Update: Tesla has responded to the facts below that it stopped a crucial safety test during "production hell" of the Model 3, confirming it did indeed not do the brake test, however justifying this by saying that every car is tested after production on a test track.
“Every car we build goes through rigorous quality checks and must meet exacting specifications, including brake tests. To be extremely clear, we drive *every* Model 3 on our test track to verify braking, torque, squeal and rattle. There are no exceptions.”
The response did not explain why the test was necessary in the first place. It certainly did not help the shares.
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One of the biggest mysteries to emerge from Tesla's mad dash scramble over the past week to hit its 5,000 Model 3 production quota in a week, was the question: what is a "factory gated" model and why are so many of the Model 3s produced by Musk not quite "production quality."
In addressing this question yesterday, Vertical Group's Gordon Johnson offered this explanation:
TSLA mentioned that it reached 5,031 Model 3 cars of “factory gated” production in the last week of June; while the company said it has used the “factory gated” terminology all along, we were not able to find this term in any SEC filings or public transcripts; however, looking to Linkedin, it seems “factory gated” may mean cars that require further testing and quality inspection upon leaving the factory floor (Exhibit 1) – this would mean these cars are likely not “full production vehicles” in the traditional sense of auto industry terminology;
Exhibit 1: Linkedin Review Suggests “Factory Gated” Produced Cars
May Require Further Inspection/Testing
The implication of the above is that in its rush to produce as many Model 3s as possible, Tesla was slashing quality control corners, and not producing fully QC-compliant units, which while perhaps permissible when producing less sophisticated goods, is clearly controversial to say the least when the product in question is a car that already has a spotty record of crashes and safety.
But while Johnson's speculation sounds accurate, is that really what happened?
Now, courtesy of Business Insider, we not only have confirmation but also evidence that Musk's quality control transgressions were especially acute: according to the report, which was based on internal Tesla documents provided to BI by what appears to be a whistleblower, "Musk appears to have asked engineers at his Fremont, California factory to remove a standard brake test, called the brake and roll test, from the tasks Model 3 cars must complete in order to move through production."
In order to maximize output and hit the company's weekly output quota, Musk went all out, eliminating what he considered non-critical "tests" to...