The Financial Times dove into the UBS teardown of the Tesla Model 3 to get a read on whether it is truly a revolutionary vehicle that represents a paradigm shift for the automotive industry or if it is simply an evolutionary car that takes the next logical step forward for the industry.
The UBS Evidence Lab tore down a Tesla Model 3, a 2014 BMW i3, and a 2017 Chevrolet Bolt EV to see how the Model 3 stacks up to the competition in a few key areas. As electric vehicles, the real innovation and technology that’s changing is in the powertrain, so they started there and moved on to the compute power each has onboard. They then closed with a discussion about fit and finish.
Right off the bat, UBS noted just how advanced Tesla’s powertrain was, noting that its “military grade tech” allowed it to outperform the competition on cost, weight, and energy efficiency. Getting down to the nuts and bolts, Tesla’s system provides the best torque, power, and acceleration versus the competition, which is clear enough after driving the three vehicles.
On the performance front, the BMW i3 felt a bit more polished as a result of its ~3,000 pound build compared to the ~4,000 pound Model 3. The Chevy Bolt felt untamed, as if Chevy had taken all the stops out for maximum performance, leaving a few rough edges exposed that let the wheels spin a bit too much for my comfort.
UBS found that the motor in the Model 3 was likely “moderately more expensive” than the analysis team had estimated. Specifically, they found that a shift to silicone carbide in the inverter resulted in a 10% increase in semi content in the powertrain. All told, the UBS investigation found that a Standard Range Tesla Model 3 would likely have to be sold at a loss of $6,000 per vehicle based on what they knew at the time. (We have since learned from an Elon Musk email to employees that the car would cost Tesla approximately $38,000 to make, for a loss of $3,000.)
In other words, Tesla still has its work cut out for it to bring a $35,000 Model 3 to market. When Tesla surprised everyone with a Limited Edition Mid-Range (LEMR) Model 3 in October, Musk said that part of the reason the company was releasing the LEMR was that Tesla could do so and make money on it now versus waiting until around February for work on the Standard Range version to wrap up. The public purpose of doing so was to allow more early Model 3 reservation holders the chance to get a Model 3 and the full $7,500 EV tax credit before it is cut in half on January 1, 2019. There’s also speculation that Tesla needed to offer the lower-priced model in order to stimulate more demand before shifting deliveries to Europe, China, Japan, and beyond.
It’s a long range battery with fewer cells. Non-cell portion of the pack is disproportionately high, but we can get it done now instead of ~February
— Elon Musk (@elonmusk) October 18, 2018
UBS also found that the Tesla Model 3 had been built with significantly less high-voltage wiring compared to the Chevy Bolt EV — 80% less wiring, to be exact. That’s largely a function of Tesla having learned from its previous vehicles and leveraging that expertise in designing the Model 3. Having already hit its cap of 200,000 vehicle deliveries in the US alone, Tesla is clearly the leader in electric vehicle design and manufacturing amongst American automakers.
Tesla also found savings from its powertrain being designed entirely in house, unlike the Chevy Bolt EV, which we noted early in its existence was largely built by LG. UBS estimated that LG alone supplied a staggering 90% of the Bolt’s powertrain. Maybe GM will have to change its name to Outsourced Motors until it starts actually building its own powertrains again?
UBS sees autonomous driving as a foundational item on the checklist for modern cars and found that Tesla is far ahead of the pack relative to its peers. The analysts found that the Model 3 has better connectivity and computing power — and, funny enough, that doesn’t even take into account Tesla’s third-generation of hardware (HW3), which Tesla designed completely in house.
The Nvidia hardware UBS looked at already had 4 times more semiconductors than a typical gasoline vehicle, landing it at the top of the pack relative to its peers.
Prioritizing autonomous compute power is right in line with what Tesla found as it worked to scale up its autonomous driving suite, after bringing it in house after parting ways with Mobileye. The result was a move away from the Nvidia computing solution to its own homegrown computer (HW3), a computer that packs in 10 times more computing power than the Nvidia solution. Tesla built this new solution over an intensive 3 year period, wherein it was running in stealth mode as Tesla validated the new hardware internally. (See more about that in the in-depth CleanTechnica article linked above.)
Fit & Finish
No Tesla teardown would be complete without comments on fit and finish. These are the exterior and interior body panel gaps, interior stitching, bolt torques, having all bolts in the car, and all the things that make a car feel professionally put together.
UBS found that Tesla’s car (a December 2017 build) was still lacking in these areas. At this point, that represents a one-year old data point, but reports continue to come out about fit and finish issues and we mainly hear about them at delivery.
The teardown specifically found inconsistent gaps and lack of flush fits throughout the car, missing bolts, and misaligned welding. That told a story of sub-par quality, according to UBS.
The teardown found that the Model 3 is difficult to service, with large segments of the battery pack being held together with glue, making servicing challenging.
Model 3 Takes Gold
All told, UBS ranked the Model 3 at the top of its peer group, largely due to the cost, weight, and energy efficiency of the powertrain. The teardown resulted in UBS estimating that, today, Tesla has a $2,000 like-for-like cost advantage versus its peer group. If you consider Elon Musk’s recent email about the cost of a base Model 3 (and our critique of the UBS analysis), that advantage could be more like $5,000.
Looking a few years down the road, UBS sees Tesla’s lead diminishing as other automakers build vehicles that are increasingly competitive with regards to range, performance, charge time, and build quality. When it comes to tech, UBS believes that Tesla has established an almost insurmountable lead and that it does not see traditional automakers competing anytime soon. This speaks to Tesla’s rich IT culture and strong internal competency in building autonomous driving software and computing hardware.
It may sound funny to hear a core financials company like UBS speaking so highly of Tesla’s revolutionary vehicle, especially a company that has repeatedly advised betting against Tesla, but it serves as a clear message to the financial community that the automotive world has shifted gears and now sees the future as being electric. The UBS teardown of the Model 3 found that when it comes to electric vehicles, Tesla is not the underdog automaker that many are making it out to be, but rather, “Tesla has won the race and leads the championship.” Perhaps that’s why the stock market values Tesla higher than all automakers except Volkswagen and Toyota.
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