Blog Musk’s Favorite Analysis of Model 3 Says Material Cost is $18K

Tesla CEO Elon Musk called the work of a German teardown company the “best analysis of Model 3 to date.”

German magazine WirtschaftsWoche talked to a rep from an engineering firm that bought a Model 3 with the intent to rip it apart to study its parts and construction.

https://twitter.com/x/status/1002270980755013632

The firm said materials used in the Model 3 cost around $18,000 per vehicle. Estimating $10,000 in labor costs, the total price to build a Model 3 would be $28,000. Retail price for the Model 3 is expected to range from $35,000 for the base model to $78,000 for the performance version.

“If Tesla manages to build the planned 10,000 pieces a week, the Model 3 will deliver a significant positive contribution to earnings,” the test engineer said.

When asked on Twitter if the Model 3 cost to build could come down to $28,000, Musk said “Definitely.”

The article also suggested that Tesla may have a competitive advantage with its battery design. Lab results reported by the magazine showed that Tesla’s 2170 cells for the Model 3 consisted of 2.8% cobalt, 65% less than the industry average of 8%.

“Tesla has obviously succeeded in significantly reducing the share of the notoriously scarce metal cobalt in the batteries of his new Model 3,” the report said. “That would be a significant competitive advantage for Tesla. Cobalt is currently very difficult to get on the world market.”

 

[Kingdragon8]

Seriously! That is just about the cost of the battery alone! At about $225/KiloHour and 75 Kilo/Hour battery pack is just over $18,000. Model 3 will certainly enjoy some "Early Adopter Premium" dollars for many more months (not years) and as such higher margins...but the overhead and fixed costs will never show the vehicle profitable over its life cycle.

 

[thx1139]

$10K for labor costs. $100 per hour that is 100 hours per car. 1000 cars per week that is 100,000 man hours per week. 5,000 cars per week is 500,000 man hours per week.

Doesnt that seem inflated?

 

[adaptabl]

$10K for labor costs. $100 per hour that is 100 hours per car. 1000 cars per week that is 100,000 man hours per week. 5,000 cars per week is 500,000 man hours per week.

Doesnt that seem inflated?

500,000 / 40 per week = 12,500 people. 3 shifts = 4166 workers per shift. Not sure how close that is? That is all workers from those at the factory, the battery plant and any other sites to work on parts for the cars.

That materials cost does seem pretty low. Maybe without the battery.

 

[JeffK]

Meh, if they really are getting the battery costs to under $100/kWh at the pack level, then you're talking, what, $7600 for the battery.

 

[techmaven]

Seriously! That is just about the cost of the battery alone! At about $225/KiloHour and 75 Kilo/Hour battery pack is just over $18,000. Model 3 will certainly enjoy some "Early Adopter Premium" dollars for many more months (not years) and as such higher margins...but the overhead and fixed costs will never show the vehicle profitable over its life cycle.

So you just make up numbers and throw them against the wall to see what sticks?

Model S/X pack all in costs were less than $190/kWh. At scale, the Model 3 pack should be well under $140/kWh. The base model's pack cost is therefore closer to $8,000 each and that includes the cost to make it.

 

[techmaven]

$10K for labor costs. $100 per hour that is 100 hours per car. 1000 cars per week that is 100,000 man hours per week. 5,000 cars per week is 500,000 man hours per week.

Doesnt that seem inflated?

Likely this includes supplier labor... not just assembly labor.

 

[thx1139]

Likely this includes supplier labor... not just assembly labor.

Supplier labor would be in material cost. Invoice has the cost of the product which includes the labor to produce the product.

 

[thx1139]

Has anyone seen a teardown for similiar ICE vehicle? Since EV car is simpler with less moving mechanical parts the costs should be lower then an ICE car for everything besides the battery.

 

[Kingdragon8]

So you just make up numbers and throw them against the wall to see what sticks?

Model S/X pack all in costs were less than $190/kWh. At scale, the Model 3 pack should be well under $140/kWh. The base model's pack cost is therefore closer to $8,000 each and that includes the cost to make it.

Accuse me of inventing numbers..."should be" and "are" simply are not the same !? Regardless, the analysis is stunningly in error....labor, material,ugh! Seems a little self serving to me. At $200/KH that's still $15,000 for JUST THE BATTERY!

 

[JeffK]

Accuse me of inventing numbers..."should be" and "are" simply are not the same !? Regardless, the analysis is stunningly in error....labor, material,ugh! Seems a little self serving to me. At $200/KH that's still $15,000 for JUST THE BATTERY!

According to Elon the Tesla packs for Model 3 are the highest energy density and the lowest price / kWh in the industry. Logic dictates that if the old packs were "below" $190 / kWh at the pack level in early 2016 then it stands to reason that current packs are even less. Keep in mind at the same time early 2016 GM was getting $145 / kWh at the cell level from LG.

GM also sells the replacement 60 kWh bolt pack to suppliers for $10-11k which includes a markup.

We also know that currently VW is writing contracts for around $124 / kWh (as of March 2018)

 

[TT97]

The cost of the batteries (whatever that may be now) is for the battery pack and not just the material. As Tesla produces their batteries in-house, the cost of the batteries includes labor so as a percentage of the cost of the car, you need to evaluate it as a percentage of the $28k, not the $18k.

 

[Kingdragon8]

The cost of the batteries (whatever that may be now) is for the battery pack and not just the material. As Tesla produces their batteries in-house, the cost of the batteries includes labor so as a percentage of the cost of the car, you need to evaluate it as a percentage of the $28k, not the $18k.

That's technically true....however, typically an assembly shipped to an assembly plant is considered "In-House Purchased Material Cost" and includes all the labor, overhead, materials, capital, etc.,, and many times a "market type" markup to make the In-Housed supplied parts a profit center.

 

[azred]

Seriously! That is just about the cost of the battery alone! At about $225/KiloHour and 75 Kilo/Hour battery pack is just over $18,000. Model 3 will certainly enjoy some "Early Adopter Premium" dollars for many more months (not years) and as such higher margins...but the overhead and fixed costs will never show the vehicle profitable over its life cycle.

Nice analysis. Why not publish it in Seeking Alpha?

 

[ilg]

Seriously! That is just about the cost of the battery alone! At about $225/KiloHour and 75 Kilo/Hour battery pack is just over $18,000. Model 3 will certainly enjoy some "Early Adopter Premium" dollars for many more months (not years) and as such higher margins...but the overhead and fixed costs will never show the vehicle profitable over its life cycle.

Let's see, now...

$225/KiloHour x 75 Kilo/Hour = [cancel out the Kilos, multiply the Hours...] $16875/Hour^2

Costs are accelerating exponentially! Tesla is dooooomed! Doomed, I say!

 

[Fusion]

So we are way over paying? haha har har

 

[SageBrush]

That is just about the cost of the battery alone!

That is the bloated retail cost.
Look at the battery upgrade costs for the Tesla Semi to get a closer idea of Tesla manufacturing costs.

At about $225/KiloHour

A What ? Getting your units straight might help in your cost analysis.

 

[Electroman]

At about $225/KiloHour

If you want to just make up a number, I suggest make it big.. like $528/KiloHour or something. That way even the performance versions will not be profitable. Go big or go home.

 

[SageBrush]

If you want to just make up a number, I suggest make it big.. like $528/KiloHour or something. That way even the performance versions will not be profitable. Go big or go home.

I'll play. $3000 per GigaGoogle !

 

[Electroman]

$225/KiloHour

Actually I like this unit. Like $225 per 1000 hours. I believe thats the rate for child labor in Congo to mine Cobolt. Yes, I read that in Seeking Alpha. Now it all makes sense.