Red Sage
The Cybernetic Samurai
Hmmm... I apologize. I mistook you for a reasonable individual who was interested in gathering valid information. I'll not bother you with such details in the future.
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stopcrazypp
Well-Known Member
That's a completely different argument than the battery costs making it "impossible" for Tesla to make a profit on a $35k car. It is pretty clear they can make a gross margin even at that price. Yes, the challenges of scaling is the biggest one Tesla has to face, but even though it is a difficult challenge, it is far from impossible. And if it doesn't work out that well, they can always raise the price a bit (like they have done in the past). They have enough demand to cover.
Tesla's goal for the giga factory is to produce batteries at $100 per kwh so if they achieve that a 60 kWh would cost $6000.
voip-ninja
Give me some sugar baby
That would be a huge accomplishment (and for me personally I would hope that at some point I could get a whole-home 50kwh battery backup with a 10 year warranty for $6,000).
It still means that the battery pack on a 60kwh ICE will cost far more to manufacture than an ICE engine that by comparison costs peanuts. What do you think it costs BMW to manufacture the 2.0T B48 engine in the current 3 series? $1,000 maybe? $2,000 tops would be my guess.
My point is that at the same retail price point, when you get into lower cost vehicles (not $100K Model Ss) it seems harder to me for Tesla to turn a profit. Not only from a manufacturing standpoint, but from the standpoint of the enormous cost of service & maintenance that Tesla have elected to do in house.
What will be really telling is if Tesla continues to do it in-house (a la Apple Store) or if they break down and are forced to partner or sub-contract with another provider to meet the demand.
Tesla actually makes about $20K per car in revenue. The hand wringing about losses comes from looking at the overall financial picture for the company. In 2015 the company spent about $880 mil more than it brought in and if you take the loss and divide it by the number of cars sold, it comes out to about $2000 a car. A number Bob Lutz used in one of his attack articles and often repeated by others.
If Tesla pulled back on the capital expenditure and R&D it would become profitable. I expect the numbers for 1Q16 to be much better than 2015. For last year they only had 1 car in production most of the year and the Model X was a net drag on the company. This year it's now a revenue source and even though there have been some warranty issues, they are making a net profit off the X now.
Tesla averages about $20000 profit per car, but I suspect that is much higher with the P90Ds than it is with the 70/75 Kwh cars. They probably are selling the base model closer to cost, but they don't sell that many of them. Even if they just about break even on the $35 K base Model 3, they will only sell a relative few of them and they will make money overall selling Model 3s with more features.
The battery pack on an EV is equivalent to the gas tank on an ICE. The costs are very different. The electric motors on an EV are much cheaper than an ICE motor, but with an ICE you need a lot of peripherals you don't need with electric motors. The complete drivetrain on a BMW with a 2.0L probably costs about half the wholesale price of the car when you add up not just the engine block, but the transmission, fuel system, exhaust system, alternator, engine cooling system, engine management system, air intake system, etc.
ICE systems are dramatically more complex and expansive than EV systems. ICE are only cost competitive today because batteries are still expensive and EVs are still built in low volumes compared to ICE.
Tesla has a lot of sub-contractors. They found though that when they went to traditional automotive sub-contractors, they didn't want to deal with Tesla's small order sizes. A company that was providing over 10 million seats a year to Ford was not going to make the same kind of deal on 100,000 seats a year to Tesla. They also found that suppliers tended to put their B team on Tesla orders so they were dealing with the incompetents who didn't know what they were doing.
Where they couldn't work out an acceptable deal, they went in house. On the other parts they are paying more to suppliers than larger car companies would. That is one of the reasons the Model S and X cost what they do. If they were able to get the same kind of prices for parts the bigger companies do, even with their big margins they could sell a fully loaded S90D for about $80K. By automotive industry standards, Tesla is a low volume manufacturer. That is changing, they are moving into medium volumes, but still on the low side by industry standards.
When the Model 3 is in full production, Tesla will be able to negotiate better deals with suppliers because their overall volumes will be much greater and they will have a better track record than they did in 2010 when they were first trying to negotiate these contracts.
Even when they hit 500,000 a year they will still be about 1/2 of Subaru's production, and Subaru is the smallest mass produced car maker in the US (about 1 million cars a year).
voip-ninja
Give me some sugar baby
Yes, of course the battery is the EVs "fuel tank". The comparison was really around the most expensive component in an auto. In an EV that is definitely the battery, and in a traditional ICE it is definitely the engine and associated systems.
There is no way in hell that the engine and directly related components in an ICE account for 1/2 of the build cost of something like a 3 series BMW (maybe in a Honda Fit but I am still doubtful).
There is no way in hell that the engine and directly related components in an ICE account for 1/2 of the build cost of something like a 3 series BMW (maybe in a Honda Fit but I am still doubtful).
If you are quoting this very very old, patently false statement about the MS you really don't know anything about the economics behind building a Model S. Spending per car more than revenue/car is different than losing money per car.
geoffreak
Driving My Model 3
I'm having trouble finding sources about the cost of an ICE drivetrain (aka all the parts not in an EV). Best I can tell is that an engine can cost about $10k, transmission $5k, and other bits and pieces are likely another $3-5k or so. This would put the cost right around or slightly over 50% of the vehicle cost of a $35k car. Anyone have an actual source?
If Tesla can get the battery cost under $10k (which seems like a given), they should have it made. I can't imagine the EV specific items in the car costing more than $7-10k, which means this car should align very closely with ICE estimates.
Of course these are just guesses at best.
If Tesla can get the battery cost under $10k (which seems like a given), they should have it made. I can't imagine the EV specific items in the car costing more than $7-10k, which means this car should align very closely with ICE estimates.
Of course these are just guesses at best.
Uncle Paul
Well-Known Member
There was a story going around when the Dodge Viper was first produced. Dodge went to their seat supplier and told them they wanted a special magnesium frame with hight quality leather covering. Quote came back with out of this world pricing that would not be possible for the Viper budget. They also were told that the seat manufacturer really did not want to deal with such a low volume order.
Dodge the said they were also interested in ordering millions of mini van seats too. Supplier then offered to provide the high tech Viper seats for almost free if they could get the mini van contract.
These are the type of things that Elon must deal with... while he is changing the world.
Dodge the said they were also interested in ordering millions of mini van seats too. Supplier then offered to provide the high tech Viper seats for almost free if they could get the mini van contract.
These are the type of things that Elon must deal with... while he is changing the world.
voip-ninja
Give me some sugar baby
The article you cited is pure guess work. From what I can gather for a 2 liter engine that BMW produces the dealer supplied price for a 528i new motor was quoted to one customer a few years ago at $11,000. Keep in mind that would include very healthy dealer mark up plus transportation costs of something that graded up weighs a couple hundred kilograms or more
That is exactly why I will NEVER buy any of the German luxury cars. Once the warranty is over, they can literally bankrupt you if you get one that starts having problems. This is why the market prices used German luxury cars with the depreciation that some of them have. A used Lexus is highly desirable because they are reliable and reasonable to keep up on for a luxury car. A used 5-7 year old V12 Mercedez S-class that retailed for $210k+ is only worth $30-40k today. I know someone who got suckered into buying a low mileage example and ended up literally broke when the engine went($20k) and then the ZF transmission($12k). Then the electronics started going and the car was junked when the air suspension needed servicing($10k).
We don't have enough data on used Teslas yet, but I am very interested in seeing how these electric motors and batteries will be holding up. I am a high mileage driver so I can be out of warranty quick. Of greater interest is how well the rest of the car such as the electronics and build quality will hold up. It will be meaningless if Teslas end up leaking when you drive through the carwash or rattles or the electronics start getting weird. My luxury car experience is limited to Lincoln(really impressed with how well it held up) which had no higher upkeep costs than my Fords and Land Rover(a disaster).
There is also the external cost that ICEs don't currently include, that of the pollution & carbon they put out. If they had to cover that, ICE cars would be much more expensive. That's not the case today, so perhaps it's unfair to include it in the cost calculations. But I'd bet a donut that in about 10 years there will be enough people driving BEVs who will say ICEs should pay for their pollution output that a carbon tax will be imposed. I used to say it was going to take 20 years to get to that point, but the huge interest in the Model 3 makes me think it will happen sooner.
voip-ninja
Give me some sugar baby
That sounds about right for an econobox. 22% of a $15K car works out to about $3,000 which sounds about right for cost of low end automatic transmission and cheap motor.
I definitely don't think that the cost of an engine + transmission ever costs 50% of the manufacturing cost of a new vehicle at least not until you get into semi-exotics.
I definitely don't think that the cost of an engine + transmission ever costs 50% of the manufacturing cost of a new vehicle at least not until you get into semi-exotics.
voip-ninja
Give me some sugar baby
Internal combustion engine vehicles offer way more benefit than harm in the pollution that they create. Our entire economy is pretty much made possible by them.
I don't know where China is at currently but about 5 or so years ago they were only having to meet emissions standards from the late 1990's and even though VW could have put their latest technology into the cars, in order to sell them competitively they chose not to.
So I guess I'd like to know if in your fantasy of people paying some kind of "pollution" tax, would only Americans pay that tax? What about areas that are less economically developed and poorer, do they get to pay the tax as they over time will make up a larger percent of global pollution.
Do people who live in parts of the US that can only be feasibly be serviced by coal & oil power plants get to pay a surcharge for destroying the environment (P.S. Hawaii is one of those)? What if their relative income is lower than areas that are more easily able to tap into hydro, etc? Will you be in favor of nuclear power as a way of generating lots of power with very little pollution?
What about air travelers? Should people who have the audacity to board a jet for travel pay a pollution tax when they could take a much more pollution efficient train or boat to get to their destination, even if it took an extra few days?
In case you haven't figured it out, I think your proposal that you are so giddy about is preposterous and frankly offensive.
geoffreak
Driving My Model 3
While I was searching for sources, I came across an interesting table that had all of the things ICE cars could do to improve fuel economy over the next few decades as well as their associated costs and fuel economy gains. Sadly I can't seem to find it again. I remember seeing a few easy pickings at a few hundred dollars, but most of them are at least $1,000 and many are above $5,000. As EVs drop in cost in the coming years, ICEs have nowhere to go but up in order to match fuel efficiency requirements.
Red Sage
The Cybernetic Samurai
Correct. JB Straubel has said before that the battery pack represents about 25% of the cost of the car. It was unclear if he meant 25% of the Retail price or Build cost... Though I've typically presumed he meant their internal build cost. Either way though, the numbers work out in their favor.
If it is based upon the Retail price... Then Tesla Motors would allow up to $8,750 to build the battery pack from a $35,000 total.
If it is based upon the internal build cost... Then for a $35,000 car they would allow up to $8,225 (6% margin); $7,700 (12% margin); or $7,437 (15% margin).
I believe the minimum battery pack capacity for the expected range will be 60 kWh. Others disagree, and have suggested that somehow it could be accomplished with as little as a 40 kWh battery pack. I will for now ignore those low-ball estimations.
$8,750 / 60 kWh = $145.833~ per kWh
$8,225 / 60 kWh = $137.0833~ per kWh
$7,700 / 60 kWh = $128.33~ per kWh
$7,437 / 60 kWh = $123.95833~ per kWh
At this point I expect that Tesla Motors will probably go with a 70 kWh minimum capacity, because the Chevrolet BOLT has been announced to have a 60 kWh capacity. So, the numbers would change a bit.
$8,750 / 70 kWh = $125.00 per kWh
$8,225 / 70 kWh = $117.50 per kWh
$7,700 / 70 kWh = $110.00 per kWh
$7,437 / 70 kWh = $106.25 per kWh
$8,225 / 70 kWh = $117.50 per kWh
$7,700 / 70 kWh = $110.00 per kWh
$7,437 / 70 kWh = $106.25 per kWh
At any of these points, the money that is 'left over' is more than enough to build the rest of a car in this segment.
$8,750 -- $26,250
$8,225 -- $24,675
$7,700 -- $23,100
$7,437 -- $22,311
$8,225 -- $24,675
$7,700 -- $23,100
$7,437 -- $22,311
FYI... This is comparable to an amount someone posted here before about the $22,000 cost of a BMW 3-Series 'roller'. That would be a car with everything except drivetrain and motor. I expect that motors for a Tesla Motors product cost less in parts and materials than those for a BMW 320i, 328i, or 340i.
This is why I am so confident the Tesla Model ☰ will be profitable from the outset. Those who say otherwise are not looking at the numbers, or Tesla's advantages, in the correct light. Plus, they don't acknowledge that the very first projection I listed ($145.833~ per kWh) is right in line with what General Motors has already reported as their expected cost per kWh for the BOLT.
Tesla Motors will, on average, be able to reduce their costs for batteries through the Gigafactory by an additional 7% to 9% per year going forward. So, even if they start on the high end of these projections, within a few years, they will approach the low end. And if they begin on the low end, they will be under $90 per kWh before 2020.
Red Sage
The Cybernetic Samurai
I would suggest you be careful not to use retail costs for automotive parts to make the comparisons. Don't overlook the rest of the paragraph from the link you quoted (the parenthetical line 'with a 50-75% discount due to the mark-up of ala cart pricing' is telling). Even the wholesale price for replacement parts sold over-the-counter is much higher than the internal cost for them that an automobile manufacturer spends to make them.
Here in Norway at least there is a pollution tax on new cars (that BEV's do not pay of course). There is one tax for CO2 and one for NOX, based on the NEDC test (witch VW and others have cheated on). And in most of Europe there is heavy taxes on gas/diesel that is at least partly a form of pollution tax. But no, this taxes do not fully pay for the pollution - yet. So no, it will not be "only Americans pay that tax". How it is elsewhere in the world I do not know anything about.
... and yes, this is exactly one of the main reasons BEV's - and Tesla - are so popular here, because all the fossil cars get that more expensive, and cost a lot to use.
