Industry gut punch -- The Tesla price drop maintains insane margins

[Billyk24]

Tesla's new battery cell-Panasonic 4680?- uses less expensive material than previous Tesla batteries? Does this figure into the large Tesla price cut?

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[4sallypat]

....., I'm afraid the catfish cars are going to be even more ubiquitous and the competition in receivership.

^^^
That was funny !

 

[Jimrpa]

Some have short memories, the rest of us remember quite clearly not only the auto bailouts, but the outright restructuring of GM post bankruptcy. It's naive to believe it won't occur again, especially with the chinese coming.

Will the Chinese be able to produce federalized vehicles? Their domestic market vehicles are definitely not safe and I’m surprised European regulators have passed the vehicles sold over there.

 

[flapjake314]

tesla is a public company you can see their financials, you don't need to watch youtube (???) i started watching the first 3 minutes and it's one guy doing a weird thing with his hands and them showing you binders of paper

https://www.sec.gov/Archives/edgar/...a-20211231.htm#management_discussion_analysis

that's 2021, it clearly tells you the gross margins of tesla's automotive segment is 29%.

reducing price drops straight down to profit, so if their margins were 29% before and they lowered their price by 10%, their margin is now 19%.

 

[Vulnox]

Yeah I would also question Tesla and their magic margin, especially saying 40%. Unless it's all from cutting corners which would explain their ongoing build quality issues and lack of basic content in their vehicles like buttons or an instrument panel. If that's how they get to 40% then I will pay more for the Ford. But I bet it isn't anywhere near 40%. Simple logic would tell you that doesn't make sense given that as others mentioned Tesla only recently hit profitability on their actual car business, and when they were claiming profit it was only thanks to fuel credits that other automakers were buying off them.

This article is from 2020, I understand that and already covered that they don't just rely on these now, but 2020 isn't that long ago and if someone thinks Tesla went from barely making a profit thanks to 400 million in regulatory credits to a 40% margin on their vehicles in just over two years, well...

https://www.caranddriver.com/news/a32346670/other-automakers-paid-tesla-record-354-million/

 

[sdevfan]

Many analyses end up being overly optimistic. I have a hard time believing that Tesla can maintain 30% margins after these price drops. I guess we’ll know soon enough when they have earnings next week. Then we should get a clearer picture. Until then, I’m working on the assumption that their margins are much lower at these new prices.

 

[tdmeng]

If you look at the spartan, I mean minimalist design, I can see how aside from the battery and drivetrain, it’s $25k cost camry.

I take that back, didn’t mean to disrespect the camry like that, it has a nicer interior.

 

[Maquis]

I think these are 2021 data:
Industry average was 10.85%.

 

[Vulnox]

Many analyses end up being overly optimistic. I have a hard time believing that Tesla can maintain 30% margins after these price drops. I guess we’ll know soon enough when they have earnings next week. Then we should get a clearer picture. Until then, I’m working on the assumption that their margins are much lower at these new prices.

Well earnings call would be from before the price drop. But will still be interesting. If they are maintaining even 10% margin though after the price drop, the increased interest in the vehicles is sure to make the end of this quarter earnings very interesting.

Don't get me wrong, the price drop definitely makes for a tempting product and if it gets more butts in EVs, that's great. Heck if Elon detached himself from the company, I would have a hard time picking the 2023 Mach-e with no tax credit and a much higher price over the Model Y, ugly exterior or not. Thankfully we already have our MME and after tax credit and A-Plan got it for way less than even the price dropped Tesla, but looking at things as they stand today, it would be tougher to ignore.

 

[VindictivePantz]

Tesla's new battery cell-Panasonic 4680?- uses less expensive material than previous Tesla batteries? Does this figure into the large Tesla price cut?

I don't think they're in production yet - supposed to be "soon." I think BMW is looking at something similar.

They (along with others) are also looking at smaller packs to stuff into the frame instead of having them in one big slab.

EVs in 5 years will be a lot different than what we have now - which is good. Innovation helps us all in the end.

 

[TheVirtualTim]

A few things....

In the auto industry, a car maker typically comes out with a new product (new model car). They put a few years of R&D into developing the not just the new car (product engineering) but the machine needed to make the car (production engineering).

When the car goes on the market, while each unit is sold at a cost higher than what it costs to make it (although that's not always true due to CAFE ... they sometimes accept a loss) they need to be able to sell that same product for a few years without a substantial redesign in order to recoup the R&D.

So for most new EV's... they're in the position of trying to recoup R&D.

Tesla hasn't updated a car in ... how many years? I don't ever recall anything more than a minor tweak on any of their cars. Tesla has likely remade their R&D money where other auto makers have not.

Additionally ... I recall learning that Tesla sells the carbon credits earned for their EV's to other companies. I'm not sure who those other companies are ... but it occurs to me that with multiple car makers now selling EV's there are more companies that either don't need to be buy carbon credits or have credits to sell.

 

[tdmeng]

I don't think they're in production yet - supposed to be "soon." I think BMW is looking at something similar.

They (along with others) are also looking at smaller packs to stuff into the frame instead of having them in one big slab.

EVs in 5 years will be a lot different than what we have now - which is good. Innovation helps us all in the end.

You can buy the 4680 Model Y SR on Tesla's current inventory.

Good comment on tooling, Model 3/Y and mega cast is basically the same production tooling. Once Tesla amortizes the tooling cost (think of any long running Toyota Truck), they can recognize additional profits.

 

[Blue highway]

Will the Chinese be able to produce federalized vehicles? Their domestic market vehicles are definitely not safe and I’m surprised European regulators have passed the vehicles sold over there.

Living in Detroit at the time I heard a lot of similar comments about the Japanese in the 70's and 80's.

The Chinese are crushing it in Europe... they will be in the US next. Plenty of 5 star Euro NCAP scores.

https://www.sophus3.com/2022/11/27/sophus3-briefing-paper-chinese-auto-brands-in-europe-part-1/

 

[Hammered]

Idra's massive presses and the molds have higher upfront costs, but they're able to mold an entire section of the vehicle in seconds. The end goal is to 1-shot the entire vehicle frame, and with cyber truck, the entire vehicle body is the frame (sans doors, obviously). That not only removes several steps, raw goods are brought in as efficiently as possible. 1 tool, 1 machine, replacing up to 30-40 other machines from stamping / forming, to welding. Each individual part has at least 2 steps to its creation, then it's joined with dozens of other parts (and their steps), welded, etc... The model Y's rear end went from 70 discrete parts to a single diecast part.

That's not only highly inefficient, each step opens the door up to tolerance deviation. If several segmented parts that rely on the one before it are joined just a little bit off from the previous, the final product could end up well out of tolerance due to compounding deviation. Tesla started out doing things like traditional OEMs and then quickly moved into molding parts. In one step they reduced that part's cost to a fraction of the previous process while simultaneously achieving the best tolerance possible, all in one step.

Other companies have since been scrambling to jump onboard with it because it's the most cost effective way in both time and money to do it. Idra's order backlog is several years now for these presses. Someone wanting to get in on the process now wouldn't have a vehicle with the parts for a good 5 years from now.

 

[Hammered]

Living in Detroit at the time I heard a lot of similar comments about the Japanese in the 70's and 80's.

The Chinese are crushing it in Europe... they will be in the US next. Plenty of 5 star Euro NCAP scores.

https://www.sophus3.com/2022/11/27/sophus3-briefing-paper-chinese-auto-brands-in-europe-part-1/

Yes, the chinese regulator's rating agency has copied the EU's almost verbatim. They did this to make sure that their vehicles are ready for export as they're already performing the exact same tests the EU does. The US is similar in scope. The one test I can't watch enough of is SORB. Brutal.

The chinese have copied tesla's approach using the presses as well. Their time / money saving capabilities cannot be overstated.

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