Published on March 4th, 2014 | by Christopher DeMorro33
Cost Of The Tesla Model E Exaggerated In Flawed Study
March 4th, 2014 by Christopher DeMorro
Elon Musk has always called for a $35,000 Tesla, but one research firm says that the numbers just don’t add up. Too bad the study makes flawed assumptions. But it’s still worth asking if can Elon Musk really deliver a 200-mile EV for $35,000.
Stanphyl Capital Management looked at Tesla’s profit margins on the Tesla Model S, and figured out that the cost to build a 60 kWh Model S is about $59,559. That means Tesla is earning over $10,000 per car right off the bat, but it’s the additional options that drive Tesla’s profit margins to over 25%, or about $25,000 on every $100,000 Model S sold, $100,000 being the average transaction price.
So basically, Tesla is pulling down big numbers because it up-charges on optional features like you wouldn’t believe. Sounds like a typical luxury car maker if you ask me. But what happens when the electric automaker goes down market?
According to Stanphyl, most rumors suggest that Tesla is spending about $260 per kWh for the Model S, putting the battery cost for the 60 kWh battery at about $15,600. The Tesla Model E will likely need at least a 48 kWh battery to go 200-miles per charge, which would put battery costs $12,480. If the Tesla Gigafactory lowers battery costs the expected 35%, tit will cost just over $8,000 for the Model E’s proposed 48 kWh battery pack.
So far, I don’t have any problems with Stanphyl’s math, but then the last couple of paragraphs get rushed and hurried, without nearly as much supporting math. The study suggests Tesla could save around $3,000 per car via bulk ordering, $400 per car with smaller video screens or wheels, and another $664 in random savings, and Stanphyl thinks each and every Tesla Model E will cost around $48,000.
That’s right where they lost me.
I think the most obvious point to make here is that the Tesla Model E is an entirely new and different car from the Tesla Model S. It is likely to be smaller, lighter, less powerful, and less luxurious than than the Model S. Stanphyl seems to think the only difference will be in the battery pack size and cost, but the Model E is going to need less of everything; less aluminum, less leather, less of everything. The Model E may not even need a 48 kWh battery pack to go 200-miles.
There are other methods of keep the cost of a car down, and $8,000 for a major part of the Tesla’s drivetrain isn’t that far out of whack with many modern luxury cars. What do you think the engine of a new BMW 3-series costs? But Bimmer seems to make plenty of money off of their luxury sedans. So why not Tesla too?
That said, Tesla definitely has its work cut out for it. First off, it may not have the $7,500 Federal tax credit to fall back on by the time the Tesla Model E comes to market. Also, a $35,000 Model E only works if battery prices continue to fall, and with a reveal rumored for next January, time is definitely working against Tesla. But considering a $50,000 Tesla Model S was already sold (though swiftly cancelled), at least on paper Tesla should be able to pull this one off.
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