From Breakingviews - Tesla prepares for its next production hell
That would potentially make a cheap car viable. Tesla’s average selling price was nearly $51,500 in the, with gross profit less regulatory credits per car delivered at around $12,500, implying roughly $40,000 per-vehicle costs. Halving that would yield a 20% gross margin on a $25,000 price.
A mere $5,000 in absolute gross profit, though, would leave little room for research and development and other operating expenses, which ran to $4,545 per car delivered last quarter. It also requires that all planned cost reductions go perfectly. Even if they do, they might not stick: Tesla’s automotive gross margin less credits fell from 30% at the beginning of 2022 to 24% at the end as inflation bit; recent discounts threatening more drag.
Meanwhile, there is no timeline on a new vehicle actually arriving. A previously announced new model, the Cybertruck, is yet to roll out. And sales in China show boosts from discounts. Still, Musk pulled off the seemingly impossible before when ramping up the Model 3, a messy slog he dubbed “production hell” at the time. Introducing an affordable car might require a second trip through the inferno, but it’s an urgent one.
After an opening presentation focused on the broad viability of transitioning the world to sustainable energy, Musk and fellow executives outlined goals to streamline production, reduce manufacturing costs by half and scale up energy storage products. Multiple presentations referred to a planned “next-generation vehicle” platform.Opinions expressed are those of the author.
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