Tesla is industry outlier with Model 3 seats assembled in-house, but self-sufficiency comes at a price. Roselle Chen reports.
When a contractor was having trouble building seats for Tesla's vehicles, the company's CEO, Elon Musk, decided Tesla would build them itself. Tesla's demanding chief executive vowed years ago to shake up the auto industry. But experts say his insistence on in-house work is among the reasons Tesla is nowhere close to its goals. The goals include building half a million vehicles annually by next year, most of them Model 3s. Model 3 is a lower-priced electric car that - Tesla hopes - will win hearts of average Americans. Kelley Blue Book's Matt DeLorenzo. (SOUNDBITE) MATT DELORENZO, MANAGING EDITOR, KELLY BLUE BOOK (ENGLISH) SAYING: "He's looking at vertical integration to get the details right for the car. And that's what he thinks will separate Tesla from other vehicles in the market. That's fine if you're selling $100,000 or $70,000 or $80,000 vehicle. But, when you get into the mass market, cost become such a huge part of it, and vertically integrating a seat, which is a low margin business to be with, it's going to impact his cost. He's going to be at a disadvantage to other competitors in the field, who are using outside suppliers, who can give them pretty good seats at a pretty good price." Tesla has tried to be self-sufficient before, something not seen in the auto industry in decades. It has spent $2 billion on a Nevada factory to make batteries for its electric vehicles. It employs programmers who design software that runs the Model 3. It also controls its own retail chain, selling Tesla's cars directly to customers and bypassing dealers.