22nd
Starting in late 2007, one of the first things we did to solve our problems was move battery pack production from an outsourced factory in Asia to California. This may sound counter-intuitive, but our unit cost actually went down and quality improved as we went to a more automated system and could iterate quickly with engineering to find design efficiencies.
Avoiding the cost of shipping a half ton pack from Asia also meant significant savings on shipping costs. This is a much bigger deal for a heavy and bulky product than a small consumer electronics device, where outsourcing to Asia makes a lot more sense. Very importantly, our supply chain went from a tectonically slow six months and having to pay for tens of millions of dollars of inventory in transit to a matter of a few weeks.
As labor cost go up and environmental regulation tightens in places like China and India, we are going to see more and more manufacturing moving back to the US. Shipping cost and time to market are 2 very big negatives that exist when outsourcing manufacturing to Asia which so far have been covered up by low cost.
