Can the Tesla Model S be profitable at $57,400? Not according to these calculations...
by Sebastian Blanco on Apr 29th 2009 at 7:57PM 
Tesla Model S – Click above for high-res image gallery
Tesla Motors' charismatic frontman, Elon Musk, will be showing up on the Late Show with David Letterman tonight to dazzle America's TV audience with his gorgeous all-electric sedan. Tesla says that when the Model S goes on sale at an undefined point in the future, the cost for the base model will be just under $50,000 – $49,900 to be exact – after a $7,500 government tax break. Business Insider has a word for that: Horsefeathers.
BI teamed up with Mark Boyadjis, an auto analyst at iSuppli, and they did some math based on actual numbers used in the auto industry and a lot of educated guesses. The result? They didn't exactly find a lot of room for profit if the car sells for $57,400. Their math is based on at least one error – they say the replacement battery for the Roadster is $36,000, but that's a carry-over mistake from Edmunds – it's actually $30,000. Still, that's the equivalent to the base price of an entire "near luxury" sedan – one that conventional automakers have trouble making margins on. That big, sexy touchscreen? Estimated to cost $4,000. Add everything from chassis and body panel costs to in distribution, marketing, further engineering, and lest we forget – building a factory, and Musk's price target starts to look more and more implausible.
BI has a good point here – Tesla needs to be careful with their pricing predictions. The ambitious startup made big financial mistakes when pricing the original Roadster – which didn't make everyone happy – and there's not a lot of room left to goof up a second time.
Gallery: Tesla Model S
[Source: Business Insider]
Reader Comments (Page 1 of 4)
2004m3driver 8:06PM (4/29/2009)
At 50k it would dominate its segment. I knew it was too good to be true even though some of those guesses were a bit too exaggerated. Touch screen for 4000? You can buy a 22" touchscreen from HP that includes a computer for 1400 dollars retail right now.
However, without the exaggerations I can't see them selling a nice looking high tech sport sedan for that price without taking a bit of a loss.
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Paul 9:23PM (4/29/2009)
iSuppli is INFAMOUS for pulling numbers out of their asses (oh, sorry... "educated guesses") They price components out at sticker price retail costs. I thought they only made these off base cost calculations on cell phones and video game consoles, I guess they do cars now too.
zamafir 11:04PM (4/29/2009)
So autoblog's correcting the miscalculation on the batteries, does that mean at least $6,000 profit per car? if so that's better than honda's insight and toyota's prius according to... autoblog:
http://www.autobloggreen.com/2009/04/28/honda-toyota-make-3-100-profit-on-each-hybrid-sold/
lawstud 11:42PM (4/29/2009)
The battery is not $30,000 for Tesla, but 30K for replacement for a customer. There is a mark up there.
When the company was overhauled awhile back an investment banker from one of the capital venture firms said the battery was costing $20,000 per car. This model S has a smaller battery pack as standard with the option of a larger one.
The $36,000 figure is horse manure. Try $13,400 per car a little birdie told me for the base 160 mile range one.
Randy915 12:29AM (4/30/2009)
If these calculations are correct then I wouldn't be surprised if they charged $2,000 5K maintenance.
why not the LS2LS7? 2:10AM (4/30/2009)
lawstud:
Your numbers sound low for a 160 mile battery for this car. But either way, I don't think you are accounting for the oddball pack that Tesla uses. Perhaps if they used a straightforward pack with large cells like the Volt, but this isn't like that.
The Model S pack in this car is shorter in range, but it isn't much smaller in capacity, it loses quite a bit due to the larger size of this car. I think the small pack in this car is 48kWh and the Roadster pack is 53kWh.
Ligor 8:30AM (4/30/2009)
to add to this,
- all automakers request millions of dollors worth of testing to accept a suppliers parts. I am willing to bet Tesla is accepting the parts with minimal if any testing at all.
- Say if you have a ABS/VSC packaging module that usually will cost other companies about $100-150 dollars, half of which is usually all the testig that has to be done, so if tesla is smart they'll accept a module already in use to someone else with different software without any environmental testing
- they'll likely do ths for may pannels as well- they can ask the company that's making it, what is used in such and such car? they tell them, so they use the same material and everything and all they really need to do is verify the dimensions
- I very much doubt if Tesla is testing many of their components, including the touchscreen, which somehow these retartd are saying is $4k?
- please, you can replace any tough screen navigation on any MB right now for less than that, and that's the consumer price. MB likely payed about $200-250 dolloars for it.
- stop with the BS estimations.
Lucas 8:14PM (4/29/2009)
Begin irrational Tesla Hate in 3,2,1..
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AMcA 8:16PM (4/29/2009)
It's not hate. It's reality.
I'd love to see this car at that price. But it's not realistic, not by any stretch of the imagination.
Lucas 8:24PM (4/29/2009)
People love to hate on Tesla and wish them trouble. I don't get it.
why not the LS2LS7? 8:41PM (4/29/2009)
It's not hate. It's an attempt to burst the bubbles of those who willingly kid themselves in order to give a justification for their condemnation of other companies.
"If Tesla can make the Model S for $50K (usually quoting the wrong figure), why can't GM/Chrysler/company I hate do the same?" Or better yet "If BYD can make a car just like the Volt For $21K, why does it take GM 4 years and $40K to make a Volt?"
People like me have the (probably mistaken) idea that if we can make people understand that their assertion in their question that a company has made a profit doing this is incorrect, it easily shows why no one else can either. Tesla is losing a lot of money, and they're very likely to lose money on this car too, even with the smaller battery. BYD announced a car, made it in tiny numbers, but they likely limited the numbers since they make a loss on each one and because this way, they use the vehicles sold as test beds so they can find the problems in the vehicle before they make it in larger numbers.
Musk wants you to think that Tesla is currently a viable company because he needs to do this in order to get money from the DOE next month. But there is significant evidence that it is not true.
tankd0g 8:54PM (4/29/2009)
Yes America, you should like being lied to. Pony up those tax dollars, bend over and like it.
Jared 10:03PM (4/29/2009)
It's not hate. Tesla has always been overoptimistic. We're just pointing out that Tesla still hasn't learned its lesson and continues to make unrealistic projections. That lack of reality will end up crushing Tesla.
They can't make money on the Roadster, which is a much simpler car and is priced much higher. There is no way they will be able to make money selling the Model S for $57k.
homunculus 10:05PM (4/29/2009)
There are Big 3 fanboys/employees/devotees here, any competition, foreign or domestic, must be dumped on.
Jared 7:15AM (4/30/2009)
homunculus: I don't work for the big 3 or the auto industry. I never have, nor has any of my family. I drive a Toyota. I'm not a big 3 fan boy.
None of that changes the facts concerning Tesla:
- the Roadster was years late coming to production.
- Tesla has admitted that they are losing money on the Roadster.
- the Roadster is based on a Lotus platform and the bulk of manufacturing is performed by organizations other than Tesla.
- the electric motor and bulk of the drivetrain is not manufactured by Tesla.
In contrast, the Model S will not be based on an existing platform. It is a much larger car, which will require a larger battery pack. It will thus be more complex and more expensive to produce. If they can't build a Roadster and sell it profitably for about $100k, how are they going to build a more complex and larger Model S and sell it profitably for $57k?
AMcA 8:14PM (4/29/2009)
Absolutely right. If the Volt's 40 mile battery is going to cost somewhere near $20K, a battery sufficient to give the Model S even a 100 mile range would run pretty darned near the proposed $57,000 pricetag. And that's the battery alone. No car to put it in.
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PyRo1509 8:15PM (4/29/2009)
wow that touchscreen is 4k?
bling bling.
But im excited for the model S. REALLY EXCITED
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Brian 8:20PM (4/29/2009)
Has Isuppli lost their mind?? $4,000 for a standard 17.1" widescreen multi-touch screen?? What in the world are they smoking??
I work in distribution, and am specifically an LCD and display specialist, and there's no way that thing would even get close to $4,000 for a screen & touch screen. Not with the best technology out there. 17.1" LCD's are standard laptop sizes that have been so hammered by pricing wars that you can get a 17.1" LED backlit display from Samsung for less than $100 per panel right now. That's not even in large quantities.
Even the most expensive multi-touch platform from 3M or Touch International is only going to run $150-200 per. You add a touch controller, which may not even be necessary, and even if you optically bonded the thing to the screen, you're still running sub $1000 per screen.
I highly doubt they bond the screen, so you're more likely to see that thing run around $500-600 total for that touch screen.
If that's the case, I wonder how much other "padding" they put into that battery number.
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dolphinstatic 8:20PM (4/29/2009)
Let's take a look at what they did wrong. A: the battery. Actually that's all they did wrong. They're using the base model cost of $50k and using the premium battery cost to do their math. The base battery is a smaller unit than in the Roadster with only a hundred or so miles to it per charge. This battery will undoubtedly be cheaper than the high performance 250 mile battery in the roadster and 300 mile battery touted as the high end Model S battery. I'd guess this battery would cost closer to $15k than $30k. The power-electronics systems should be cheaper to because it won't have to handle as much current at any given time to accelerate the car in under 6 seconds compared to the roadster in under 4.
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why not the LS2LS7? 8:24PM (4/29/2009)
The Roadster is not under 4 (the "sport" version supposedly is), and this vehicle needs a lot more power than the Roadster at equivalent acceleration rates.
I agree with you about the battery pack. One of the more annoying things about the Model S is that Tesla managed to write language that confused news outlets into not noticing that you got a small capacity battery pack with the model that costs "only" $57,400.