Tesla Model 3 deemed to have a 30% profit margin by a teardown specialist

Thanks for the link. Munro makes a number of technical mis-statements in the video, but he is generally correct. Also note that this tear-down has occurred over the last several months. Therefore he had an early '18 car and there have been a number of improvements since then. He did have the integrity to say that they have been "eating a lot of crow" around his shop after looking at the car in detail compared to his first impression.

This tear-down was on a $49K car. It appears that there will be a similar profit margin on the $35K car.

 

I've been wondering why these big margins don't show up in the financial results, and I think the answer might be in a note in the annual report: Tesla considers the cost of building superchargers to be part of the "cost of revenue" on their financial statements. So while the car may be cheap to build, Tesla also figures that each car needs some fraction of a supercharger to support it and roll that cost into the cost of the car.

This is neither to say it's a good thing or bad thing. It's just something I figured out while trying to match news stories like this up with the numbers I see in the financial results.

 

If the financials are close to real-world, and barring any more gaffs by the CEO, it's going to take a quarter or two before the 3's profitability starts to chew away at the red numbers.
I'm curious as to whether the $50,000 '3' profit margin will stay proportional in the $35,000 '3'.
If so, this would be another departure from automotive norms, since profit margins for other OEMs are much higher for up-optioned models.

Something else that makes my head itch is that I read once where Yota and Honda pretty much rule the roost for sedan profitability, and they're in the low teens.
If we accept it as truth that there's a multi-million unit/year demand that's not being met, and that one or more of the CEO's of the other OEMs have three-digit IQs..........why are not more of them availing themselves of this ultra-high profit industry?

I think that EV's are BOTH profitable and in demand.....but when people start throwing numbers around, I usually short them to ground and wait for the market.

YMMV

 

Excellent points!

The only nit I can find to pick with it is that IMHO while BEVs are very fun to drive (I've only driven one) a $50,000 ICE car can be too!!
Tesla is also going to have to succeed in the sedan segment and become economically viable before they can move on to the segment of the market that REALLY IS profitable, which is cross-overs. One of the reasons that sedans and hatches are less profitable is that they are less in demand, and since I have family members that will never EVER drive a small sedan or hatch, this seems a logical next step.
EDIT: Yes. I've seen the napkin drawing.
Put some $35,000 '3' models on the road and I'll pay more attention....

Also, and perhaps non-related.....somebody needs to take away Tesla CEO's media privileges for a little while or put him on some meds....or Tesla is going to have further cash problems.
with an IPO of $17 and a current price of..............(lemme check.....) about $317....they have some serious exposure here.

Other examples are out in the news cycle.
Just sayin.

 

avoiding taxes is a good thing. evading is another story...

 

Tesla, Inc. (TSLA) is comprised of four components - Tesla Motors, Gigafactory, Solar City, and Superchargers. All components of their operations are figured into their financial reports. Tesla Motors have been profitable in the past with Model M/X. We have discussed this on this forum several times. That profitablity took at hit the past 12 or 18 months as the ramp up of model 3 caused a drain on capital resources. But that is now changing as a result of relatively massive production of the model 3.

Solar City has not been a profit center for Tesla since they acquired it as a result of reorganization and increasing competition. Elon says that is about to change as Tesla restructured and converts Solar City into a company that provides solar roof tiles, power walls, and energy storage systems where there is no competition. In fact, Tesla has a one to two year waiting list for their energy systems and that is about to change to a couple of months as they ramp up production in Solar City as a result of restructuring.

The Supercharger system has never been profitable since capital has gone into expansion at a break neck speed and then Tesla provided free supercharging for the Model M/X. Again, that is about to change as more model 3s hit the road and they will pay for supercharging and that are rumors that Tesla is considering limiting the amount of free supercharging Model M/X on new sales. Elon said he never intended the supercharger system as a profit center but only breakeven as passing on their direct cost of the utility. That cost will decrease as Tesla builds more Supercharger stations pwered by Solar City PV.

Gigafactory is a mystery to me. I suspect that it has operated at a loss in the past, but with the ramp up of model 3, I expect Gigafactory component will now be profitable.

So, in conclusion, I expect the Tesla Inc. will show a profit at the end of Q3/18 as a result of Tesla Motors profitability carrying the other three components. This profitability will cause new investors to jump on the Tesla juggernaut to fund the expansion of new auto production facilities in the US, Europe, China, and India, expansion of the Supercharger network around the world, the Gigafactory expansion into China, and ramp up of the Solar City energy systems in the US. In my opinion, the FUTURE is upon us and will encourage others to jump in and address climate change in a profitable way - which is Elon's ultimate goal - the more the merrier!

All companies are expected to follow GAAP (Generally Acceptable Accounting Principles) which Tesla does. That is hardly "playing games with numbers."

What traditional economists and stock market analysts don't understand is the "viability paradigm" is shifting for these newer companies in an increasingly high tech world, companies like Amazon, Apple, and Tesla. Profit margins are not as important as innovation as long as the marketplace is willing to fund the goals and objectives of companies that disrupt that marketplace and support those goals and objectives. It is a shocking paradigm shift, but it appears that it is working in some cases.

Elon will continue to make "gaffs", it is part of his DNA.

I expect that Tesla Inc. (all four components) will show its first profitable quarter in Q3/18.

The more highly optioned model 3s will be more profitable than a base $35K model 3. But there will be very few $35K cars sold because most buyers will load them up with $10K to $20K of options!

This is my criticism of Toyota upper management - a lack of vision for the future for personal transportation. They will eventually jump into the BEV market, but it will be a day late and a dollar short.

If you are shorting Tesla stock, you have made a mistake and it is going to cost you some money.

 

True. Also, gambling in the stock market by shorting a company is one thing, manipulating the stock market by compensating stock analysts for negative analysis and ratings in order to make money as a short seller is quite another story.

 

stock manipulation by big investment firms is a long held tradition, and not frowned upon by congress.
they'll get their pound of flesh one way or the other.

 

I don't think the public has a clue about anything that has changed in the last 10 to 15 years. Look how long the Prius has been around and I had a guy as me last night if it has an engine. I rest my case.

 

Your $50K ICE will not be very much fun to drive if you are suffering from cancer and emphysema caused by environmentally induced greenhouse gasses, your home is under 2 feet of water caused by rising sea levels, your home is destroyed by increasingly strong hurricanes, your life is disrupted by a massive earthquake, and you enjoy paying increasingly higher prices for fossil fuels. You are welcome to think that it is "fun" but just don't make it my kind of "fun."

 

Well that can certainly be said for Republican held Congresses and to a much lesser extent by Democrat held Congresses. Vote wisely, fight FUD.

 

agree. unfortunately, more of these characters are showing up in democratic administrations than previously. apologize if i get us thrown into fhopol.

 

That must have been @orenji He thought it was the new Toyota $20K BEV that is a Tesla killer!

(EDIT) I would love for Toyota to make a $20K Prius BEV with 300 mile range. I would definitely buy one.

 

I would love to see more "America First Nation people" in Congress and the Presidency, particularly from the State of Massachusetts!

 

wouldn't we all. unfortunately, the system is set up more towards states first, america second. bring home the pork.

 

Well.....since this thread is rapidly heading towards the Political sub-forum, I'd recommend that you get a hall-pass into that kindergarten.

I've tried very hard to keep my questions, comments, criticism, praise, bitches, gripes, moans, groans, complaints and selected spurious thoughts non-partisan for the very purpose of LEARNING about big T and Tesla....and I'm grateful for the exchange of info and ideas from those who have taken the time to post thoughtful responses!!!

I WILL say this.
FUD can be used a few times when you're fighting the good fight against fire, flooding, famine, pestilence, civil unrest and twitter storms....but Wall Street is a very Darwinian environment.
They have to be, because they're playing with REAL money and they will only buy the FUD excuse so many times before it starts to sound like "fake news'...."deep state"....etc.

 

that is why there are still enough large investors to keep the company afloat.