Nice article.
Mark Vilimek

Great points!

There’s definitely operational risk in scaling the business. It’s a difficult task, but it’s not impossible: other manufacturers have done it previously, so it’s not a stretch to believe Tesla can figure it out (especially after having launched 3 cars, each with their own issues, before truly going mass market).

But I don’t think it’s fair to say that other manufacturers are perfect — or, at least, better than Tesla. There have been numerous high-profile defects recently that have been far more dangerous than the issues Tesla has seen: Takata airbags, GM ignition switch defects. That’s not to say Tesla will be perfect going forward, but that as far as quality control is concerned, without actual data about defect rates (and the severity of defects) it will be tough to get to a robust conclusion about whether Tesla is better or worse than others.

That aside, solving defects and supply chain issues is easier the task other manufacturers face: of building cars on a different axis of competition from the one that has prevailed for 100 years and exploring alternative business models concurrently. Tesla is wrangling with its suppliers and partners; other manufacturers are fighting their own organizations.

With regard to scaling and the cash/supply chain problems it may entail: so far Tesla has mitigated this by collecting cash in advance via pre-orders, which has helped them build capacity and inventory. Because of the level of demand for their cars so far, they’ve been able to produce cars on a just-in-time model while keeping their factories at more or less full capacity. But it’s also unclear how long they can sustain demand at this level, or what happens if/when demand drops below their production rate. (Build out a fleet of self-driving cars for on-demand? Some unknown operating trick that allows them to either reallocate slack capacity quickly to products where it’s needed or reduce it to a bare minimum cost level? I’m not sure.)

Cars are a seriously tough business. Thanks for shedding more light on it!

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