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The Tesla Model 3 has a base price of $47K. Tesla's gross margin was 33% in Q1 2022. So estimate of manufacturing cost is ~32K (probably somewhat higher as ba

The Tesla Model 3 has a base price of $47K. Tesla's gross margin was 33% in Q1 2022. So estimate of manufacturing cost is ~32K (probably somewhat higher as base model probably has lower margin). The battery is 50kwh. Price of a battery in 2021 was $132 / kwh (1). So the battery accounts for $6600 of that manufacturing cost. Even if they could get the batteries for free, and assuming the same gross margin that would drop the manufacturing cost to $25.5K and the price to $37K. So it seems like reducing battery cost is not going to get EV's to mass market. Am I missing something here? 1. https://elements.visualcapitalist.com/breaking-down-the-cost-of-an-ev-battery-cell/ https://elements.visualcapitalist.com/breaking-down-the-cost...

epgui 5y ago
Yes: - Even without further improvements, the Model 3 economics are sufficient to get EVs to mass market, even assuming no further economies of scale. - Reducing the cost of a 6600$ part is an enormously high impact thing to do. Consider as well that reducing cost only a little bit expands your TAM quite a lot.
fshbbdssbbgdd 5y ago
In this hypothetical you’re taking Tesla’s profit as a constant. Most car companies don’t have a margin anywhere near Tesla’s. Less than 10% is common. Edit: Also, the average new car price is 47k in the US (https://www.kbb.com/car-news/average-new-car-price-tops-47000/ https://www.kbb.com/car-news/average-new-car-price-tops-4700...). Although, I guess the world average is probably a lot lower.
- londons_explore 5y ago
  You should be looking for the median new car price, not the mean. The mean can be greatly impacted by a few million dollar supercars.
whazor 5y ago
Tesla's are still very big cars with lots of expensive but unnecessary electronics and custom build parts. To really drive costs down you want a smaller, slightly more efficient car with yet a smaller battery. Basically an improved version of the Nissan leaf.
rcMgD2BwE72F 5y ago
>So it seems like reducing battery cost is not going to get EV's to mass market. Am I missing something here? Cost per mile is much lower for EV than ICE, and the electricity bill decrease as the share of renewables will grow into the grid mix (to incentivize off-peak charging). Maintenance is much cheaper too (almost no moving part, million-miles batteries and motor, no fluid except wiper, fewer brake change thanks to regen…). The initial cost may still be high but with financing, it's easy to imagine a much cheaper plan for EV vs ICE.

epgui 5y ago

Yes: - Even without further improvements, the Model 3 economics are sufficient to get EVs to mass market, even assuming no further economies of scale. - Reducing the cost of a 6600$ part is an enormously high impact thing to do. Consider as well that reducing cost only a little bit expands your TAM quite a lot.

fshbbdssbbgdd 5y ago

In this hypothetical you’re taking Tesla’s profit as a constant. Most car companies don’t have a margin anywhere near Tesla’s. Less than 10% is common. Edit: Also, the average new car price is 47k in the US (https://www.kbb.com/car-news/average-new-car-price-tops-47000/ https://www.kbb.com/car-news/average-new-car-price-tops-4700...). Although, I guess the world average is probably a lot lower.

londons_explore 5y ago
You should be looking for the median new car price, not the mean. The mean can be greatly impacted by a few million dollar supercars.

whazor 5y ago

Tesla's are still very big cars with lots of expensive but unnecessary electronics and custom build parts. To really drive costs down you want a smaller, slightly more efficient car with yet a smaller battery. Basically an improved version of the Nissan leaf.

rcMgD2BwE72F 5y ago

>So it seems like reducing battery cost is not going to get EV's to mass market. Am I missing something here? Cost per mile is much lower for EV than ICE, and the electricity bill decrease as the share of renewables will grow into the grid mix (to incentivize off-peak charging). Maintenance is much cheaper too (almost no moving part, million-miles batteries and motor, no fluid except wiper, fewer brake change thanks to regen…). The initial cost may still be high but with financing, it's easy to imagine a much cheaper plan for EV vs ICE.