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

[Hammered]

I would expect this to be true.

The cost of the materials is likely higher since it's aluminum alloy versus steel. Here they've removed labor, but the difference is labor can be automated but material costs change with the market.

There is a reason low price vehicles use almost all steel, since that helps control the material cost.

You misspelled plastic.

Material costs aren't the cost driving aspect in this context. Every time you touch / shape / weld an object, it costs money. It costs space as well. Tesla considers the factory as much of a product as the vehicle itself. It's this obsession of sorts that's driven their advancement. They not only use less manhours, they use less steps, have faster rates of production, and do all of that in less than half of the space. They're already the most efficient automaker in the world, and each factory they open is more efficient than the next (sans Berlin, but that's govt induced).

They don't classify their vehicles by model year because when they make an advancement on one of the parts, it goes right into the line. Ford for comparison retools twice per year. About the only thing that will happen mid-cycle is deletes. Where's the MME's heat pump? I'll tell you where it is, it's already in the damn car. Every AC is a heat pump. The difference is in the valves.

Ford has calculated (incorrectly) it's cheaper to put in a resistance heater, plus the additional wiring and circuitry, than it is to re-tool for a new valve setup. They've done this in both the MME and Lightning. ACs are heat pumps, they're not some mystical unicorn device. We're now into the 3rd production year and 5th production cycle and they still haven't produced the valves.

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[MachHunter]

See Toyota 1990s-2020s. Or the model T. Once people love their brand with major purchases, they stick with it. To be “The Coca-Cola of…” is a know thing in marketing and corporate strategy. Kleenex is not all tissue, yet we say Kleenex when we mean tissue. He’s mucking it up pissing people of with politics. But it’s a solid move. I’ve talked to people in LA who are like “I hate him and he’s a white supremicist but the car has been so great I’m probably just gonna buy another one and donate to a charity that opposes him…” Not kidding.

 

[Hammered]

See Toyota 1990s-2020s. Or the model T. Once people love their brand with major purchases, they stick with it. To be “The Coca-Cola of…” is a know thing in marketing and corporate strategy. Kleenex is not all tissue, yet we say Kleenex when we mean tissue. He’s mucking it up pissing people of with politics. But it’s a solid move. I’ve talked to people in LA who are like “I hate him and he’s a white supremicist but the car has been so great I’m probably just gonna buy another one and donate to a charity that opposes him…” Not kidding.

I've owned many toyotas and have had several in the family. It's a solid brand, it's just behind in tech. It's funny almost that people complain about tesla making the same car/s without refresh when toyota is the true master of milking a platform for a decade or more.

Tesla is maximizing revenue, I'm sure toyota's reasoning is the same. So long as they have no problem selling their vehicles, they won't change. Where's cyber truck (talk about fugly) and the semi? Well they're selling every vehicle they already make with fat margins. Why would they break a highly profitable model for the sake of product diversity.

 

[Pushrods&Capacitors]

Sounds like you haven't done your research.

Arrange for a tour of Tesla Austin where Tesla uses 6000-ton Giga Presses to build the front and rear chassis of the Model Y as single pieces. And then check out Ford where they weld together 120 pieces of metal to make the same part. Ford is in way over their head.

My bro. I live outside of Austin in Round Rock, have a neighbor that works for Tesla in Austin and I was in manufacturing engineering for over a decade with a heavy dose of Kaizen Taien and Toyota Production System study/implementation. So, yeah. I didn’t just read about “giga” presses and come to the interwebs like that’s gonna put legacy makers out of business

 

[Hammered]

My bro. I live outside of Austin in Round Rock, have a neighbor that works for Tesla in Austin and I was in manufacturing engineering for over a decade with a heavy dose of Kaizen Taien and Toyota Production System study/implementation. So, yeah. I didn’t just read about “giga” presses and come to the interwebs like that’s gonna put legacy makers out of business

You do know what will put legacy out of business though, right? When your competitor is selling your models competition for less than you can build it for. GM is so desperate they're pushing for a SAS model, except they have nothing to offer. Even BMW is getting desperate. SAS for your heated seats, LMAO doesn't even begin to cut it. Granted if DE doesn't solve their energy problems, the loss of BMW is the least of their concerns.

 

[Pushrods&Capacitors]

You do know what will put legacy out of business though, right? When your competitor is selling your models competition for less than you can build it for. GM is so desperate they're pushing for a SAS model, except they have nothing to offer. Even BMW is getting desperate. SAS for your heated seats, LMAO doesn't even begin to cut it. Granted if DE doesn't solve their energy problems, the loss of BMW is the least of their concerns.

You know what else will put you out of business? A loudmouth a-hole “CEO” who thinks that 100+ years of manufacturing experience has to be a liability rather than, possibly, an asset. Therefore, he does everything his way to “disrupt” regardless of the costs involved. Over-automating, ruling by edict and trying to inspect quality in after the fact rather than build it in with better processes and design for manufacturability. Because his share prices are so inflated that the company is printing money with no end in sight.

Except it is in sight now. Because he also went and bought another company and alienated advertisers to the tune of Billions of $. Now he has to service debt to Saudi investors. As in, OPEC’s biggest exporter. Man, the irony.

 

[Shkval2]

See Toyota 1990s-2020s. Or the model T. Once people love their brand with major purchases, they stick with it. To be “The Coca-Cola of…” is a know thing in marketing and corporate strategy. Kleenex is not all tissue, yet we say Kleenex when we mean tissue. He’s mucking it up pissing people of with politics. But it’s a solid move. I’ve talked to people in LA who are like “I hate him and he’s a white supremicist but the car has been so great I’m probably just gonna buy another one and donate to a charity that opposes him…” Not kidding.

I’m an outlier I guess. I have a 2018 Model 3 I’ve driven over 100k miles. I’ve had zero problems with it. The only maintenance beyond tires and wipers was replacing the 12v battery (less than $100). Overall it’s been a good ownership experience. And yet I had ZERO interest in another Tesla when I went looking for a new EV.
Why? Because Teslas are boring to me (YMMV). They all look the same. And that look is bland. There is no plan to update/rework the 3 or any other model. Probably because Tesla’s product development timelines suck.
Now if Ford would get off their collective asses and build the MME I ordered, that would be great.

 

[dbsb3233]

You do know what will put legacy out of business though, right? When your competitor is selling your models competition for less than you can build it for. GM is so desperate they're pushing for a SAS model, except they have nothing to offer. Even BMW is getting desperate. SAS for your heated seats, LMAO doesn't even begin to cut it. Granted if DE doesn't solve their energy problems, the loss of BMW is the least of their concerns.

A few legacy makers may go out of business (or more likely, merge). It happens. But of course there's no way Tesla can meet more than maybe 10-15% of US auto demand. Especially since most of that demand is for ICE and will be for many years yet.

Tesla is in a sweet spot right now. A sweet spot that won't last forever.

 

[ab13]

You misspelled plastic.

Material costs aren't the cost driving aspect in this context. Every time you touch / shape / weld an object, it costs money. It costs space as well. Tesla considers the factory as much of a product as the vehicle itself. It's this obsession of sorts that's driven their advancement. They not only use less manhours, they use less steps, have faster rates of production, and do all of that in less than half of the space. They're already the most efficient automaker in the world, and each factory they open is more efficient than the next (sans Berlin, but that's govt induced).

They don't classify their vehicles by model year because when they make an advancement on one of the parts, it goes right into the line. Ford for comparison retools twice per year. About the only thing that will happen mid-cycle is deletes. Where's the MME's heat pump? I'll tell you where it is, it's already in the damn car. Every AC is a heat pump. The difference is in the valves.

Ford has calculated (incorrectly) it's cheaper to put in a resistance heater, plus the additional wiring and circuitry, than it is to re-tool for a new valve setup. They've done this in both the MME and Lightning. ACs are heat pumps, they're not some mystical unicorn device. We're now into the 3rd production year and 5th production cycle and they still haven't produced the valves.

Not sure what you mean about plastic. High strength steel is the most commonly used structural material for a car chassis because of the low cost and high ultimate tensile strength. Aluminum is used in cars for largely lowering the weight, but any car with a lot of aluminum is not inexpensive. Aluminum has lower structural strength so more is needed or higher alloy grades are needed at higher cost. Many cars sell for around $20k, they use steel.

Products like cars that use a large amount of materials relative to the total cost of goods have most of the cost in materials not labor. I understand at least 60%+ of the cost is the material. When you do volume you amoritize all the production setup cost over the large volume to bring piece price down. Cost of materials is based on the market price, which car companies have less control over. They have full control over the labor and assembly in their own factory.

I test drove a Tesla recently and it is missing a lot of features most other cars have, that's a place where they save money.

 

[Hammered]

You know what else will put you out of business? A loudmouth a-hole “CEO” who thinks that 100+ years of manufacturing experience has to be a liability rather than, possibly, an asset. Therefore, he does everything his way to “disrupt” regardless of the costs involved. Over-automating, ruling by edict and trying to inspect quality in after the fact rather than build it in with better processes and design for manufacturability. Because his share prices are so inflated that the company is printing money with no end in sight.

Except it is in sight now. Because he also went and bought another company and alienated advertisers to the tune of Billions of $. Now he has to service debt to Saudi investors. As in, OPEC’s biggest exporter. Man, the irony.

Complete automation is the end goal of technological evolution. Each step reducing the number of human-involved labor, until there is none. It's a strange world we're rapidly approaching where human labor becomes redundant. Ai advancements are happening exponentially and the world is going to be much more different in the next 5 years than at any point in the past.

Some things will be the same, but the evolution of design and manufacturing at large firms will be much different. Machines will design the software and machines that control other machines, and it will happen as fast as is possible. Software will be different, as will be how we interact with it.

None of the twitter nonsense matters, at all. I sub'd for a month as the platform became better, but through sabotage or other means, there's been an algo regression and I won't support such things. The mainstream line that's expected to be toed is garbage. I'm indifferent on elon -- while I'm sure I'd enjoy speaking with him about future technology, I can't for the life of me listen to him "speak". I'm more concerned with the fruit, than the marketing. Show me the fruit, and I'll support the work. It's just that simple.

 

[Hammered]

Not sure what you mean about plastic. High strength steel is the most commonly used structural material for a car chassis because of the low cost and high ultimate tensile strength. Aluminum is used in cars for largely lowering the weight, but any car with a lot of aluminum is not inexpensive. Aluminum has lower structural strength so more is needed or higher alloy grades are needed at higher cost. Many cars sell for around $20k, they use steel.

Products like cars that use a large amount of materials relative to the total cost of goods have most of the cost in materials not labor. I understand at least 60%+ of the cost is the material. When you do volume you amoritize all the production setup cost over the large volume to bring piece price down. Cost of materials is based on the market price, which car companies have less control over. They have full control over the labor and assembly in their own factory.

I test drove a Tesla recently and it is missing a lot of features most other cars have, that's a place where they save money.

Aluminum is much easier to recycle at the point of manufacturing. In-fact the gigapress 'system' recycles everything on the spot sans ~2% of the recyclable content. The plastic reference is to vehicles like saturn / GM where they just went hella cheap. Forming molten metal into the final product is far more efficient than everything that goes into steel work. On the strength aspect, those cast aluminum parts are far stronger than their steel contemporaries that have to build in margins to account of joint deficiencies. The aluminum castings are also much more rigid as well.

I'm not a fan of teslas yet. They're too model A for me. Less isn't more, it's just less. They deliver less, and now they cost less. That doesn't mean their manufacturing evolution isn't fascinating to observe.

 

[Thor2j]

Basic autopilot is included for free in all new Teslas.

To get auto lane change , self park and a few others like the 23 GT ITS 6K

 

[Nemy]

Does anyone really think that Tesla will keep this massive price drop in place after the IRS regulations for the EV tax credit drop in March? I just saw on another forum thread that Tesla has only postponed orders on higher price variants of Model 3 and Model Y trims until March 2023. Funny, that’s when the updated IRS regs for the IRA EV tax credit are due.

I've been doing a bunch of research now that I have a MY on order. And I think the prices will go up in April but it'll coincide with a cheaper model Y that qualifies for the tax credit and/or they'll include some other feature like advanced autopilot ($6k) or HD radar. The tax credit is working the way its supposed to - forcing vehicles to $55k etc. Tesla will want to keep that lane open even if it drops to $3750, though they've also been working on their own in-house batteries.

Acceleration. I have yet to see a Tesla stomp on it at a red light. I do quite often, but never have seen a Tesla driver show the acceleration off. Weird to me. If you got it, show it. And it's not just bravado (ok, probably some), but showing people incredible new technology and engineering.

I've always thought that was strange too. Maybe alot of retirees? When I'm alone I basically floor it every time I drive. So if you see a midnight silver MY stomping it in the next couple of weeks you'll know who's driving it.

 

[RedStallion]

Munro sets the record straight -- Tesla's margins are still above 30% post price cut due to

Munro was always a Tesla fanboy and doesn't really know anything about financial side.
Tesla's price cutting in the US alone could cost Tesla $7 billion in profit this year according to Deutsche Bank estimates. For comparison, the full year earnings were about $11 billion.
But there is another wrinkle. After IRS sets battery rules in March, the Model 3 w/LFP will no longer be eligible for at least $3,750 of the tax credit, because the battery is made in China.

 

[Ghost Ryder]

Munro was always a Tesla fanboy and doesn't really know anything about financial side.
Tesla's price cutting in the US alone could cost Tesla $7 billion in profit this year according to Deutsche Bank estimates. For comparison, the full year earnings were about $11 billion.
But there is another wrinkle. After IRS sets battery rules in March, the Model 3 w/LFP will no longer be eligible for at least $3,750 of the tax credit, because the battery is made in China.

Actually, he did not like the first model 3 that he took apart at all. Tesla has made a lot improvement under the skin of their cars. He's not just another youtuber, his core business is all about cost analysis of a product and how to make it more efficiently.

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