Tesla's Bottlenecks Show Just How Far It's Come

Tesla (TSLA) has certainly had its problems with production--remember when they were making cars by hand last fall? The company has gotten plenty of pushback about its Model 3 bottlenecks, but Bernstein's Mark Newman writes it's all part of the innovation cycle.

Newman writes that with any new product, there are four main hurdles to mass adoption: immature technology; weak demand; incumbents' resistance; and supply-chain bottlenecks. At this point, we've overcome the first three, with better batteries, plenty of consumer interest in new technologies, and offerings from legacy auto makers, like General Motors (GM). That just leaves the supply problem to be solved.

Newman expects the tipping point for electric vehicles could come as early as 2021, and with that in mind, he sees batteries and raw materials as two pain points where bottlenecks could surface--not as long-term issues, but rather near-term problems, especially shortages of high-quality battery cells, given increasingly complex quality control and manufacturing processes.

Tesla, as well as other vertically integrated original equipment manufacturers (OEMs) such as China's BYD look best positioned in his environment, he argues, given their structure and ability to address shortages, while Daimler and SAIC Motor are his picks among the incumbent auto makers.

Shares of Tesla are up 5.4% to $344.77 in recent trading.

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