Thread: Tesla Model 3
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Old 07-19-2018, 04:33 PM   #471 (permalink)
redpoint5
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Quote:
Originally Posted by JSH View Post
You seem to have skipped some key parts of that article:

"But Munro’s manufacturing costs for the Model 3 don’t include everything. Design time for engineers to develop the parts, sales and dealer distribution, marketing or any of Tesla’s “selling, general and administrative expenses” aren’t included. Munro’s figure essentially just considers the material and labor expenses needed to manufacture the vehicle.

He said it can be fairly straightforward to crunch numbers on the difference in cost based on kilowatt-hours of the lower-capacity battery, but devising cost for the car without the Premium Trim package would be hard. “What kind of functionality are they taking out? What kind of materials are they taking out for the lower trim model?
I didn't leave that info out so much as summarize it. We have a pretty good idea of the cost of the car minus 25 kWh of battery capacity. Removing premium upgrades would further reduce Tesla's cost. By what amount remains to be seen, but it seems that even at a high trim level and the standard battery, Tesla can turn a marginal profit by selling for $35k. It may not be a huge 30% profit, but that's why volume is key to profitability. The article makes my point, which is why I linked it.

As long as their products are marginally profitable, (revenue from producing 1 more vehicle is greater than their cost to produce it), overall profitability is a relatively minor concern, especially when profits are reinvested back into the company.

Amazon wasn't profitable for 4 years, and they followed a similar cycle of reinvesting back into growing their business.

Elon's goal isn't to end up with a pile of money from Tesla profits; he already had that pile of money when he started the company.

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