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Tesla Model 3 Teardown Reveals a 'Symphony of Engineering,' 30 Percent Profit Margin (bloomberg.com)
An anonymous reader quotes a report from Bloomberg: Munro & Associates, a small Detroit-area firm that disassembles new cars and analyzes them down to the nuts and bolts, came out in April with damning findings that the Model 3 was poorly built and -- even worse for Tesla's long-term outlook -- costly to build. On that second point, at least, founder Sandy Munro has reversed course. Upon further analysis, his firm has found that the sedan can be profitable. It may even have the potential to make a 30 percent margin, which would be unmatched by any other other battery-powered vehicle. Munro said the systems that impressed him most were the tight integration of circuit board components, which he calls "a symphony of engineering," and the efficiency of the battery developed by Tesla and Panasonic Corp. Munro also pointed to a comprehensive side-by-side comparison of the parts and materials used by the Model 3, General Motors Co.'s Chevrolet Bolt, and BMW AG's i3, in which the Model 3 comes out favorably. The report echoes a teardown published in June by German magazine WirtschaftsWoche, which found that the Model 3 costs about $28,000 to build -- $18,000 for materials and $10,000 for production.
Then why isn't Tesla profitable?
Well, roughly, they have spent the last two years building up manufacturing capability, and only the last month has their manufacturing been putting out a reasonable number of cars, so the upfront costs are spent, but the income stream produced by the investment has only started. The key question is to look at Tesla's balance sheet in six months.
In more nerd terms, the "income" part of "income-outgo = profit" is a time integral, while a large portion of the outgo is fixed, so the profitability rises with time.
Will Tesla be profitable? Stay tuned.