Executive Summary

In 2020, Tesla began building an automotive manufacturing facility, Giga Texas, which will be the main production site for the Tesla Cybertruck and the Tesla Semi. This facility will be the fifth gigafactory built by Tesla, which will be built using the same automated building process system as was used in previous projects. While project managers have successfully developed a schedule management process, other knowledge domains such as communication management and cost management require improvements. Project management can compare previous gigafactory building projects and discuss the best practices in dealing with the complexity of these projects. Managers can explore what went wrong in previous building projects and how Telsa can improve its project management for Giga Texas.

 

In 2020, Tesla began building an automotive manufacturing facility in Austin, Texas, known as “Giga Texas.” The 4-5 million square foot plant will be the leading production site for the Tesla Cybertruck and the Tesla Semi. The 100% renewable-energy-powered plant is the fifth gigafactory built by Tesla, following Nevada, New York, Shanghai, and Berlin.  Each of the gigafactories has been built in extremely short periods despite their massive size and various project management setbacks. (Legal Monitor Worldwide, 2020) To ensure the smooth completion of the Giga Texas, managers should compare the management of different knowledge domains of previous gigafactory construction projects. Evaluations in schedule management, cost management, and communication of previous projects can provide implications for the Giga Texas project and future projects of similar complexity.

Schedule Management

The rapid building of the gigafactories can be attributed to Tesla’s automated building process system. For each project, Tesla utilizes a ‘building-block style’ process that allows variations of the same construction process to occur in any new location.  This style enables Tesla’s project managers to follow a predetermined project approach and more easily identify project requirements early in the project. Managers and engineers implemented this process to stay on track with the project schedule and deliverables.  In addition to this process, Tesla’s project scheduling includes pre-determined construction sequences. This scheduling style allows for decreased downtime between project phases and a more time-efficient method. These sequences include installing off-site-manufactured elements to speed up the process further and allow for the simultaneity of processes. (Bicknell, 2020)

Tesla is building Giga Texas using a modification of the automated building process system utilized for each of the previous building projects. Tesla estimates the project’s duration is to be less than one year, demonstrating the advancement and effectiveness of Tesla’s schedule management. (Bicknell, 2020) The estimated completion of a project as large as Giga Texas in such a short period implies management has nearly perfected the gigafactory construction process and schedule. While many changes due to compliance, regulations, resources, funding, environmental issues and more, will require changes to the schedule, the project management team should be able to adjust and monitor the schedule as needed. The advancement of the building process requires a well-planned and well-executed schedule. By evaluating previous schedule performance and modifications, managers can better plan, sequence, and estimate the schedule for Giga Texas. (Wu, 2018)

Cost Management

When deciding where to build the first gigafactory, states offered millions of dollars in incentives, specifically up to $400 million for site infrastructure and training and up to $600 million in tax breaks. (Woodyard,2014) Ultimately, Tesla chose to build its first Gigafactory in Nevada after being offered up to $1.25 billion in tax breaks over 20 years from the state. (Howell, 2014) To understand the value of tax incentives, the substantial investment into the factory and the local community by Tesla should be noted. The construction of its Nevada gigafactory initially had estimated costs of $5 billion. The first few permits for the site revealed foundation costs estimated at $16 million and an additional permit cost of $93,000. (Mac & Muller 2015) Tax breaks are one of the main determinants of where Tesla will build its next gigafactory, mainly because of the substantial investment Tesla undertakes to construct a facility and its contributions to the surrounding area.

When choosing where to build what is now known as Giga Texas, managers received offers from several different cities, ultimately deciding on Austin, Texas. Travis County officials granted Tesla over $14.7 million in tax breaks, and the Del Valle School district, which owns the land, gave Tesla around $46.4 million in property tax breaks. Also, they offered Tesla an $80 million property tax value cap for ten years, while the factory’s initial cost is estimated to cost over 1.1 billion (TheStreet, 2020)

By comparing the value of the tax incentives from the previous gigafactory constructions, project managers and executives were able to develop their expectations for the new gigafactory. Managers exercised their expectations during negotiations and the receiving of offers from different locations. Ultimately, managers could decide on the new site and solidify substantial tax breaks for the project. Also, by comparing previous tax incentives, Tesla’s project management team can better understand the effects of tax breaks on the new factory’s budget. Managers will gain a better understanding of the state’s expectations and proposed requirements through the agreements. For example, with the tax incentives comes agreed-upon contributions to the local economy, such as minimum-wage determinations, job training, internships, and housing. This information can help with longer-term budget planning.

Communication Management

During Tesla’s construction of Gigafactory Berlin, Tesla’s first European factory, the project management team neglected to pay the company Strausberg-Erkner Water Association. The German utility company joined Tesla in a water development contract to supply over 380 million gallons of water and dispose of 250 million gallons of wastewater for the Berlin construction site. After several warnings without response, the association shut down the water supply to the site, leading to significant delay operations. (Legal Monitor, 2020)  Tesla halted all construction activity due to the inaccessibility of water, which is necessary for producing concrete and other materials. Tesla experienced additional construction halts due to a second unpaid water bill in early December 2020 and unpaid permits totaling over 100 million euros. (International Business Times, 2020)

The several delinquent payments unearth a possible communication problem within Tesla’s project management teams. For a company as advanced as Tesla, there is no excuse for teams to miss payments and warnings regarding those payments. As previously stated, Tesla is striving to complete Giga Texas in under one year. There is little room for miscommunications that can affect the schedule and success of the project. Effective communication is an essential part of project efficiency, team effectiveness, and partner relationships. For the construction of GigaTexas, project management should strive towards better communication management through planning, implementing, and monitoring communication among resources and teams. (Wu, 2018)

Best Practices

Tesla’s Giga Factory project is considered highly complex due to its sizeable matrixed involvement, ambiguous deliverables, leading-edge technology utilization, challenging constraints, and a high level of complex uncertainties. (Wu, 2018) While managers can utilize the post-project evaluations of previous gigafactory projects, each new location, new team, and project scope brings new challenges and uncertainties. For example, Tesla’s successful activity sequencing and scheduling process can ensure the rapid completion of each build. However, managers must still adjust the project to the specific requirements and scope of Giga Texas. It is essential for managers to adapt the “building blocks” approach to the environment of the new project.

To better manage the Giga Texas construction project, project managers can conduct and analyze post-project evaluations. The evaluations can provide implications for which knowledge domains were handled correctly and which can be improved. For example, project managers can analyze the communication issues surrounding unpaid bills and their effects on project completion. Managers can use this information to implement a system to prevent this from happening on the Giga Texas project and plan for possible solutions if similar issues occur. Similarly, project managers can review the terms of each tax break agreement and their implications on project scope, deliverables, and cost management. This information can better prepare the team for their expectations on the next factory location, tax incentives, and negotiations. Project managers should conduct post-project evaluations on each knowledge domain to gain valuable insight into future projects and similar complexity projects. Especially with a company like Tesla, these evaluations can be conducted using advanced tools and technologies. By utilizing these practices, Tesla’s project management team improves the likelihood of the successful completion of Giga Texas.

 

Biography

Alyssa DeNora is the Operations Manager at Advanced Plumbing & Drain Cleaning, Inc. She is currently pursuing an MBA at Montclair State University. Learn more about the author here.

 

References:

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Construction Halted At Tesla Gigafactory Over $122 Million Missed Payment. (2020, December 21). International Business Times – US Ed.

Howell, D. (2014, September 5). Tesla Chose Nevada For Factory Based On Time To Completion Gets $1.25 Billion Tax Break Company needs battery factory ready in time for its $35,000 e-car ahead. Investor’s Business Daily.

Mac, R., & Muller, J. (2015). Tesla Gigafactory Permits Reveal Huge Costs: $16 Million For The Foundation Alone. Forbes.Com, 15.

Tesla Berlin Factory Failed to Pay Water Bill. (2020, October 17). International Business Times – US Ed.

Tesla Gigafactory Texas construction plans revealed in permit documents. (2020, September 17). Legal Monitor Worldwide.

Tesla Wooed With Tax Breaks to Build Texas Gigafactory. (2020, July 15). TheStreet.

Water Company Cuts Off Tesla Over Unpaid Bills. (2020, October 16). Legal Monitor Worldwide.

Williams, N. (2017, November 17). Why did Tesla buy Perbix? To build faster factories. The Business Jour

Woodyard, C @chriswoodyard, & USA TODAY. (2014, March 3.). “Gigafactory” sets off 4-state bidding war. USA Today.nal (Minneapolis, MN), 35(25).

Wu, T. (2020). Optimizing Project Management (1st ed.). CRC Press.