4 ms·

And it's only selling for $35k? I thought the rule-of-thumb was that you charge 3x the "bag of parts" for a product you make, sell, and service. Apple certain

And it's only selling for $35k? I thought the rule-of-thumb was that you charge 3x the "bag of parts" for a product you make, sell, and service. Apple certainly got this memo... Elon is leaving a lot of money on the table.

jccooper 8y ago
The as-configured vehicle they examined was sold for at least $49,000 (but probably more likely $54,000 with Autopilot), as they're only selling large-battery and high-trim interior now. The headline lumps material and labor together, but materials was reported as $18k, which is a surprisingly exact 1/3 of $54k. The base model would have to have $12k of materials for the same ratio. I don't think that's likely (since much of it's invariant and especially since the $54k figure includes the Autopilot upgrade, which is only software) but it will have 1/3 less battery, which is a decent part of the cost of the car. So the base model will probably not be as profitable, but I think that's true for most cars.
cheald 8y ago
The models currently being sold (high-capacity battery, premium upgrades) are closer to the the 50-55k range.
zip1234 8y ago
It depends on the product. Most automakers only make single digit percent profit.
freehunter 8y ago
The selling point of the Model 3 is a $35k electric luxury car. It's not leaving money on the table if no one is willing to pay $100k for the car. Even if they sold it at 2x the cost, the selling point isn't "small electric luxury car" it's "inexpensive electric luxury car". And trying to meet that target before technology allows them to is what is driving Tesla's current financial problems.
rgbrenner 8y ago
Thats for smaller ticket items. Boeing isn't 3x'ing the cost of a plane, and neither are car manufacturers. Toyota makes an average of $2800/car, and GM makes only $654/car [0]. Porche makes $17k/car... but that's on an average price of $100k.. so only 17%[1]. 0. https://www.detroitnews.com/story/business/autos/2015/02/22/toyota-per-car-profits-beat-ford-gm-chrysler/23852189/ https://www.detroitnews.com/story/business/autos/2015/02/22/... 1. https://www.autoblog.com/2017/03/21/porsche-17250-profit-per-car/ https://www.autoblog.com/2017/03/21/porsche-17250-profit-per...
- briankelly 8y ago
  But the parent said "bag of parts" which implies only the cost of materials, not the full per-car cost of production, and I can't tell if that also includes things like R&D, marketing, insurance, etc.
deleted 8y ago
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mchahn 8y ago
The 3X rule assumes a middle-man distributor. When selling direct, as Tesla is, 2X is more common.
orev 8y ago
The cost of production has absolutely ZERO bearing on the sale price. Price is based on what a consumer is willing to pay for the product, that’s it. The cost of production only comes into play after that is determined, to ensure the company doesn’t sell at a loss (in which case they would probably cancel their plans), or whatever profit margin they are willing to accept.

jccooper 8y ago

The as-configured vehicle they examined was sold for at least $49,000 (but probably more likely $54,000 with Autopilot), as they're only selling large-battery and high-trim interior now. The headline lumps material and labor together, but materials was reported as $18k, which is a surprisingly exact 1/3 of $54k. The base model would have to have $12k of materials for the same ratio. I don't think that's likely (since much of it's invariant and especially since the $54k figure includes the Autopilot upgrade, which is only software) but it will have 1/3 less battery, which is a decent part of the cost of the car. So the base model will probably not be as profitable, but I think that's true for most cars.

cheald 8y ago

The models currently being sold (high-capacity battery, premium upgrades) are closer to the the 50-55k range.

zip1234 8y ago

It depends on the product. Most automakers only make single digit percent profit.

freehunter 8y ago

The selling point of the Model 3 is a $35k electric luxury car. It's not leaving money on the table if no one is willing to pay $100k for the car. Even if they sold it at 2x the cost, the selling point isn't "small electric luxury car" it's "inexpensive electric luxury car". And trying to meet that target before technology allows them to is what is driving Tesla's current financial problems.

rgbrenner 8y ago

Thats for smaller ticket items. Boeing isn't 3x'ing the cost of a plane, and neither are car manufacturers. Toyota makes an average of $2800/car, and GM makes only $654/car [0]. Porche makes $17k/car... but that's on an average price of $100k.. so only 17%[1]. 0. https://www.detroitnews.com/story/business/autos/2015/02/22/toyota-per-car-profits-beat-ford-gm-chrysler/23852189/ https://www.detroitnews.com/story/business/autos/2015/02/22/... 1. https://www.autoblog.com/2017/03/21/porsche-17250-profit-per-car/ https://www.autoblog.com/2017/03/21/porsche-17250-profit-per...

briankelly 8y ago
But the parent said "bag of parts" which implies only the cost of materials, not the full per-car cost of production, and I can't tell if that also includes things like R&D, marketing, insurance, etc.

deleted 8y ago

[deleted]

mchahn 8y ago

The 3X rule assumes a middle-man distributor. When selling direct, as Tesla is, 2X is more common.

orev 8y ago

The cost of production has absolutely ZERO bearing on the sale price. Price is based on what a consumer is willing to pay for the product, that’s it. The cost of production only comes into play after that is determined, to ensure the company doesn’t sell at a loss (in which case they would probably cancel their plans), or whatever profit margin they are willing to accept.