Does anyone know what cost assumptions this estimate by UBS is based on? In May 2017 (before Model 3 production started), UBS came out with a report that estimated the base Model would have an EBIT margin of -8% and would lose $2,830 on an EBIT basis. That report said the base Model 3 would have a 55 kWh battery that costs $165 per kWh. I believe Tesla has indicated the base version will have a 50 kWh battery at a cost of less than $124 per kWh. Using UBS’ model from 2017, if you simply adjust the battery size down from 55 kWh to 50 kWh and the battery cost down to $124 per kWh, you get a tiny (but positive) EBIT margin on the $35,000 Model 3 of around 0.01% — or $45 per car. Now UBS is saying the base version will lose $5,900 per car on an EBIT basis. I don’t have a sense for what cost factors caused their estimate to change. Noteably, an unnamed German teardown firm was reported to estimate $28,000 in parts and labour costs for the Model 3 at a 10,000/week production rate. (Important note: Tesla’s cost of automotive revenue as reported in its income statements includes more than parts and labor, so this estimate alone can’t be used to calculate gross margin, as Tesla calculates it.) Detroit-based teardown specialist Sandy Munro estimated that the base version would cost no more than $31,500 in parts and labour to produce, which by one anonymous writer’s math could translate into something like a 7% gross margin (paywalled article). So, estimates vary quite a bit! I am really curious to know what assumptions UBS is using. The Wall Street Journal reports that UBS is using an even higher estimate of battery costs following their teardown. Fred at Electrek says UBS is now estimating $178 per kWh. However, that only accounts for $715 of the $3,070 difference between UBS’ 2017 estimate and its 2018 estimate. I’m not sure what accounts for the rest of the difference.