You started off by assuming they will get 6% net profit margin and by operating without dealership, adding another 6%. You just can't make an argument of Model 3 having more than "razor thin margin" by assuming they will have 12% without providing any reasons.
It seems to me you are assuming I'm wrong without any evidence to the contrary. Please, do prove me wrong. That's OK. But do so with something other than trite statements such as
'Time will tell.' or whatever.
As I noted before... Companies that have a 5% margin or less go out of business. I'm pretty sure that Tesla Motors does not want to go out of business. So suggesting they will offer the base version of Model ☰ either at COST or a RAZOR THIN margin is utterly ridiculous. That would be DUMB, and the people who work there are NOT DUMB. Thus, the absolute WORST margin they would aim for is 6% on the base car -- the same margin that apparently works for the rest of the entire automotive industry even to support their
'loss leaders' -- when selling at wholesale to
'independent franchised dealerships'.
You overlooked that I also mentioned expenses for traditional advertising -- which Tesla Motors does not engage in at all. They have a web page, YouTube and Vimeo channels, a Facebook and Google+ page, and Twitter accounts. Those, along with word of mouth and news coverage of a highly opinionated SuperGENIUS CEO have been enough to keep the public aware of the company -- and the kick-ass cars they build. That is all quite a bit less expensive than
'$1,500 FACTORY CASH BACK!' deals and Superbowl ads along with the supposedly prerequisite late night movie commercials on television, local newspaper ads, and incessant radio spots on every frequency on the AM and FM dial.
A long time ago, and several times since, Elon Musk has stated he does not believe the Model ☰ will enjoy the margins that the Model S has, those being in the range of 25%-to-28% or so. He said they would likely be lower, between 10% and 15%, then corrected that to say about 12% might be sufficient. That makes sense, because if the base version of the Model S is $70,000 then the proportional margin on a car that cost half as much at $35,000 would be about 12% instead of 25%. So, no... I didn't pull that number out of my [BUM]. It was a stated target by the CEO of the company -- around THREE YEARS AGO.
This being a Tesla Enthusiast forum, I sometimes presume that others have rabidly consumed any and all sources of video, audio, and written coverage of Elon Musk and Tesla Motors as I have. As such, I expect they are already aware of such statements. Please, try to find a way to forgive me if you are unaware of them, and stuff. But really, I kindasorta know what the [FLOCK] I am talking about here.
How much does the battery cost?
Less than anyone else in the world for the given capacity thanks to the Gigafactory. I would guess somewhere between $6,600 and $8,750 as internal cost, dependent upon capacity.
Designed and built in-house from naught much more than copper wire from less material overall than goes in a Honda 600cc motorcycle engine.
Designed in-house and assembled at Fremont from components ordered from various high volume electronics suppliers. Having connections to the Silicon Valley industry has its benefits.
Not really built that way... But if we must... A traditional
'glider' would be the entire car less engine and transmission. The analog for Tesla Motors would probably be the entire car less the battery pack -- because really, the motor(s) and inverter are kind of cheap. Considering the intended profit margin, I calculate this will come to about $22,000 -- or right in line with a BMW 3-Series Glider.
Luckily, due to the strict
'NO [ICEHOLES]' hiring policy in management, there is no union to muck things up, and employees get to keep those
'dues' to themselves -- happily. So, Tesla Motors gets to pay a fair wage to everyone on the line. Perhaps a bit more than they would pay someone in Texas or Mississippi, due to the location in California, but certainly no worse than anyone else that manufactures here.
It costs what it costs -- and is a one-time expense. Simplifying the design for easy manufacture will reduce the amount of tooling needed to build the cars. Every vehicle you build over the course of eight years allows its initial cost to be absorbed that much more readily. Not a problem at all.
It's the cost of doing business. Building a better car to begin with will limit exposure. And Consumers should not pay for a manufacturer's mistakes. This is different from traditional automobile manufacturers, who would be happy if the service departments at
'independent franchised dealerships' charged people up the ying-yang for spare parts until something becomes an official recall or class action lawsuit issue.
Will they be at a disadvantage with their suppliers in terms of buying parts because they are not buying the same parts several millions units a year and if so how big is the disadvantage?
Not any more. As long as a supplier isn't informed in a back room, under-the-table, back-door, threatening fashion that they will lose major contracts for Corolla, Cruze, or Civic by working with Tesla Motors? It is of no concern. Tesla Motors has made a name for themselves now. It is now a point of prestige that they choose your components to build their cars. And hundreds of thousands of Reservations 18-to-24 months ahead of Delivery make it really easy to say,
"Yes. We've got you covered," when Elon Musk calls.
Also, yes they don't need to cut their profit for dealership, but they are spending money on renting the stores and paying those employee. At the end of the day, how much less are they spending to achieve the same goal of selling cars?
The point is how much less the Consumers pay for the same car. No need to haggle. No need to navigate a minefield of up-charges. No need to pay 8% or more above MSRP for the privilege of having an
'independent franchised dealership' hold your hand during the process. If a car is popular and desirable, those guys will claim a bonus with a markup to
'What the Market Can Bear' in a heartbeat or less. Stick a Cadillac, Lexus, AUDI, Porsche, Mercedes-Benz, or BMW emblem on the Model S or Model X today and their prices go up by $100,000 overnight regardless of trim level for sales through
'independent franchised dealerships' while their sales drop to 25% of their current totals. The very same would happen to the Model ☰. That doesn't help The MISSION one bit.