Tesla Shifts from 'Gigacasting' Amid Sales Dip, Rises in Rivalry

Key Takeaway

• Tesla shifts from its ambitious one-piece gigacasting to a three-piece method amid sales decline and rising competition, notably from BYD.
• The company enacts layoffs and refocuses on self-driving technology, halting development of the Model 2, initially planned with one-piece gigacasting.
• This cautious approach in manufacturing reflects Tesla's strategy to mitigate risks and manage investment amidst market challenges.

Gigacasting Strategy Shift

Tesla, the electric vehicle (EV) pioneer known for its innovative manufacturing techniques, has made a significant shift in its gigacasting strategy. Gigacasting, a process that uses immense pressure to die-cast large sections of a car's underbody, has been a hallmark of Tesla's approach to simplifying manufacturing and reducing costs. Initially, Tesla aimed to revolutionize this process by casting the vehicle underbody in a single piece. However, according to sources familiar with the matter, Tesla has decided to revert to a more established method of casting underbodies in three pieces. This method involves gigacasting the front and rear sections while using aluminum and steel frames for the midsection to accommodate batteries. This decision reflects a cautious approach amid challenges such as declining sales, softening EV demand, and increasing competition, notably from Chinese EV manufacturers like BYD.

Adjusting to Market Realities

Tesla's retreat from one-piece gigacasting is part of a broader strategy shift as the company grapples with falling sales and profit margins. In addition to facing softening global EV demand, Tesla is contending with intensifying competition from rival EV makers. This strategic pivot also includes cost-cutting measures such as layoffs, with more than 10% of Tesla's global workforce being reduced, and the departure of several senior executives. Furthermore, Tesla is now focusing more on developing self-driving vehicles rather than solely pursuing aggressive growth in EV sales volume. This shift occurred last autumn, before Tesla decided to halt development of the Model 2, an affordable car that was expected to be the first vehicle built with one-piece gigacasting.

Manufacturing and Investment Considerations

The decision to halt the one-piece gigacasting effort and the subsequent cancellation of the Model 2 project highlight the complexities of Tesla's manufacturing and investment strategies. Gigacasting, while promising in terms of reducing long-term costs, requires significant upfront investments and is challenging to perfect. Experts in vehicle manufacturing have noted that Tesla's more conservative path on gigacasting reflects the company's historical struggles with launching complex and innovative vehicles on time. By holding off on one-piece gigacasting, Tesla avoids making massive short-term capital investments in manufacturing and design, which could have led to costly delays or manufacturing problems.

Street Views

• Terry Woychowski, President of U.S. engineering company Caresoft Global (Neutral on Tesla's gigacasting strategy):

  "Would they rather have done it all in one big piece? Sure, they would’ve, but at what cost?"

• James Womack, Vehicle manufacturing expert and former research director at the Massachusetts Institute of Technology (Neutral on Tesla's gigacasting strategy):

  "It’s not very exciting from the standpoint of the public and buyer... and you don’t know whether this is really a big cost-saver or not."