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Having a hard time believing this - as they say in the video 30% profit margins are v rare in the auto industry. I trust Munro though...

agumonkey 8y ago
Surely stock owner will review this thoroughly
deleted 8y ago
[deleted]
barbegal 8y ago
I'd say there isn't enough detail in this video to say. Munro said 30% net profit but I think he meant to say gross profit. Costings may have been based on like for like labor costs but in reality labor costs are highly variable with the California factory being one of the most expensive (one of the reasons why Toyota decided to stop manufacturing there). In addition it wasn't clear which exact model, sold in which country the 30% was based on and at what scale of manufacture. Taxes, grants, customer options and volumes change the pricing very significantly. My take away is that at the right price point, cheap enough labor and sufficient volumes the Tesla model 3 could have gross margins of 30%. Whether it is saleable at that price point and volume is unknown but more likely than the i3 and Bolt.
danhak 8y ago
All-electric drivetrains, $5000 software-enabled options, over-the-air service, vertical integration and direct sales are v rare in the auto industry too. Reasoning-by-analogy does not always hold up when comparing tech newcomers to incumbent players.
newnewpdro 8y ago
EVs should have far better margins than ICE vehicles, at least in the interim transition period where prices still reflect the cost of comparable ICE vehicles. They're far simpler to manufacture once all the electronics have matured enough to be integrated. If you look at the Model 3, the power system is largely bundled with the battery. So the gigafactory is pumping out that module where much of the cost and complexity resides, and the rest of the car is largely devoid of precision machining processes. ICE vehicles have complicated transmissions and engines, lots of machining and delicate assembly processes. I expect there to be a period where the margins on EVs are quite fat thanks to inertia in the market's price expectations established by high-cost ICE vehicles. It'll wane once the competition matures and the undercutting commences. These cars should be much cheaper to manufacture (as well as operate/own/maintain).
- elihu 8y ago
  I think electrics will eventually be cheaper than gas (and I'm looking forward to that day), but right now production is bottle-necked on battery supply. So, manufacturers can sell cars for any price they like because electric cars are relatively rare. It won't last forever, but it's a nice position to be in for the companies that have a steady, reliable source for battery cells.

agumonkey 8y ago

Surely stock owner will review this thoroughly

deleted 8y ago

[deleted]

barbegal 8y ago

I'd say there isn't enough detail in this video to say. Munro said 30% net profit but I think he meant to say gross profit. Costings may have been based on like for like labor costs but in reality labor costs are highly variable with the California factory being one of the most expensive (one of the reasons why Toyota decided to stop manufacturing there). In addition it wasn't clear which exact model, sold in which country the 30% was based on and at what scale of manufacture. Taxes, grants, customer options and volumes change the pricing very significantly. My take away is that at the right price point, cheap enough labor and sufficient volumes the Tesla model 3 could have gross margins of 30%. Whether it is saleable at that price point and volume is unknown but more likely than the i3 and Bolt.

danhak 8y ago

All-electric drivetrains, $5000 software-enabled options, over-the-air service, vertical integration and direct sales are v rare in the auto industry too. Reasoning-by-analogy does not always hold up when comparing tech newcomers to incumbent players.

newnewpdro 8y ago

EVs should have far better margins than ICE vehicles, at least in the interim transition period where prices still reflect the cost of comparable ICE vehicles. They're far simpler to manufacture once all the electronics have matured enough to be integrated. If you look at the Model 3, the power system is largely bundled with the battery. So the gigafactory is pumping out that module where much of the cost and complexity resides, and the rest of the car is largely devoid of precision machining processes. ICE vehicles have complicated transmissions and engines, lots of machining and delicate assembly processes. I expect there to be a period where the margins on EVs are quite fat thanks to inertia in the market's price expectations established by high-cost ICE vehicles. It'll wane once the competition matures and the undercutting commences. These cars should be much cheaper to manufacture (as well as operate/own/maintain).

elihu 8y ago
I think electrics will eventually be cheaper than gas (and I'm looking forward to that day), but right now production is bottle-necked on battery supply. So, manufacturers can sell cars for any price they like because electric cars are relatively rare. It won't last forever, but it's a nice position to be in for the companies that have a steady, reliable source for battery cells.