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Is AWD cheaper to produce than 2WD?

Discussion in 'Model S' started by Omer, Oct 11, 2014.

  1. Omer

    Omer Member

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    #1 Omer, Oct 11, 2014
    Last edited: Oct 12, 2014
    UPDATE: Simplest example explaining this entire long-winded post is:
    Car1 (S85) - 265 miles range, one large rear motor
    Car2 (S75D) - 268 miles range, two smaller motors front and back
    Car2 (S75D) is cheaper to produce!
    _________________________________________________________


    So I'm doing some basic arithmetic and it looks like for any given range, a dual motor Model S is equal to or cheaper to produce than a single motor.

    The additional cost to add dual motor is no more than $2000 and if range is held steady, the battery capacity can be reduced creating a cost savings of $1875 - $3300 (probably more).

    Most of the data is simply unavailable so I'm using multiple paths to try and find the actual values. I am trying to find the marginal range extension for a Model S per KWh addition to the battery. Obviously the dynamics change based on the size of the battery. Overall the 60KWh battery provides 208 miles range so 3.46 miles per KWh average (I'm not looking for average, trying to find the additional range at the margin), the 85KWh provides 265 miles range netting 3.12 miles per KWh average. This indicates that as the pack gets bigger the additional miles per KWh range goes down. The 25KWh difference between the S85 and S60 nets an increase in range of 57 miles, so at that point the additional miles per KWh is only 2.28! Since that's the average over the 57 miles it might be higher for the 61st KWh and lower for the 85th Kwh.

    The addition of the extra motor nets a 17 mile improvement for the S60 and 30 miles for the S85 (have they explained yet why there is almost a doubling of extra range in the 85?). Therefore the addition of dual motors has the same impact as anywhere between 7.5KWh and 13.2KWh of additional battery capacity.

    We don't know Tesla's cost of battery and there are different opinions all around and different measures used. Some quote just the cell cost and others include all of the additional components for a completed pack. I've seen current speculation between $250 - $350 per KWh for completed pack (probably $200 - $260 for just the cells). If we conservatively assume $250KWh for completed pack including connections and cooling, the battery cost savings for reducing pack size by 7.5KWh and 13.2 KWh is $1,875 and $3,300. So the savings in using less batteries while achieving the same range is $1,875 to $3,300. And in reality battery size can actually be reduced further because the weight benefit of the reduced pack size will also help increase range further.

    Tesla currently charges $4000 for the dual motor. While Tesla have targeted 25% gross margins, most manufacturers (I'm guessing Tesla included), aim for at least 50% gross on options so the cost of the additional motor plus the power electronics is no more than $2000 after subtracting the cost savings of the reduced rear motor size.

    Therefore the additional cost to add dual motor is no more than $2000 and if range is held steady, the battery capacity can be reduced creating a cost savings of at least $1875 - $3300 (probably more).

    This obviously involves lots of assumptions and if anyone has input on any of those assumptions to help make them more accurate, please share. It appears that for the same range, it would cost Tesla at most the same money to use AWD.

    This isn't to say that Tesla should have kept range the same and made all cars standard with AWD by reducing the battery size appropriately to maintain range (although this indicates they easily could have done exactly that and essentially become like Audi with all cars having AWD). But this basically means that the extra $4k everyone is paying is simply for that extra range not the AWD since the AWD could have been included at the same cost as 2WD with no increase in production costs.

    Why did they choose to not make AWD standard for all cars and keep the range the same? I'm sure there are plenty of reasons; a few I can think of are:
    1. Increase average revenue per vehicle. If they had kept all range the same and made AWD standard, in theory they could have still offered a $4k option for 20 miles of increased range using slightly bigger batteries but the uptake would have been very low and the complexity of producing slightly larger batteries as an option is not cost effective so that would not have worked.
    2. They are getting customers used to paying extra for AWD so later when the cost of batteries drops substantially and AWD actually does cost more for a given range, they will be ahead (although I doubt dual motor will be cheaper than single motor after accounting for battery savings for a very long time).
    3. They would like to keep pushing range higher and this method allows them to do so because they can cost effectively offer a range extension beyond the base options.

    On the other hand the benefits of them instead choosing to keep the range the same and just making AWD standard for all cars are:
    1. Increased production efficiency and reduced cost by having the same 2 small batteries in all cars (except performance where the premium paid more than balances out the cost of the larger motor). This would actually further bring down the cost of dual motors making it certainly cost effective and cheaper for a given range to single motor now and for at least the next decade.
    2. Increased perceived brand value in colder climates. In many colder locations, you can see a significantly higher percentage of Audi's relative to warmer climates. BMW and Mercedes both offer AWD on most of their vehicles but because ALL Audi's have it, laymen generally perceive the brand as being more capable in harsher environments and therefore purchase it in greater quantities then they would if it were just offering AWD as an option. That's not to say Audi outsells BMW or Mercedes in colder climates (they don't), just that the percentage of Audi ownership tends to go up in colder climates compared to the general sales proportions of Audi vs BMW/Mercedes which indicates that in colder climates people are valuing Audi's more than the general population values Audi.

    Sorry for the long winded post; just found this stuff interesting.
     
  2. dhrivnak

    dhrivnak Active Member

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    I am quite certain dual motors is a good bit more expensive. The range improvement is claimed to be what 30 miles? That is just 10%. While nice 10% is not a significant improvement.
     
  3. Tedkidd

    Tedkidd Member

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    I like the "pay for range" thinking.

    But right now they have just two battery packs. I think there is a lot of simplicity in that, as well as avoidance of a lot of retesting. Can you imagine the complexity and confusion that would create for the used marketplace?
     
  4. tezco

    tezco Sig P85

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    And we'll eat up that difference by accelerating more strongly with AWD.
     
  5. green1

    green1 Active Member

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    Shrinking the already too small batteries is simply not an option for Tesla, people are screaming for more range, not less, so any hint of shrinking the battery would have had people up in arms.

    This is however an interesting discussion when thinking about the Model 3. If it is in fact cheaper to add a second motor than the equivalent amount of batteries, it would be a compelling case to make the model 3 AWD (cost will be king for that project). Of course by the time we get to Model 3 the battery price is supposed to be much lower (often quoted at $100/kwh) so it seems unlikely that the extra motor would be cheaper than the batteries in this case.
     
  6. Omer

    Omer Member

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    We know how much dual motors costs based on the option price. The additional motor is expensive but Tesla also saves money by making the rear motor smaller. They charge $4k. Since options usually have the highest margins (usually 50%+) Tesla is clearly indicating the total extra cost for adding a motor and reducing the size of the rear is no more than $2k.

    Exactly, if people aren't valuing the extra 10% range extension they could have just left the range the same and the battery savings would have been greater than the cost of the additional motor. The dual smaller motors costs Tesla about $2k above the cost of using a single large motor and if they kept range the same, they could have reduced their battery packs by 8KWh - 12KWh saving more than the $2k cost. So Tesla could have made ALL cars AWD standard and their production costs would have at worst stayed the same, possibly even gone down a bit.

    Yes for sure. I don't think they would make AWD standard and then offer a battery increase option. That wouldn't be cost effective but they could have just left range alone and made AWD standard.
     
  7. mdevp

    mdevp Member

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    Maybe the newer, smaller 188hp motors are more expensive than we thought?
     
  8. Omer

    Omer Member

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    #8 Omer, Oct 11, 2014
    Last edited: Oct 11, 2014
    People don't really care about battery size per se, they care about range; battery size is just used as a proxy to complain about range. If reducing battery size while adding dual motors yields the exact same range, I'm not sure people would complain. In fact you could probably add a few miles to range and still be at the same cost. If Tesla had come out and said, surprise - all new Model S cars now have standard AWD AND we added 5 miles range to all cars while reducing the size of the batteries and making the cars lighter, all at the same price as before; I doubt there would have been any complaints

    The Model 3 was where this thought first originated for me since there they keep pointing to a specific range of 200 miles rather than a battery size. Elon has said he expects to get to $100KWh within the next decade not within the next 3 years so I don't think they will be quite there. Probably when they reach higher factory efficiencies with better chemistries around 2020-2022. Either way if you consider $125 KWh and it saves 8 KWh, that's $1000. Since the Model 3 will be smaller and lighter the cost of dual motors will probably be lower than the Model S so it will probably still be just about a wash. The HUGE upside to making AWD standard for all Tesla cars is in the design and production efficiencies. You are designing cars based on one configuration not designing cars that need the space for both a larger single motor in back and 2 smaller motors front and back. If cost is the same for the same range, it seems like you could get a nice marketing benefit in addition to cost savings.

    We already know the cost of going from one single large motor to two smaller 188hp motors because of Tesla's option pricing.
     
  9. green1

    green1 Active Member

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    of course they would complain, they'd see the missed opportunity for more range and be quite upset that they didn't get it.


    I don't think that follows. Sure it may be a tiny amount cheaper that on the S, but along the lines $1900 instead of $2000, but I highly doubt that the smaller motors would actually be half the cost (including labour to install them, wiring harness, and all the other associated bits!) to get down to the $1000 you just calculated to break even with the batteries.

    It's an interesting "what if", but my hunch is that it's still cheaper to stick to a single motor.
     
  10. stopcrazypp

    stopcrazypp Well-Known Member

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    In this case, when tweaking the existing pack only a tiny bit (rather than designing a whole new pack), the pack overhead matters a lot and there may be almost no savings in reducing the capacity because of the specific capacity of the cells and how it is packaged (see what happened with the 40kWh Model S).

    And as others put it, I also highly doubt the AWD system will be cheaper than the RWD version. The wiring and cooling is now split into two places so that adds overhead. And also, the front axle assembly is a lot more complex in the AWD system.
     
  11. Omer

    Omer Member

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    #11 Omer, Oct 11, 2014
    Last edited: Oct 11, 2014
    I wasn't thinking that the dual motor would cost half the cost of the Model S. $2,000 is the top end of what I think it costs now (after accounting for cost savings of reducing the size of the rear motor), it might already be lower. I was thinking that the Model 3 might use 2 smaller motors given the size/weight savings but more important than most of that is design/packaging/production. If you know in advance that all cars will be using 2 smaller motors, you design for that. Right now in terms of packaging, they need to design for the physical space, electric components and power supplies for a larger motor in the rear AND design the space and capacity for a front motor in addition to sourcing and production where each car is fitted differently. By using one set-up you create efficiencies in packaging allowing the use of less materials overall and probably reduced weight (as well as more design freedom) and obviously lower production costs due to increased throughput and singular process. That would save at least a few hundred dollars per vehicle.

    The cells are still quite expensive now so saving 8KWh - 12KWh would save more than the additional cost of dual motors even just at the cell level and obviously moving forward the new pack designs for future vehicles would account for the difference.

    I'm not saying AWD is cheaper than RWD in absolute terms. I'm saying that the extra cost of AWD over RWD is less than or equal to the battery cells that could be reduced from the pack due to the increased efficiency while maintaining the same range.

    Again, I'm not advocating either way it's just an interesting thought experiment that had Tesla decided to leave range the same rather than increasing it with AWD, all Tesla's could be AWD for the same or lower cost of production they currently have for that same given range with a single motor.

    They've given up the marketing benefit of all cars being AWD (while not costing anything extra to produce), the increased flexibility for their designers and engineers in creating both the aesthetic look and technical structure of future cars, and the increased production efficiencies. In return they've created the option for customers to opt for a slightly increased range by choosing AWD. I'm sure there were other factors in their decision, but I have a feeling it wasn't so cut and dry and they certainly weighed both sides. Ultimately, I think the main reason they went with optional AWD is due to their desire to continue expanding range with the ability to slightly increase revenue per vehicle being a very small part of the decision (earning $4k on an option that costs $2k only increases gross profit by 0.5% on a $100k car).
     
  12. David_Cary

    David_Cary Member

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    The big assumption here is that 10% more range is actually real. I will be happy to take bets that the EPA does not agree. Probably closer to 5% which puts a wrench in things.

    2 small motors = cost of 1 large motor (roughly).

    I would think that on the Model 3, the production differential would be close to $1000. It gets tempting to make it standard for reduced battery size.

    The 4 motor concept has been out for awhile and that is the most efficient. Many do believe that the efficiency even trumps the manufacturing cost.

    Might not need to cool 4 motors. Heck, might not need to cool 2 motors on a Model 3. Wires are pretty cheap (and they can be smaller).
     
  13. jerry33

    jerry33 S85 - VIN:P05130 - 3/2/13

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    I would certainly complain. In that scenario, Tesla would have had the opportunity to increase range but didn't. The most frequent excuse I get at car shows for not purchasing a Tesla is that the range is too low. People want 400 to 500 miles of range because that's what they currently have. You can explain how a trip using SCs from Dallas to Houston (~250 miles) doesn't really take any more time than in a gas car, but they really don't believe it and they want to drive to Houston without stopping.
     
  14. Bighorn

    Bighorn Member

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    Trying to intuit the price of the new motor from the $4k up charge is a faulty premise because the customer is trading in a larger rear drivetrain, heretofore valued at $15k, for the newer small motor combo. It's unclear whether the new dual motors share an inverter, but if the two drivetrains are identical, it goes to reason that the new unit retails for closer to $9500.
     
  15. Omer

    Omer Member

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    #15 Omer, Oct 12, 2014
    Last edited: Oct 12, 2014
    They are posting these new ranges on the website in place of the previous EPA numbers so they probably are accurate.


    Exactly, and if range is kept the same battery savings would easily offset that difference.

    You're saying the exact same thing I am. I'm comparing S60D and S85D where the customer does trade in the larger motor. Using your numbers, Tesla saves $15k in retail cost for the larger rear drivetrain motor and instead installs 2 smaller motors with $9500 retail price each. That totals $19,000 in new retail price and savings of $15,000 in retail price. The difference being $4k retail price - exactly what Tesla is currently charging to make the switch. Assuming the normal industry margins on options and you get to my assumption that the cost DIFFERENCE between one large motor and two small is approximately $2k.

    Remember I'm not comparing the cost of producing P85D vs P85. In that case you have the same large rear motor and have added a small front motor and kept battery size exactly the same. I'm considering 2 cars sitting on a showroom floor:
    Car1 (S85)- has a range of 265 miles with one large motor
    Car2 (S75D)- has a range of 268 miles with two small motors

    Car2 is cheaper to produce!
     

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