Yes, I do follow the travails of Tesla, as it’s the most interesting story in the industry in decades. From a historical perspective, this is the first attempt to establish a new mass-production car company in America since the ill-fated effort by Henry Kaiser, another rich megalomaniac Californian who decided to take on the Big Three. Tesla has already outlasted Kaiser-Frazer so far. Unfortunately coverage of Tesla is mostly highly polarized, emotional and often focused on Elon Musk’s personality traits rather than the cars itself. This article by Alex Roy puts that issue in perspective.
Obviously, the critical issue facing Tesla now is producing the Model 3 profitably, as Musk has said that Tesla must and will be profitable in the second half of 2018 in order to prove its viability. There’s a lot of folks out there who’ve said that’s impossible, including Munro and Associates, which specializes in tearing cars down to their component parts and making detailed cost analyses for competitor manufacturers a suppliers. After their initial tear down of the Model 3, the verdict was not so good. But now that the tear down and analysis is complete, Sandy Munro “is eating crow”, as he’s extremely impressed by its engineering and cost controls. Now he’s saying the Model 3 has a solid 30+% profit margin potential, which is huge in industry standards.
Of course that doesn’t mean the Model 3 is yet generating that degree of profit, as Tesla continues to work through their “production hell”. The focus most recently is in getting production up to and in excess of 5,000 per week. That’s been attained, but possibly not yet in a sustainable fashion. But clearly the potential is there.
There’s no denying that the Model 3 is a brilliantly engineered (and a superb driving) car, as Sandy Munro had to acknowledge as his company dug deeper into its systems and cost-optimized engineering and design. And there’s little doubt that Munro will have some eager buyers for the $78,000 report on the 3 he’s now selling. GM will undoubtedly be one of the first, as not long ago they essentially admitted to losing up to $9,000 on each Bolt they manufactured. GM and other “compliance-mobile EV manufacturers recoup some/much/all of that in not having to buy ZEV credits from Tesla in order to meet ZEV mandates.
All of the existing manufacturers are very concerned about their ability to manufacture EVs with any profit margin, or even just a small loss. The potential profit of the Model 3 shows that it’s possible, and undoubtedly many aspects of its engineering will find their way into competitor’s EVs.