Summary: Analysts are doubting Tesla's ability to achieve industry standard benchmark on COGs based on the perception of chaos of recent activities
Critics claim Tesla has a split personality when it comes to production capability which they can't reconcile. Good at product development, horrible at general assembly.
These conclusions of chaos are premature if you don't understand the operating system.
Can Tesla Achieve Industry Standard COGS?
This is the thesis of this article. Tesla's profitability relies on competent manufacturing efficiency that can achieve standard industry cost benchmarks. It won't matter that Munro & Associates says the Model 3 should have an 18%-36% gross margin at 10K/wk, if Tesla can't reach industry standard costs and efficiencies to achieve those margins.
But what is causing doubt that they can achieve these COGs? Analysts have criticized the way Tesla has been operating its manufacturing facilities in Fremont and Nevada. From the bottle neck in battery packs at the Gigafactory to the general assembly bottlenecks and the Sprung structure at Fremont. Both bulls and bears are perplexed at how on one hand Tesla can produce state of the art, high density, integrated electronics and drive trains, yet, on the other hand, has not been able to handle the more basic aspects of production that have been around for decades.
Tesla seems to have some sort of a split personality when it comes to execution... or does it? This article is a direct response to the bear thesis that Tesla isn't capable of achieving the gross margins verified by 3rd party analysts. The media is reporting that cost overruns are due to incompetence, but my research has turned up something that explains it as part of an investment with an unfinished "work backlog". It also reconciles these seemingly contradicting personalities under a unifying strategy and contradicts the claim of incompetence.
Tesla Playing Catching Up On A 100-Year Lead
Tesla's mission is to accelerate the world toward sustainable energy. This is a daunting task that requires competing against legacy automakers, some of whom have a 100-year-old head start.