Tesla Model 3 can become profitable
Comment of the Day

July 17 2018

Commentary by Eoin Treacy

Tesla Model 3 can become profitable

Thanks to a subscriber for this article by Stefan Hajek for Wirtschafts Woche which may be of interest. Here is a section:

The Model 3 is still months away from its launch in Europe, but the German engineering service has managed to ship a few electric cars across the ocean and dismantled them into their smallest individual parts. A practice that is common in the automotive industry to keep abreast of the competition and their technology. Still, it is rare to see as much effort being made as in this case.

WirtschaftsWoche got the evaluations and laboratory results first hand – and they surprise in two respects: Firstly, the dismantling specialists estimate that the sales price per Model 3 of 35.000 to 78.000 dollars contrasts with estimated material and supply costs of 18,000 dollars plus production costs of 10,000 dollars. The more vehicles Tesla gets off the production line per unit of time, the greater the profit remains. According to the report, the targeted 10,000 shares per week (currently estimated at between 2,000 and 4,000 per week) would make a „significant positive contribution to earnings,“ says an engineer. The complete analysis and various graphics are not available online, but only in the print magazine. Still, this report will likely result in a frown or two across boardrooms of the industry today.

Eoin Treacy's view

The big question for investors is less about the cost of producing one Model 3, although this article is certainly encouraging, but whether the company can keep up with the its forecast production schedule to ensure it can meet its financial obligations. That is still a major uncertainty for the share.

Tesla bounced from above the psychologically important $300 level today. It needs to hold that level if potential for higher to lateral ranging is to be given the benefit of the doubt.

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