Tesla Average Cost Per Vehicle Drops $50K
In 2018, the average cost per vehicle to Tesla was $86K. Now it stands at $36K, a drop of $50K in a little over 4 years.
This is one of the reasons why the company went from losing money each quarter to a growing profit.
In this video I discuss this along with my forecast of how much lower they are going to drop costs throughout the decade.
▶️ 3Speak
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of course he wins and if they can continue to lower the average per vehicle of those 36K profit margins will continue to increase
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Summary:
The video discusses Tesla's significant reduction in the cost of producing vehicles over the past four years, from $86,000 to $36,000. This cost reduction is attributed to scaling up Model 3 production, adding Model Y to the product mix, and the economies of scale. The speaker predicts a further decrease in average vehicle cost to around $18,000 in the next few years, driven by the introduction of a low-end entry vehicle, continued battery cost reductions, innovations in manufacturing processes, and investment in refining battery materials. This cost reduction is expected to translate to lower prices for Tesla's EVs in the future once supply chain issues are resolved.
Detailed Article:
In the video, the speaker delves into Tesla's remarkable transformation from a company that was once losing money every quarter to one that is currently recording profits consistently. The main focus is on the substantial drop in the cost of producing a vehicle, which has seen a staggering decrease from $86,000 in early 2018 to $36,000 a little over four years later. This drastic reduction is primarily credited to several key factors that have contributed to reshaping Tesla's manufacturing dynamics.
One crucial aspect highlighted is the shift in Tesla's product mix, with a heavier emphasis on the production of the more cost-effective Model 3 compared to the pricier SNX models back in 2018. The speaker emphasizes that as Tesla increases the production volume of the Model 3 and introduces the Model Y, which is a lower-cost vehicle, the average cost per vehicle naturally decreases due to the economies of scale at play.
Moreover, the role of batteries in the cost reduction is underlined, with batteries accounting for an estimated 30-35% of the total vehicle costs for EVs. The speaker points out that Tesla's continued efforts in scaling up battery production and potentially using less expensive materials or refining battery composites could further drive down production costs significantly.
Looking ahead, the speaker predicts a future scenario where Tesla's average vehicle cost could potentially halve to around $18,000 in the next five to seven years. This projection is anchored on the introduction of a low-end entry vehicle, envisaged to be priced at a modest $12,000, further leveraging economies of scale and high production levels. The speaker also anticipates a continuous downward trend in battery costs, fueled by advancements in battery technology, refinement processes closer to consumption areas, and sourcing materials that are more abundant and cost-efficient.
Furthermore, the speaker underscores Tesla's commitment to ongoing innovation in manufacturing processes, referencing the gigapress technology that is poised to play a pivotal role in reducing production costs. Despite acknowledging uncertainties surrounding scaling in new locations such as Berlin and Texas, the speaker remains optimistic that Tesla's strategic advancements will ultimately lead to a significant reduction in EV prices once production levels soar and supply chain challenges are overcome.
In conclusion, the video presents a comprehensive analysis of Tesla's journey towards cost efficiency in vehicle production, attributing the company's success to strategic product mix adjustments, scaling initiatives, battery technology advancements, and continuous innovation in manufacturing processes. The speaker's forward-looking perspective underscores the potential for Tesla to further drive down EV costs and make electric vehicles more accessible to a broader consumer base in the near future.