I don't know where to start on this, I don't have much to take issue with the final conclusions because they are so broad and general and long-term, they are nearly meaningless and it seems a lot of very specific and very recent data was mined to try to a broad understanding how this might play out over time. While I applaud the discussion, I think it's a misguided way to come to the broad, general conclusions because we know there is always a cost to growth. That is best modelled in from a general case without using specific data from limited timeframes without controlling for other variables and a general lumpiness of data.
One example, the circled data in the table above represents the automotive GM% difference between Q1 and Q2 2022 of 5%. However, you are using gross margins including regulatory credits which should be backed out of such an analysis due to their high variability. Tesla recorded $344 million in regulatory credits for Q2 2022, down 49% from Q1 which was $679 million. That's a loss of around $1,200 per vehicle due to quarterly regulatory credit variation which is essentially random (not correlated to quarterly sales at all). Backing this out would have the effect of reducing the 5% drag to GM you attribute to ramp costs by over 20%.
Another example is that Q2 had a rather precipitous drop of over 15% in production over Q1 due to COVID shutdowns. That naturally had a strong downward pressure on GM's that is seperate from the drag of ramp on GM's. We don't have enough data to quantify which impacts contributed how much. But I would guess COVID shutdowns had an even stronger impact on GM's than that of not backing out regulatory credits:
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If sharply lower regulatory credits, disrupted production due to COVID shutdowns and costs of ramping all had negative impacts on GM's in Q2, but they only fell 5%, then it looks to me like those impacts might be hiding some very significant gains in terms of manufacturing efficiency (in addition to the higher selling prices and potentially other hidden positive impacts).
Using the quarter over quarter GM decline between Q1 and Q2 2022 to estimate the impact of ramping on GM's is simply not possible and a misguided use of the data we have. Stepping back and looking at the big picture is almost always more productive than trying to extract meaning by using a magnifying glass.
One large variable in terms of overall margin potential, which you correctly state is not knowable, is margin compression due to pricing pressures which would either be due to market conditions (most likely, IMO) or competitive pressures from other manufacturers (very unlikely, IMO). Either possibility can be potentially offset by further increases in production efficiency. I think this, combined with changes in market prices, is the most important variable when speaking of long-term margins and any attempt to quantify long-term margins without discussing production efficiency is suspect.
You make no attempt to quantify how production efficiency could impact Tesla's competitiveness going forward and that is
the same mistake many analysts make when they just assume all manufacturers are roughly equal in their ability to manufacture efficiently and to constantly improve that efficiency. That it must cost the same to produce a product that is comparable in functionality to a competitor's product. But Tesla's constant production innovations and optimizations have been blowing that misguided notion wide open (at least for those willing to look at the trends). That's why Tesla's current margins are so much higher than competitor's margins.
Ignoring cost to produce for a moment, Tesla's current margins are not really limited by what other manufacturer's sell their products at, margins are limited by how much people are willing to pay, how much they can afford in any given economic climate. Because there are not enough cars available of the kind people want to buy in the price range they are willing to pay. As the cost to produce continues to decline and volumes continue to rise I will suggest that Tesla's biggest competitor will continue to be themselves as they ramp volumes ever higher.
All manufacturers are not approximately equal, and this is not a static dynamic, Tesla's lead in terms of cost to produce is slowly increasing. Look at the trend of Tesla's cost to produce each car over time. I would suggest this is not entirely attributable to volume efficiencies that have been realized so far, and that will continue to accrue, but also to a superior way of looking at every challenge and the desire to take on those challenges in an efficient manner.
Elon has made no secret that he has big goals in terms of increasing speed of production throughput as well as continuing to increase the density of manufacturing in three dimensions. The reason Tesla strives for volumetric production efficiencies is because this leads directly to a reduction in the investment required for building new production facilities. This plays directly into the cost to continue ramping production and is a big deal as Tesla ramps production from 2 million vehicles/year to 20 million/year.
Not only does a smaller factory cost less to build, but more cars per day from a smaller footprint has compounding returns in efficiency. A smaller plant requires less time for people and materials to move about. A smaller plant requires less land area to clear and build (which further reduces capital expenses) and improves efficiency of movement outside the building. Any competitor who thinks Elon's next factories will be cut/paste copies of existing factories are in for a rude awakening because Elon did not go into automaking to be like the rest. Every generation is a big improvement, Elon does not believe in limitations beyond those imposed by physics itself as guided by economics. These efficiencies manifest slowly, as each new generation of plant is optimized, and production gradually increases.
The future is always hard to see, and there will be surprises along the way, some positive, some negative. But the overall trend is clear and without seeing a reason why that trend is coming to an end, I will continue to bet on Elon and his teams to continue to improve at a rate faster than the rest. The Chinese will be the closest competitors, but I don't think even they will be able to match the efficiency of the systems Tesla is implementing. Chinese manufacturing rides on Elon's coat tails which is why they invited him in to begin with. The Chinese are not infallible, they are just smart, focused and willing to work hard. If they had the vision to exceed what Elon is doing, they wouldn't have invited him in, they follow in his footsteps. At best they can match it a few years later. Never say never but the trend is your friend and I have not seen that the trend is not favorable.
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