We've reported several times over the past three months about the curious hiring patterns at Tesla. Or rather, the lack of hiring. As the company was finalizing its assembly line for the Model 3 - and missing production goals - there was a curious lack of hiring activity.

Yesterday, we finally got a bit of an explanation: Bernstein analysts Max Warburton and AM Sacconaghi, Jr, say that Musk is basically trying to create a modern automotive plant without automotive workers. And it's not working.

"Tesla has tried to hyper-automate final assembly. We believe Tesla has been too ambitious with automation on the Model 3 line. Few have seen it (the plant is off-limits at present), but we know this: Tesla has spent c.2x [about two times] what a traditional OEM [Original Equipment Manufacturer] spends per unit on capacity.

"It has ordered huge numbers of Kuka robots. It has not only automated stamping, paint and welding (as most other OEMs do) – it has also tried to automate final assembly (putting parts into the car). It talks of two-level final lines with robots automating parts sequencing.This is where Tesla seems to be facing problems (as well as in welding & battery pack assembly)."

Our data appears to back this claim. We reported back in January (Tesla takes a speed bump, hits the brakes on hiring) that Tesla laid off 700 workers at exactly the wrong time and wasn't showing signs of a hiring push to replace them. Since then, hiring numbers have improved modestly, but not enough to make a difference. This is particularly true at the Fremont plant where the Model 3s are being assembled:

And for Fremont:

In our previous article, we took a look at three possibilities:

  1. The company claimed the layoffs were performance-based, and standard procedure. Nothing to see here.
  2. Analysts speculated that the layoffs were meant to send a signal to investors that Musk was serious about cutting costs.
  3. Or... It was a union-busting move.

More and more, it's looking like our conclusion was correct - that the notoriously union-averse Elon Musk was, indeed, playing hardball. So what happened? Did he lay off a bunch of union orginizers "for performance reasons" in October, and then vow to build an assembly line without workers?

The analysis by Warburton and AM Sacconaghi seem to back up that conclusion.

Here's more from the Financial Review:

"Automation in final assembly doesn't work," wrote Warburton, who spent his career before Wall Street at The International Motor Vehicle Program (IMVP) – a part-academic, part-commercial organisation based at MIT.

Bernstein adds that the world's best car makers, the Japanese, actually try to limit automation because it "is expensive and is statistically inversely correlated to quality". Their approach is get the process right first, then bring in the robots. That has been the complete opposite of Musk's approach.

Is Musk merely doing this to save money? The numbers don't back up that notion: Bernstein says that taking everything into account, Tesla would only save about $150 per vehicle doing it this way.

"But while all that exotic capital might allow Tesla to remove 5 workers, it will then need to hire a skilled engineer to manage, programme and maintain robots for $US100 an hour (our estimate of a robotic engineers' hourly rate).

"So the net labour saving may be only $US50 per unit. Yet putting the automation into the plant seems to involve an apparent capital cost that's $US4000 higher per unit of capacity than for a normal plant. If the product is built for 7 years, that's over $US550 of additional depreciation per unit built. It's hard to see an economic case even if somehow the Fremont Model 3 line can be made to work. So why exactly has Tesla taken this route? It's unclear."

"It's unclear."

It would be a terrible irony if one of the most progressive companies in contemporary America - Tesla - on the forefront of one of the most progressive industrial breakthroughs of the 21st century - the electric vehicle revolution - was brought down because its charismatic founder just couldn't stand to share a little power with his workers.

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