Tesla has managed to reduce the cost of producing its cars by gradually optimizing assembly lines. The brand is now profitable and generates good margins.
Profitability in the automobile industry depends directly on the manufacturer’s ability to reduce production costs. There are several solutions for this: set up robots (a specialty of the Germans…) and ultra-optimized production lines to eliminate the slightest loss of time, space or manpower. And then there remains the solution of manufacturing electric cars, which require less staff due to their reduced number of spare parts compared to a car with a combustion engine. Tesla seems to have found the right path in 2021, since the operating margin increased to more than 14% in the second half : it’s more than BMW, Audi or Mercedes.
How much does a Tesla really cost?
The “COGS” (cost of goods sold), literally the “cost of goods sold” makes it possible to estimate the cost price of an industrial product for a manufacturer, excluding certain expenses: marketing/advertising, and the salaries of salespeople. . For Tesla, these two areas are reduced to a trickle, since the manufacturer does not advertise, while the number of concessions and sales representatives is greatly reduced compared to a conventional brand.
COGS per vehicle in 2021 at Tesla was $36,000, and this includes the Model 3, Model Y but also the Model S and X, even if these cars sold less. $36,000 is lower than the selling price of an entry-level Model 3 (excluding bonuses, which, we recall, come back to the customer’s pocket and not to the manufacturer), and much lower than that of a Model Y.
Margins probably won’t be able to sustain at such high levels over the long term as cheaper models arrive, but Tesla has time: Elon Musk has confirmed that the Model 2, which should be produced in Europe, is not currently not on the schedule. The Californian giant is too busy with its factory constructions, new battery technology and managing shortages.