A car that costs 80 percent as much to produce as another can't be half the price. That's the simplistic version why Stanphyl Capital Management says Tesla Motors will not be able to sell its "mass market" sedan for the low, low (by luxury electric-vehicle standards) Elon Musk-backed price of $35,000. In fact, the California-based automaker will take about a $13,000 bath for each unit it sells of the new vehicle, now referred to as the Model E.

Stanphyl Capital Management breaks down the fourth-quarter costs and revenue associated Tesla's Model S, of which it sold about 6,900 units during the last three months of the year. In a nutshell, Tesla generated a whopping $106,000 per vehicle sold, with about two-thirds of the company's gross profit coming from battery and optional upgrades. And while Tesla may be able to get the Model E battery costs down to about $8,100 compared to the $15,600 cost of the Model S battery (the smaller car will use a smaller battery that will provide about a 200-mile single-charge range), all of the other stuff brings the Model E's unit cost up to about $48,000. That compares to the $59,600 average cost of a Model S. Fremont, we have a problem.

Reports came out in December saying that the Model E may be unveiled at one of next year's auto shows and sales could start as early as 2016. The argument against the possibility of a $35,000 Model E may sound reasonable on paper, but more than a few people have lost money betting against Elon Musk. You can read more at ValueWalk.


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  • 97 Comments
      Rotation
      • 9 Months Ago
      Oh Danny. You're going to take it in the shorts for posting this. But I concur. There's no way the car makes this price figure. With with a "200" mile range. Even discounting that to 160 miles, it's just not going to happen. The cost structure isn't there. Tesla bumped the price on the Model S twice and dumped the lowest end model, they once claimed a price for the car of $49.9K (after $7500 subsidy) and you can't get one for under $63,570 right now (after $7500 subsidy). And they still are suffering from low gross margins (although improving) and may suffer from a reduction in emissions credit sales in the future too. The Model E will have to be delayed a lot, increased in price a lot or both to make this figure. My guess is a little of the first and a lot of the latter. I fully expect this car to end up costing $49.9K before subsidy and before options. Expect a 40kWh battery, hopefully with a chemistry that allows some pretty beefy supercharging, although probably still not making it up to 90kW.
        jeff
        • 9 Months Ago
        @Rotation
        Elon does miss his goals some times, but he also does what other claim is impossible just about as often.... I think the 200 mile car will land in the $40-45K range..... But who knows...
        purrpullberra
        • 9 Months Ago
        @Rotation
        Gross margins are over 25% and getting better and better. That margin is higher than virtually every other car maker. And with production increasing 10 fold the costs for most everything will decrease dramatically, the way it always happens, since the beginning of economies. There is nothing special about the increases/decreases we expect from Tesla. You can choose to not believe it but you can't claim margins are poor. And the credits have nothing to do with margins; that is an admission that you are just TROLLING with this post, much like the article itself. I'll take your bet. How late do you think the ModelE will be? Past 2017? And $49k for the base price, ok. Shall we make it for a $20 donation to a charity? I hope you like feeding elderly people's pets cause that's what you'll do. :-)
          Rotation
          • 1 Day Ago
          @purrpullberra
          No, that margin is not higher than virtually every other car maker. There are a lot of after-sale expenses which pare the profit down, you need a higher gross margin than that. And Tesla has more of those than other companies due to their many service campaigns to fix issues in the cars and the supercharging buildout and operation costs on top of that. So yes, margins are poor. They are getting better though. That's good. The cost of most everything will not drop off a cliff if they go 10x on the production. Much of the cost of the car is materials and those don't get wildly cheaper. It will reduce their costs of production, but they'd need more than that to meet the price targets. What are you talking about the credits have nothing to do with margins? They would have to sell the car for $7500 less to make the same sales if you just removed the one credit. And that's just in the US, the difference is far larger in some other countries like Norway. So yeah, the credits have a ton to do with margins. They have a ton to do with margins for Tesla, GM, Nissan, Ford. Everyone who sells an EV or PHEV. The entire point of the subsidies is to increase margins and this make it possible to viably sell EVs/PHEVs! So yes, the credits have a lot to do with margins. Take my bet? I didn't offer a bet. But yes, that is $49K for a 40kWh-ish car. There may be a lower-capacity model, but given that isn't what Tesla originally specified as the Model E that's not what I'm predicting for. Yes, I guess I'd say no significant sales before end of 2017. Squeaking out a few cars like with the Model S did before the end of 2012 wouldn't count. But again, no bet. I'm not interested. If you would like me to give $20 to feed elderly people's pets I'll do it right now, regardless of the any bet. Just tell me the charity.
      David Murray
      • 9 Months Ago
      I'm not following this.. I mean, where do they come up with the idea that the Model-E will cost 80% as much to build as the Model-S? I mean, the Model-S has a bunch of luxury items that could be cut to reduce price. I mean, if the battery is going to cost around $8,500 or so, then that still leaves another $20,000 or so to make the rest of the car. However - I've said it before and I'll say it again. The base model of the Model-E might have an MSRP of $35,000 but you can bet it will be stripped bare and if you want any options at all you'll be looking at $40,000 to $50,000 for a better equipped version. The base model will just be there to make the starting MSRP look good. Of course, Nissan tried that with their Leaf-S and it turned out that there was more demand for the stripped down version than they originally thought.
        Rotation
        • 9 Months Ago
        @David Murray
        What luxury items? The Model S is the least luxurious car in its class by a longshot. It has a lower level of features than even a Ford Fusion. Sure, you can take the fancy door handles off. You can cheapen up the key fob (and make it stop breaking at the same time). You can even take off projector beam headlamps. I really can't think of other items which add a lot of cost they can remove which won't put the Model E below the level of amenities you find in a typical car nowadays.
        Spiffster
        • 9 Months Ago
        @David Murray
        Totally agree, 20K should cover the rest of the car along with a smaller electric motor, and less amenities, leaving a healthy profit margin. Completely doable IMO.
      Ziv
      • 9 Months Ago
      I doubt the E will come out in any form for $35k, unless it is a stripped down version with just 100 miles of AER. And that might be a wise play for Tesla to make. If they only sell full utility Model E's with 200+ miles of range, they will take a PR hit because they will probably cost at least $40k. So sell a gorgeous Model E with a 25 kWh battery at $34,900 and a full utility E with a 50 kWh battery for $39,900, if possible. But as has been noted, it is impossible to say now what BEV's will cost in 3 years. There are just too many drivers pushing the prices down at various rates, and a few that may push prices up, (or at lest minimize the otherwise steady reduction in price).
        j
        • 9 Months Ago
        @Ziv
        Does your 35 to 39K analysis take in to account the next three years of continuing battery price drops of over 10% each year? The mass production advantages of building at Model E scale? The 30 - 40% reduction of battery prices that results from Tesla having it's own battery factory? Or the year of additional cost reductions while Tesla sells it's high margin founders and high end Model E versions exclusively? Or is the conclusion just as random as, "But as has been noted, it is impossible to say now what BEV's will cost in 3 years" makes it appear to be?
      ferps
      • 9 Months Ago
      My guess is that a 40kw version will have a base price of $39.5k, and that will be a stripped down version lacking many basic features (think of the BMW 320i).
      purrpullberra
      • 9 Months Ago
      What a funny line of 'reasoning'. As if things aren't getting MUCH cheaper for Tesla to buy. And, gee, going from 30k cars built and sold to 300,000 doesn't seem like there is room for costs to come down more, oh wait, that's exactly what happens. I'll listen to any good arguments but this is just silly. This type of report is so easy to see through and the bias with which the 'conclusion' is drawn is so obvious that this 'source' should be stricken from the record. So that means ABG and Dummy King will keep up slinging this crap around. Sorry, Danny King. Big difference.
      Cavaron
      • 9 Months Ago
      So, they say that Tesla can't build a 27k electric car (battery excluded) with profit? I can think of tons of cost reductions for Model E compared to Model S. Here are some: - You will need less aluminum and other resources for a smaller car - You can even use - If you use as many parts as possible for all three cars, you can get a much better price (like for 300,000 units compared to for now 20,000-30,000 units) - some premium parts can be replaced with standards (like the door handles, manual keys and trunk-opener) - the large center screen can be replaced with a dock for an android tablet/ipad you already have - standard charger just supports 2 to 3kw charging and there's so much more...
      2 wheeled menace
      • 9 Months Ago
      One company's speculation is not fact. I know that Musk has a lofty goal here, but when you consider that the Model S with a 40kw-hr battery would have came in at around $60k, a dramatically lighter and smaller car for $35k is not impossible at all, especially with battery costs going down in the future. I did ask Danny to post something that craps on Tesla though, so that i could more easily afford to buy stock, so thanks. I know that he's always willing to do this job. :)
        2 wheeled menace
        • 1 Day Ago
        @2 wheeled menace
        Depends on the design. The EV1 could go 160 miles on 26-28kw-hrs. If you threw a 40kw-hr battery into a EV1, you could have a ~230 mile range. Now consider that today's batteries are half the weight as that old NiMH pack, and Tesla's cars are using Aluminum frames instead of steel. Take that EV1 and subtract 1000lbs off of it. How far does it go on a charge now.. 250-300 miles? I see 200 miles on 40kw-hrs as being possible. It's just going to take serious aerodynamic optimization to get there ( though, not as extreme as what was on the EV1! )
          2 wheeled menace
          • 1 Day Ago
          @2 wheeled menace
          I don't know. Look at bicycles. An aluminum frame bike can come at a surprisingly low cost today. But that wasn't always the case. Keep in mind that a Model E is going to be a lot smaller and thus require significantly less materials to produce. I think that a $35k figure for a 200 mile range car is a definite stretch.. I believe that you can come close, though.
          theflew
          • 1 Day Ago
          @2 wheeled menace
          I agree with what you say, but an all Aluminum frame isn't going to come cheap. Things that can be done for a $75K+ car aren't as easy when you're trying to mass produce.
        Spec
        • 1 Day Ago
        @2 wheeled menace
        Well, the 40KWH Model S would not meet the 200 mile range goal if they are going by EPA standards.
      • 9 Months Ago
      That assessment is based on the rather ludicrous assumption that the Model E *is* a third generation Model S with mass produced batteries and a somewhat smaller frame. But the world is full of sub-$27000 entry level cars that could easily accommodate that estimated $8000 battery pack and cost $35000. Why do they assume Tesla is incapable of doing something every major car manufacturer in the world has been doing for ages? The rest of an electric drivetrain is actually cheaper to manufacture than a gasoline engine due to a much simpler, smaller, and less fire-containing design. It doesn't even use a shifting transmission. So there would be plenty of cash left over to add niceties like aluminum bodies and infotainment systems without turning it into a Model S. The Model S will continue as Tesla's luxury sedan. They're not giving up that cash cow.
      purrpullberra
      • 9 Months Ago
      From what I understand, after 3 years of the same type of improvements the current battery has undergone the smaller battery pack range will be 200 miles. Elon has said that they don't need any special breakthroughs with battery tech to get to 200 mile range in the ModelE. I may have misread that but I don't think so. And if it is what he said I have no reason to doubt him. Which is partly why you get so many people willing to believe him. But one still needs a bullsh1+ detector for Elon since the hyperloop for example is pie-in-the-sky dreaming. But the roadmap to ModelE is something almost exclusively grounded in reality.
      Joeviocoe
      • 9 Months Ago
      No need for a BS detector for the hyperloop... he said he would not be pursuing it. That is all the info you need to know, to get that it is just a concept.
      danfred311
      • 9 Months Ago
      Keith, you're a moron. I many times said that shorting was too dangerous. It's on the record although because AB has some idiots most of my comments of the past may be deleted. A bit better minds than you can however vouch for the fact that I warned against shorting. And I most certainly didn't short either. I haven't moved any goal posts. You should probably think before you speak. It's true that I didn't accurately predict the sales 3 years in advance but I myself pointed that I out, you didn't have the mind to remember and as I stated that prediction was before the design and performance was known. Both of which were very decisive. My stances are on the record in thousands of comments, feel free to refer to the truth.
      Andy Smith
      • 9 Months Ago
      As far as I'm concerned they have always aimed between 30-40k for the model E..Add extras, possible range upgrades and they may still hit iprofitability...add in the slightly reduced costs of components, a streamlined factory and the future giga factory and it's not exactly a pipe dream
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