed and hilly areas. There is a danger to life and property."
Ophelia transitioned from a hurricane to an extra-tropical system on Sunday, but that only marginally diminished its threat to Ireland and the United Kingdom on Monday, before it likely dissipates near Norway on Tuesday. The primary threat from the system was high winds, with heavy rains.
Forecasters marveled at the intensification of Ophelia on Saturday, as it reached Category 3 status on the Saffir-Simpson scale and became a major hurricane. For a storm in the Atlantic basin, this is the farthest east that a major hurricane has been recorded during the satellite era of observations. Additionally, it was the furthest north that a major hurricane, at 35.9 degrees north, that an Atlantic major hurricane existed this late in the year since 1939.
We've been extremely lucky. The LIGO and VIRGO detectors only operated simultaneously for a few weeks, but they were a remarkably busy few weeks. Today, those behind the joint collaboration announced that they've observed the merger of two neutron stars. And, because neutron stars don't swallow everything they encounter, the gravitational waves were accompanied by photons, including an extended afterglow. So dozens of telescopes, and many in space, had representatives involved in the announcement.
The number of major astrophysical issues cleared up by this collision is impressive. The collision was simultaneously detected with the Fermi space telescope, confirming that neutron star mergers produce a phenomenon known as a short gamma-ray burst. The gravitational waves were detected nearly simultaneously with the gamma ray burst, confirming that they move at the speed of light. And heavy elements like gold were detected in the debris, indicating that these mergers are a source of elements that would otherwise be difficult to produce in a supernova.
Finally, the gravitational waves from this event were detected over a period of roughly 100 seconds, which should allow a detailed analysis of their production.
A paper by two Belgian researchers has cast more light on the vulnerabilities discovered in the Wi-Fi Protected Access II (WPA2) implementations on most, if not all, wireless networking devices that use the protocol. Dubbed "KRACK" (Key Reinstallation AttaCK), the attack "abuses design or implementation flaws in cryptographic protocols to reinstall an already-in-use key," wrote Mathy Vanhoef and Frank Piessens of the Katholieke Universiteit Leuven (KU Leuven) in the paper, released today.
The report came after wide disclosure of the problems, as Ars reported Sunday night. The research is built upon previous explorations of weaknesses in WPA2's component protocols, and some of the attacks mentioned in the paper were previously acknowledged to be theoretically possible. However, the authors have turned these vulnerabilities into proof-of-concept code, "and found that every Wi-Fi device is vulnerable to some variant of our attacks. Notably, our attack is exceptionally devastating against Android 6.0: it forces the client into using a predictable all-zero encryption key."
While Windows and iOS devices are immune to one flavor of the attack, they are susceptible to others. And all major operating systems are vulnerable to at least one form of the KRACK attack. And in an addendum posted today, the researchers noted that things are worse than they appeared at the time the paper was written:
“Fill your cart with color,” read several giant billboards standing high above San Francisco’s highways this summer. Down below, in the city’s underground BART stations, loud posters with proclamations like, “Shop like nobody else because you aren’t like anyone else,” covered walls. On television — including during the NBA finals, in which local heroes the Golden State Warriors would ultimately clinch the title — ads featured footage of brown boxes rolling down a warehouse roller conveyer. Text on the screen read, “When did shopping get so beeeeeeeeeeeige?” before flashing dramatic shots of colorful sneakers and stacks of denim, along with sped-up clips of fly-fishing and leaf-blowing.
This was all the handiwork of eBay, the auction website that rose to fame by promising a treasure trove of used goods that could be delivered to your door, provided you make the winning bid. For years, it staked its reputation on antique collectibles and Beanie Babies. Then, its age started showing, and eBay decided to make a statement in recent months: We’re a fun, exciting shopping destination — they posited in this summer’s massive marketing push — not just for old car mufflers and used silver tea sets, but rather high-end accessories and next-generation drones.
“We have to tell our story differently because what people know about us is not really who we are anymore,” says Suzy Deering, eBay’s chief marketing officer, from the company’s sprawling San Jose campus one afternoon in August.
Prior to coming to eBay two years ago, Deering worked at Disney and Verizon. She knows about big brands and eBay brought her on with a complete overhaul in mind. “They think we're a used auction site,” she continues. “They don’t think of all the advancements we’ve made, so we have to show a modern eBay, one that looks and acts differently.” She puts a finer point on it: “We have all the things that so many brands want, but what we’re missing is the heart and soul.”
One of those things that so many brands want is scale: eBay is enormous. It has 171 million users, with 1.1 billion listed items at any given time. But it’s also no longer the only game in town. There’s competition from all over, most notably from eBay's great rival to the north, Amazon; Brooklyn-based crafts giant Etsy; and venture-backed consignment sites like The Real Real and Poshmark. Deering may talk of the company’s advancements, but the truth is, eBay has fallen far behind.
It’s dedicated to remaining an online marketplace — nothing more than a platform on which buyers and sellers can interact — a position that’s hard to justify as it’s become less enticing to both kinds of users. It hasn’t invested in warehouses or inventory; it hasn’t introduced competitive shipping programs. It now needs to both differentiate and elevate itself, and then it must communicate all of that to the customer.
These days, 88 percent of postings are “Buy It Now” items, not at all tied to the auction function eBay is known for, and 81 percent of what’s available for sale is new. To eBay, new means unopened, never-used items; this claim is murky, though, as most items are still coming from third-party sellers and not from brands themselves. In fact, eBay has become a haven for flipping, a practice in which users sell in-demand merchandise at exponentially higher prices, further adding to eBay’s sometimes-dubious reputation.
eBay also thinks it’s positioned to acquire Millennial and Gen Z customers who have largely ignored the site. “Younger customers don’t have misperceptions of eBay — they don't have any perceptions,” says Deering. “We’re not even in their awareness at all.”
The company’s research has found that a younger audience wants unique products and “is searching for items that push against conformity.” In this way, Deering believes eBay can be something of a foil to Amazon: “People felt like they were becoming anti-human because Amazon is so habitual, but that isn’t us. If you love Converse, you come to our site because there’s every color, every graffiti-ed version, vintage. You’re not going to get that if you go onto Amazon or into a department store.”
The goal, as eBay’s vice president of merchandising Jay Hanson puts it, is to get customers to think of eBay as the first shopping site they should visit, no matter what they’re looking to buy. But can the once-dominant company actually take that crown from Amazon? Or compete with much nimbler startups that offer white-glove services and more curated and easily navigated shopping experiences? It seems wildly unlikely, but eBay’s determined to try.
Amazon and eBay have always been inextricably linked. Software engineer Pierre Omidyar wrote the code for AuctionWeb, as eBay was first called, over Labor Day weekend 1995. Just two months before that, Jeff Bezos had launched Amazon from his garage in Seattle.
In the beginning, Amazon functioned just like your local bookstore, albeit online, in that shoppers could browse the site’s selection and then purchase what they wanted directly from Amazon. eBay, on the other hand, was a user-to-user experience, without any sort of interference (or help) from the company. It was a platform on which to buy and sell everything, from long-forgotten oddities you’d find in your grandmother’s attic to rare watches and Elvis Presley memorabilia. Omidyar envisioned his website as a utopia, says Adam Cohen, author of The Perfect Store: Inside eBay, “a perfect marketplace where anyone could have an opportunity at commerce.”
eBay’s initial popularity stemmed from the novelty of it all, not just in terms of the merchandise, but also the auction system. One early user told CBS, “there are times where I see something cool and I must have it; I don't need it, but I'm not going to let anyone outbid me.” Rather than mediating disputes between buyers and sellers, Omidyar enabled forums and message boards, as well as the ability to rate users and leave reviews. The social component of eBay became one of its calling cards.
Amazon’s sales surpassed eBay’s early on. By launching in the UK and beginning to sell CDs and DVDs, Amazon’s sales soared to $610 million by 1998, while eBay saw sales of $47.4 million during that same time (eBay would expand internationally the next year). Still, many shoppers considered eBay the more important e-commerce player, according to Cohen, because anyone could set up shop and start a business. Sellers are even given the option to sign up for a professional account and pay a monthly fee in exchange for the ability to list a large number of items. Amazon was selling products traditionally (albeit masterfully), but eBay offered users a chance to both spend and make money. “eBay monopolized the space because there was a virtuous circle,” says Cohen. “The buyers were going where the sellers were going and vice versa. It had this first-mover advantage.”
The company filed for IPO in 1998, following a blockbuster year. Omidyar had changed the name of the site from AuctionWeb to eBay, and the site was hosting nearly 800,000 auctions a day, with traffic skyrocketing thanks in part to an AOL partnership that placed eBay on its homepage. By 1999, eBay’s revenue hit $224.7 million, with Marketwatch calling the company an “unstoppable locomotion.”
Amazon earned more than triple eBay’s revenue as it continued to invest in pricey and popular inventory like electronics, something Time magazinerecognized when it put Bezos on its cover as Person of the Year in 1999 and relegated eBay to the inside of the magazine. That same year, the Wall Street Journal criticized eBay for being a mere middleman for buyers and sellers, a business model it did not deem sustainable and, more importantly, “could be easily copied.” Lo and behind, November 2000 saw the launch of Amazon Marketplace, a hub for third-party sellers to list new or used merchandise.
Amazon Marketplace has grown significantly in the last 17 years. Today nearly half of all products sold on Amazon come from the Marketplace, which sells about 2 billion items and brings in an estimated $132 billion in sales each year, according to e-commerce consultancy firm ChannelAdvisor.
eBay has, of course, seen growth too. The site now has more than 20 million sellers across the world. It’s also introduced new ways to shop, including the fixed-price, Buy It Now option, which launched in 2002. But the company has spent most of its energy diversifying through big-name acquisitions — buying PayPal in 2002 for $1.5 billion, a 25 percent stake in Craigslist in 2004 for what is believed to be around $15 million, Skype in 2005 for $2.6 billion, and StubHub in 2007 for $310 million. Each acquisition provided eBay with a sense of renewed relevancy and cash flow, but it found itself allocating much of its resources and manpower to these businesses while leaving its flagship site largely untouched.
Some merchants still say eBay is the better choice: Amazon takes more of a profit cut, and the site has various barriers to entry for sellers. But Amazon does sweeten the deal for merchants in other ways. With Fulfillment by Amazon, introduced in 2006, sellers pay a fee and Amazon handles the storage and shipment of merchandise, as well as customer service. Opting into FBA also gives merchants access to shoppers with Amazon Prime. eBay’s strategy of not getting involved with inventory or logistics has helped keep company costs down, but it’s also made it less desirable for sellers.
“The FBA program is extremely unique compared to any other marketplace,” an investor at Seeking Alpha wrote last year. “There is no other marketplace (eBay, Wal-Mart, Best Buy, etc.) where the marketplace fulfills items on behalf of the seller. That is why these marketplaces are not growing nearly as rapidly.”
There are also a host of shiny resale startups, all backed by venture capital, that have helped the resale market grow to $18 billion. The RealReal launched six years ago with the value proposition that there needed to be a more trustworthy eBay. With revenue expected to surpass $500 million this year, founder Julie Wainwright says sellers in the luxury space prefer The RealReal to eBay because the company holds sellers’ hands, and buyers prefer it because the site rigorously authenticates items to weed out any possible fakes.
“We do all the work!” says Wainwright. “We go to their home and pick up their items and bring the items back to one of our warehouses for processing, which includes inspection and authentication, photography, copywriting, merchandising, pricing, selling, and shipping.”
While eBay was once known for its forums and message boards, Poshmark, another venture-funded resale startup, has become popular because of its community-oriented platform. The app is a social shopping destination, where shoppers can comment on listings and interact with sellers. Poshmark also offers limited-time events it calls “parties,” in which sellers curate virtual showrooms organized by theme. About $4 million worth of inventory gets listed on Poshmark every day; TechCrunch estimates the company is on track to see $100 million in revenue for 2017, doubling from last year.
There are other players stealing market share too, including Tradesy and ThredUp, the latter of which is performing so well (20 million users and a $500 million valuation) that it’s opening physical stores at a time when other companies are closing doors by the hundreds.
In the shadow of competitors big and small, eBay has remained stagnant. Its 2016 net revenue hovered just under $9 billion — a significant figure, but one that's only marginally risen over the last for five years. Analysts attribute eBay’s shortcomings to outdated technology and a confounding user experience.
“The eBay site hasn’t really gone through dramatic levels of change since the beginning, and if there was any change, it was subtle and not slick enough,” says Sean Maharaj, a director at global management consulting firm AArete. “The customer interface, the website, it is not on par with some other companies that are coming at this with a new digital strategy. It’s unfriendly and it’s not easy to navigate.”
One of eBay’s main bragging points — that it has 1.1 billion listings — has also become a source of weakness for the company. Organizing that many items is a herculean task, particularly when the bones of the site are now decades old. Greg Portell, a retail partner at global strategy and management consulting firm A.T. Kearney, understands why eBay positioned itself for so long as a marketplace for everything and anything, as opposed to offering a more edited selection of products.
“If you think of successful retailers like T.J. Maxx or Marshall’s, you can justify it,” says Portell. “They aren’t known to be very neat and tidy, and they do extremely well. My guess is eBay was emphasizing this attitude, as opposed to a clean, personalized experience you’d expect from a well-curated store. eBay’s problem now, though, is they are stuck in a middle space where it’s hard to differentiate. You have smaller, niche sites that can curate and provide a less cluttered environment, which is what’s growing right now.”
“We’re currently on the precipice of changing fashion, big time,” says Steve Yankovich, eBay’s chief product architect. “We’re doing a lot to focus on fashion because it’s a trillion-dollar business that’s only just starting to get penetrated.”
Yankovich describes his job as “somehow getting customers to that one product and saying ‘Awesome, buy!’ out of a billion-plus.’” He says that where eBay has always won is in “mission shopping” — coming to the website looking for a very specific item. Where eBay recognizes it falls short is in what it calls the “browse, discover, and inspire” kind of shopping.
eBay has been playing catch up for years now. In one ongoing effort, it’s started organizing inventory by implementing structured data — a process by which listing something to the site is uniform and consistent, as opposed to the contextless, ad hoc posting of years past.
One related initiative was making cleaner listings mandatory for professional sellers, which in turn made items more visible on external search engines and made the site more searchable itself. eBay also now groups merchandise by product type and brand — for example, there’s a new, nicely-designed Coach handbag landing page. eBay CEO Devin Wenig, who was not made available for this story, told investors in a call this winter that eBay has created 180 million landing pages using this new method of organizing eBay’s data. It’s unclear if those pages are helping eBay with customer acquisition — especially when it comes to the younger demographic its marketing campaign is aiming to entice — but Wenig said they’ve helped lower eBay’s bounce rate.
This kind of improvement comes across as an odd brag for the company; category and brand landing pages have long been standard on e-commerce sites. Yankovich admits the structured data project is a massive undertaking — the site does, after all, have 1.1 billion items and can’t ask sellers to rebuild old listings. It also can’t completely overhaul its site, as that would no doubt confuse its 171 million users, many of whom have been using the site for years. However, eBay promises the site will soon be easier to navigate and that personalization is finally coming.
One personalized feature coming by the end of this year is called “related topics,” in which the homepage will show listings that other shoppers with similar search history have looked at — something known as collaborative filtering. Amazon has already been doing this for years with its “customers who bought this item also bought” module. Another addition will be “interest” pages, where eBay will add one or several of 250 categories to a user’s homepage feed, based on activities (yoga, baking, skiing), passions (dogs, collectible coins, Star Wars), and styles (athleisure, avant-garde, minimalist) for which they’ve shown preference. This is a machine-learning algorithm called clustering, a tool that companies like Spotify, Netflix, and Twitter are already using.
In September, eBay rolled out a heart-shaped button that places products, brands, and sellers onto wishlists. The move puts eBay more in line with social networks like Instagram and Facebook, which have become hot marketplacesthemselves, although wishlist functions have long been available on myriad e-commerce websites. Earlier this summer, eBay also added a visual search tool, in which shoppers can snap photos of things they see out in the world or upload a photo they found online to the site, and find the item or something close to it on eBay. Pinterest rolled out a similar tool in 2015.
Earlier this year, eBay announced free 3-day shipping on 20 million items and price-matching with Best Buy, Walmart, and Amazon for its daily sales section. Amazon has long been killing the customer acquisition game with fast and free shipping, not to mention its proprietary algorithm that basically acts as a price-matcher.
Perhaps the biggest change coming to eBay is the luxury verification program it’s rolling out now. Called eBay Authenticate, the program is accepting handbags with a market value of at least $500 from 12 different brands (for context, The Real Real authenticates over 100 designers). Sellers using the program — which will eventually expand into jewelry and watches, and will include other designers — will be able to ship luxury items to a warehouse. There, a team from a third-party company, which eBay is not naming, will authenticate the product, take photos, and complete the listing for the seller. Laura Chambers, eBay’s vice president of consumer selling, adds that eBay’s new service will include premium shipping packaging, as well as a dust bag and authentication papers; each authenticated item will also have a special icon added to its listing on the site.
eBay is charging a 20 percent commission for the service — much less than The Real Real, which takes 45 percent. It’s also offering to pay customers double what they’ve spent if a product sold through its authentication program turns out to be fake.
“I think some sellers are just a little bit hesitant right now,” says Chambers, “and they need to have this confidence to sell with us.”
Chambers adds that the company’s previous hands-off attitude is something it can no longer afford to have as competition heats up. “The authentication program is a good example of how we’re getting a little bit more involved,” she says, “and it represents a shift for us in terms of how we want to get in the transaction now.”
eBay intends to advance into luxury well beyond authentication. Hanson, eBay’s merchandising VP, says brands like Adidas, Calvin Klein, Puma, Vera Bradley, and Vince Camuto have had official eBay stores stocked with new merch for years, though these shops are exceedingly hard to find. Now eBay is talking with several high-end fashion companies (it’s declined to name them at this time) about having them selling directly on eBay too. The company knows getting luxury brands could have a significant impact on its reputation as an online retailer.
Forging such partnerships would, no doubt, be a jab at Amazon, which hasn’t had an easy time courting luxury companies to sell directly on Amazon Fashion, although both eBay and Amazon havesold counterfeits in the past. Chambers says its new authentication program will show luxury companies that eBay is dedicated to bolstering the companies on its site and is committed to authenticity. In the meantime, eBay has been pursuing a back door of sorts. A few weeks ago, it announced a partnership with fashion startup Spring, which has its own direct partnerships with some 1,500 brands, including Gucci, Prada, and Saint Laurent.
It’s standard for Silicon Valley giants to chase each other’s innovations and even blatantly rip one another off. Facebook is forever on the tail of Snapchat. Apple constantly copies Samsung and vice versa, and Apple and Google have settled lawsuits over patents and employee poaching. (Steve Jobs loved to invoke the famous Pablo Picasso quote, “Good artists copy, great artists steal.") The difference is that most of these competitive moves happen over short timelines, perhaps a few months or a single year. eBay, however, is many years behind and is only just now trying to get up to speed. And even if it is able to do so, what happens next?
eBay is firmly entrenched in the resale market — a sector that, according to research firm Fung Global Retail & Technology, is growing 20 times faster than retail overall, and could hit $33 billion by 2021. Industry research has also found that younger shoppers are taking to second-hand shopping faster than Gen X or Baby Boomers. Perhaps eBay’s energy would be best spent leaning into its long-held reputation and innovating in that space. Competing with Amazon on the “new” end of the retail spectrum is futile, but they could credibly fight off threats from startups like The Real Real and Poshmark. Many still believe eBay is the best option for vintage treasures, so why not own it? For now, though, the company has its sights set on pushing in the other direction, emphasizing the supposed shiny newness of what their sellers offer.
“When you start realizing that people only think of you as auction or used, you have to go in and over-index on the other side,” says CMO Suzy Deering. “You have to say, ‘Hey, we're modern, and by the way, look at all this cool stuff we've got.’ We still have strength, we still have velocity that is completely unmatched. The difference is we have to make sure that people think about us. That is the number one challenge.”
Once again, Tesla has missed a production forecast, this time for the highly expected Model 3. According to the Tesla optimists, it’s business as usual for Elon Musk…but Musk’s skin-of-your-teeth, renegade improvisation is about to meet a serious challenge from “Mary and Carlos”.
Less than three months ago, on August 2nd, 2017, Elon Musk exuded optimism about Tesla’s new mass-market, moderately priced Model 3 electric car:
“We are confident we can produce just over 1,500 vehicles in Q3, and achieve a run rate of 5,000 vehicles per week by the end of 2017.”
Musk foretold a rapid rise to “10,000 vehicles per week at some point in 2018”, a rate that would put Tesla within reach of 500,000 Model 3s for the year. With that goal achieved, a yearly volume of 1,000,000 vehicles would look eminently achievable, transforming Tesla from a quirky, small-scale outlier into a big-league automaker.
On October 2nd, the story changed. Far from the promised 1,500 cars, Musk let us know that Tesla had shipped only 220 Model 3s in Q3. In its SEC 8-K form (know as Current Report) Tesla management insisted everything was under control [as always, edits and emphasis mine]:
“It is important to emphasize that there are no fundamental issues with the Model 3 production or supply chain. We understand what needs to be fixed and we are confident of addressing the manufacturing bottleneck issues in the near-term.”
“In the past five years, though, Tesla has fallen short of more than 20 projections made by Mr. Musk, ranging from car-production output to financial targets, according to an analysis by The Wall Street Journal. The company missed 10 of his stated goals by an average of nearly a year.”
The Tesla optimists were undaunted. In the past year — since the time that the WSJ article was published — Tesla shares have gone up by more than 80%:
And so it goes with Tesla’s latest miss. Did the stock price fall after Musk’s October 2nd announcement? Quite the opposite: TSLA was already in the middle of a slide — it had lost 10% in the preceding two weeks. The announcement not only stopped the slide, the stock ticked up about 4%.
Tesla optimists appear to see the latest Model 3 news as the result of Musk’s sunny pronouncements and heroic manufacturing improvisation, a combination that has worked well for him so far.
But the optimists might be wrong this time.
My first serious doubts about Tesla didn’t stem from missed schedules, I’ve been guilty of too many of these, they’re part of tech life. What seriously worried me was a July 2016 visit to Tesla’s manufacturing plant in Fremont, California. In taking delivery of my wife’s Model S, we were treated to a group tour of the site. Everyone marveled at the robot porn, at the activity on the assembly line, at the endless stores of spare parts piled to the ceiling.
Everyone but yours truly.
I couldn’t help check off the sins against the “Toyota Bible”, prescriptions for car manufacturers that are lucidly detailed in The Machine That Changed The World (a great and, in parts, sad read). In particular, one mustn’t stockpile parts on the floor, they must be fed in small quantities at small time intervals. If a part has a problem, only a small quantity needs to be shipped back to the supplier who can inspect, correct, and quickly adjust their own production process.
(Ironically, the Fremont plant is prominently featured in “The Machine…” as the locus of the ultimately failed GM-Toyota cooperation.)
As I watched Tesla’s messy, hiccuping line, with workers dashing in to fix faulty parts in place, my mind travelled back to the Honda plant I had visited years ago in Marysville, Ohio. Clean, calm, everything moved smoothly. I was so shocked by the contrast that I imprudently voiced my concern. That didn’t go over well with my fellow Tesla owners. I was a killjoy, I was calling their choice into question.
I forgot about the episode until recently. In an exchange with a trusted industry observer, I found out that he had had exactly the same experience only weeks ago, but he couldn’t write about it by “virtue” of the NDA he’d signed.
“Unknown to analysts, investors and the hundreds of thousands of customers who signed up to buy it, as recently as early September major portions of the Model 3 were still being banged out by hand, away from the automated production line, according to people familiar with the matter.”
Here, I have to interject: How many people in the mediasphere and elsewhere had insider information prior to the October 2nd announcement? Could this explain the 10% drop in Tesla’s share price before shareholders were notified of the production shortfall?
We must now turn to Horace Dediu’s Asymco blog. I’ll extract two related observations from his recent post titled S3X Appeal.
First we have the relative stagnation of Model S and X production, a mere 4% year-to-year growth in the most recent quarter. Second, and more alarming, is the slow cadence of Tesla’s production machine, meaning the long pause between successive starts:
“[…] why, with so much pressure to produce cars to meet presumed unlimited demand, is output so limited?
To see just how limited, consider the rate of output. For the past 15 months and near future, the output is equivalent to 264 cars per day. If the Fremont factory is running three shifts, 11 cars are produced every hour. This is equivalent to a cycle time or takt time of 5.5 minutes.
This would be a tragic cycle time. Most car lines aim for run times between 1 and 2 minutes per station. For example BMW’s Spartanburg plant produces 1400 units per day which yields a cycle time of 1 min.”
Dediu’s cautious words throughout the piece can’t hide his conclusion: Tesla’s production process — the machine that makes the machines — isn’t there yet, and maturity isn’t around the corner.
Moving from fewer than 100K cars a year to 500K and up isn’t “more of the same”, it can’t be achieved through clever, conventional-wisdom-defying improvisation. That sort of growth is a bold jump in scale that requires a smooth, well-oiled and well-understood manufacturing process.
But perhaps Tesla’s greatest challenge isn’t within the company. It’s the “Mary and Carlos” threat. Mary Bara is GM’s CEO; Carlos Ghosn is the emperor of the Renault-Nissan-Mitsubishi-Avtovaz conglomerate that recently jumped to the #1 position in the auto industry. Both industry chieftains now wield credible competitors to Tesla’s Model 3: the Chevy Bolt and the newer Nissan Leaf. The Bolt is in production, I see it in parking lots around Palo Alto, and the newer Nissan Leaf, promised for early 2018, succeeds the unsung, world’s best-selling electric car, the “older” Leaf introduced in 2010.
The Bolt and the Leaf come from experienced manufacturers. Elon Musk ran the table with with his earlier Model S and X creations. But now he may be facing competent competition.