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A low cost Tesla is coming

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A low cost Tesla is coming

A low cost Tesla. This is the new challenge for the company of Elon Musk that in fact now change your strategy to launch his robotaxi service on the market, unthinkable to implement with current models that have a price tag ranging from 57 to 140 thousand euros.


The indiscretion comes from a Tesla executive – Martin Viecha – who unveiled his company’s future plans at a technology conference organized by Goldman Sachs. The investing public and Tesla’s tough external relations policy (statements by managers, advertising and press releases prohibited) suggest that Musk himself, through Viecha (who is Tesla’s head of investor relations), wanted to give a signal to investors tired of the constant postponements of new products (from Roadster to CyberTruck).

So Viecha focused on two topics of great importance for Tesla and the electric vehicle industry over the next 5 years: battery technology and the cost of vehicle production.

The analysis

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On the first point, the manager explained that the sector will grow so fast as to make the supply of batteries much easier and cheaper. This will impact industries such as cell and battery pack construction, but also battery design and the mining and refining of lithium, nickel and other raw materials. To the point of being able to state that we are facing a “third revolution in automotive production, after the one introduced by Ford with the assembly line and that of Toyota in the 1970s with lean production ”.

Viecha then pointed out that the cost of production per vehicle is the most important metric to monitor in the coming years, stating that this is the determining factor for the quantity of cars that companies will be able to produce and for the size they can reach. Only one data to understand the speech. In 2017, each car cost Tesla $ 84,000 to produce. Over the past few quarters, the cost has dropped to $ 36,000 per vehicle. But hardly any of these savings came from lower battery costs, so the bulk of the price cut is yet to come.


And, speaking of costs, the reference to the “Made in America”, Tesla’s historic workhorse: “The first Tesla plant in Fremont, California, near Silicon Valley – explained Viecha – is not an ideal place to build cars: there are cheaper places, like Shanghai and Berlin. But we – she concluded – insist on our policy and have opened two new factories in these locations, as well as another in Austin, Texas ”.


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But it’s not just a question of “location”. Size matters: the Fremont plant accounts for about half of Tesla’s production. Here because the challenge of a low-cost electric car appears in this case more difficult than usual. Let’s not forget that, precisely for this reason, the Chinese BYD has just overtaken the giant of Musk from the throne of the world‘s first electric car manufacturer. Yet Tesla focuses heavily on the low-cost car: first because otherwise the robotaxi service would be impossible. And then because if a company wants to be a high-volume automobile manufacturer, it needs a large portfolio, meaning important sales numbers to make fundamental economies of scale.


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Not only that: while Tesla was designing the giant Cybertruck and the supercar for over 400 hours, it was blown away by the planetary success of the “small” Model 3, then repeated by the Y, and therefore was in fact forced to revise its plans, thus focusing more on the low end of the market. All without abandoning the expensive research on autonomous driving which for Musk is the real strength of his cars. That’s why talking about Low cost at Tesla is really complicated. Perhaps more than the conquest of Mars.

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