Tesla success hinges on Model 3 margins

Discussion in 'Tesla' started by Domenick, Oct 12, 2017.

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  1. Domenick

    Domenick Administrator Staff Member

    Analyst Says Be Wary Of This With Regards To Tesla Model 3

    A large new report from Bernstein’s Toni Sacconaghi goes in depth on Tesla's future prospects. According to it, Model 3 margins will be the single most important indicator of the company's health.

    Since Model 3 production will be a large chunk of Tesla's short term revenue, this sounds like a pretty reasonable conclusion. Interestingly, this 25% figure is much higher than one Elon had originally forecasted. Of the top of my head, I believe he had said to expect something like a 17% gross margin on the Model 3. Later, he increased this significantly to 25%.
    Last edited: Oct 12, 2017
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  3. wavelet

    wavelet New Member

    It's obvious the Model 3 is a make-or-break moment for Tesla -- if it fails in the market, for any reason, Tesla won't be around in 2 years because nobody will give it any money to try anything else.
    Of course the Model 3's margin is a key issue -- the intended volume is large enough that it can't be subsidized, either by additional investor money or Tesla's other models, and shareholders are going to expect this car to fund Tesla going forward.
    All that said, it's way too early for any conclusions about the profit margins... The production isn't fully automatic yet, subsystems may end up having to be redesigned or sourced from other suppliers; if a recall turns out necessary in 1-2 years, that could change the entire picture. So could competing models being cheaper than expected -- Tesla will have to lower margins to compete if that happens.
    Until the are half a million Model 3s on the road for 4-5 years, so the real sales volume, ASPs, option mix and warranty costs are known, the analysis is bogus.
    Domenick likes this.
  4. scottf200

    scottf200 New Member

    The Model 3 is a big moment for sure but saying Tesla wouldn't be around ignores it's growing home powerwall and business/utility powerpack market. The gigafactory produces these and they are highly competitive and successful.
    Domenick likes this.
  5. I recall 15%. He has likely said both at different times.
  6. Josh Bryant

    Josh Bryant Member

    15-20% was the GM range I remember i.e. 10% less than Model S target range.

    Personally the $9k battery upgrade smells like where most of the gross margin will come from. There is probably $5k right there. So 10% GM on 50k ASP.
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  8. Feed The Trees

    Feed The Trees Active Member

    There is clearly no turning the clock back for Tesla. They bet the farm on the 3, they can't go back to niche player in the high end market trying to snipe sales from Benz et al. They owe too much to too many and their share price relies on it. It's M3 or bust from here on out. If they don't resolve production hell in a hurry then they are going to lose to Nissan and others.

    They have been handing off the first copies to employees under NDA. Smart choice but nobody who doesn't have skin in the game has had a chance to own and review one thoroughly. Great beta testers because you have them locked up under NDA and stock price for incentives, but the general public has not weighed in yet. Bring on the Bolt vs 3 vs new LEAF vs whatever reviews and let people decide which company to choose from.

    It'd be one thing if a well grounded marque was offering the 3 but Tesla is so live or die right now that if I were Joe Schmo dropping $45k +/- on a car it would not be with a company who may be folded up soon. When Saab was going out you could get cars half off, not with big margins. I hate to say it but I think the established makers will beat the 3 at it's game. Which isn't a bad thing overall in the end, just a bad thing for Tesla. They may well succeed on moving the chains but they won't be there when the game ends, they will be in the locker room under concussion protocol.
  9. scottf200

    scottf200 New Member


      • Headlights – 2:34
      • Aero Ducts – 3:15
      • Roof Rack Attach Points – 3:36
      • Wipers Detail – 4:26
      • Exterior Door Handles – 5:02
      • Windows, Doors & Trim – 5:45
      • Trunk Details – 9:26
      • Front Trunk Details – 16:17
      • Front License Plate – 18:45
      • Charge Port – 19:27
      • Wheels Detail – 20:02
      • Underside Details – 20:45
      • Interior Tour – 21:43
      • Center Console – 26:27
      • The Dashboard – 28:38
      • Speakers – 29:45
      • Dashcam Mounting – 30:12
      • Overhead Console & Sun Visors – 30:42
      • HVAC Demo – 31:54
      • Screen Tour – 33:32
      • Windshield Wipers – 51:39
      • Control Stalks – 53:48
      • Unlocking Model 3 – 54:38
      • Keycard & Phone App – 55:06
      • Phone App – 55:31
      • Sundry Items – 56:45
      • New UMC – 57:27
      • The Drive – 59:28
      • Closing Thoughts – 1:07:14
  10. Feed The Trees

    Feed The Trees Active Member

    My fault for not being more clear. I don't mean hour long diatribes or reviews from a detailer, I mean reviews and comparisons from actual car mags. I mean people you know you can talk to, though that's clearly limited by numbers now. I mean people who don't stand in line waiting with baited breath for one. Like regular people and what they think of actually owning one, their real eventual customers. Not a test drive but daily life with it. But normal people not fanatics. Fanatics can't sustain the M3. Maybe the S and X but not the volumes of the 3.
  11. Pushmi-Pullyu

    Pushmi-Pullyu Well-Known Member

    He, or some Tesla spokesman, originally said 15%... I see WalksOnDirt has already stated that in his comment above.

    I was quite surprised when Elon later raised that to 25%, about the same as the Model S. With the Model 3 sold at a lower price, and hopefully in significantly higher volume, I was expecting Tesla to do the normal thing and make up in volume what they lose in per-unit profit margin.

    I regard the 25% target as aspirational. Whether or not it's realistic... we'll have to wait and see.
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  13. Pushmi-Pullyu

    Pushmi-Pullyu Well-Known Member

    Last edited: Oct 29, 2017
  14. 101101

    101101 Well-Known Member

    The only two established makers anyone should worry about are Toyota, Honda and maybe the Hyundai. The rest suck, they are too captured by petrol with to much sunk cost to write off to do much. Nio and some others present a bigger threat.

    Jim Chanos petrol shill issued what looked like a threat Tesla on behalf of petrol and a warning to petro by petrol against Tesla. Issued it in shil shill (sponsored media) it read that he predicts Tesla CEO will be departing. ? departing this Earth? Open the article its by 2020 to go play with rockets. Then he says but Tesla will have a harder time accessing capital markets when he is gone in 2020 in essence saying to petrol that it won't be able to block Teslas access to capital unless Musk is gone. But if anything happened to Musk or Tesla went under it would just produce an amplifying martyr effect.

    Their in a panic. They keep trying to mess with the board. The put the son of a media moguel whose empire turned out to be propped up by the investment of a Saudi King. Now they are trying to push out another director with more likely BS. They try to make Musk out to be dishonest and Tesla out to be racist, careless, sexist and anti-union.

    But reality is these buggy makers in the era of digital physics or the post quantum or quantum AI or CRISPR are in an ultra weak business with fundamentals that have been failing for 70 years and the biggest most grotesque safty net kill corporate welfare grab scandal in history. A tiny pin is all it takes to pop their balloon and even the increasingly broken clearnet is providing enough info that its inevitable.

    Tiny Tesla knocked Mercedes, BMW, Audi, Porsche, Lexis on there buts routing them globally in their most prideful crown jewel sectors and did it with top margins while also teaching the world about a total obvious petrol cord cutter infrastructure. And while their sister company revolutionized rocketry. While also introducing the world to self driving cars. While also creating the first mass market electric that is desirable with margins reserved for the luxury segment and with what may be the most successful consumer products launch in history and beyond loyalty but also retaining top loyalty. While building out a lot of the needed infrastructure, while recently increasing revenue by 30% and revolutionizing the auto insurance model. Wouldn't be the current autonomy rush without Teslsa. All of which made Musk the world's most admired CEO by CEOs by a huge margin even against Jobs and Bezos etc.
    Its a green company with a mission of saving the world. Its critics are generally pure idiots and sometimes also malevolent. Its like you can't be a Tesla critic and not be a total idiot- especially the short sellers. This would hold even if Tesla went out of business and the irrelevant smear claims the paid for shill 'critics' make turn out to be true.

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