The price point of a particular product is a key part of its market positioning and viability.
Functionality X at $500 has a very different market than the same functionality X at $1500; if a startup is aiming to check for product-market fit, then the expensive manual domestic builds would be aimed at a different target market that also requires and uses different features, requires different marketing and sales channels, etc with requirements and preferences that often are entirely opposite of what the "real" product should have.
Such an iteration would help in handling the actual manufacturing, but would not help in building all the other parts of the business as intended as it would drive all of them in a wrong direction.
Furthermore, who funds the very large fixed costs of design and development? If they had chosen "more manual domestic builds in the low hundreds of units" then they would have saved money/scale in manufacturing but would not have the funding needed for the engineering team to make the actual product, whatever they had was funded essentially by pre-sales.
It's also reasonable to have products that are totally unviable if the volumes are low, because to get an adequate price you need economies of scale. A business plan that clearly states "we either go big or go bust" can be a valid business plan; many real industries have a situation where selling just 1000 units is worse than selling 0 units, you either manufacture at scale or close up the shop.
I agree with your points, especially around price point. However, a large part of hitting a price point is volume and negotiating power. Startups have neither (Kickstarter numbers aren't high enough to see a significant price drop), so--whether or not they're done domestically--the first runs of product are usually subsidized by investment anyways. Investment should also cover the R&D. If, as a startup, you're funding your R&D largely from pre-sales, I'd maintain that you don't have enough money.
Edit: Also, to your point about going big or bust--I think that's fine as long as the reason for bust is market powers beyond your control. But to bust before launch because you didn't have a viable plan/resources to get through manufacturing is just a shame.
Edit 2: I should mention that I see small domestic runs as one way to deal with the manufacturing problem. Another is to simplify the product for your first run. Another is to raise more money. They all have tradeoffs and I don't think there's a one-size-fits-all solution. I didn't mean to imply that.
Functionality X at $500 has a very different market than the same functionality X at $1500; if a startup is aiming to check for product-market fit, then the expensive manual domestic builds would be aimed at a different target market that also requires and uses different features, requires different marketing and sales channels, etc with requirements and preferences that often are entirely opposite of what the "real" product should have.
Such an iteration would help in handling the actual manufacturing, but would not help in building all the other parts of the business as intended as it would drive all of them in a wrong direction.
Furthermore, who funds the very large fixed costs of design and development? If they had chosen "more manual domestic builds in the low hundreds of units" then they would have saved money/scale in manufacturing but would not have the funding needed for the engineering team to make the actual product, whatever they had was funded essentially by pre-sales.
It's also reasonable to have products that are totally unviable if the volumes are low, because to get an adequate price you need economies of scale. A business plan that clearly states "we either go big or go bust" can be a valid business plan; many real industries have a situation where selling just 1000 units is worse than selling 0 units, you either manufacture at scale or close up the shop.