Quoted from Brijam:Good thing it doesn’t cost them more to /make/ the cars, as has been covered here about a dozen times.
Independent groups have torn down the Model 3 and the parts cost is $18,000 with $10,000 in assembly costs. Do the math on the profits on a $55,000 car. Ford’s average profit per car is $800.
"The engineers estimate a total of $28,000 in costs to build the Model 3: $18,000 for materials and $10,000 for labor and production. “If Tesla manages to build the planned 10,000 pieces a week, the Model 3 will deliver a significant positive contribution to earnings,” said one test engineer. For a car eventually supposed to retail for $35,000, that sounds like a pretty profit for Tesla.
But it won’t be, argues Erik Gordon, a professor at the University of Michigan’s Ross School of Business. The margins on the Model 3 must still pay for a cost structure that legacy carmakers don’t have, including planned factory expansions, new automation investments, and its own dealership network. While Tesla has its own advantages, like integrated solar and energy storage products and no costly pension liabilities, the company is counting on fat gross margins of 25% to stay in the black. (Ford by contrast has 10% margins.)
The $28,000 estimate for building the Model 3 “shows there’s some possibility of making money at the low end,” said Gordon. “But it actually doesn’t leave very much [money] per car for all the other expenses. If they’re selling it for less than $50,000, I don’t think it’s a good business.”
The most expensive problem the electric carmaker faces is the ballooning cost of automation at its Fremont, California, factory. CEO Elon Musk boasted in 2016 that Tesla’s highly automated Fremont facility would be the “most advanced” car factory on the planet. He’s since admitted Tesla overreached, and had to rip out parts of the assembly line.
“We had this crazy, complex network of conveyor belts,” Musk said in a CBS interview aired in April. “And it was not working, so we got rid of that whole thing.” The company bought the German automation company Grohmann to help get things back on track.
The supposed cost advantage is turning into a financial sinkhole, argues the Wall Street firm Bernstein Research. “Tesla seems to be spending over 2x what a normal [auto manufacturer] would invest per unit of installed capacity,” the March 28 report stated, citing $2 billion in recent facility investments. “The reason Tesla has spent all this money, the reason it bought Grohmann and the reason it can’t build Model 3s are all linked. Tesla has tried to hyper-automate Model 3 production.”