The factory is expected to reduce labor costs to as low as one-tenth what the electric car manufacturer currently pays in wages at its California factory, which Tesla says employs more than 10,000 workers. With such a reduction in costs, Tesla could sell its vehicles at a profit margin in the low- to mid-30% range, comparable to that of luxury auto manufacturer Porsche, according to research from Morgan Stanley.CNBC
Does anyone know if 35% profit margins are good for a car? Let me check this article from last year on the 20 most profitable car companies…
“While most investors we speak with expect China to be a success for Tesla from a demand point of view, we have found that the part of the story that is still, in our opinion, widely under-appreciated is just how profitable Tesla cars in China could be in a localized, mass scale, lower cost structure environment,” Morgan Stanley analysts wrote.CNBC
Alright Jonas, so… what you’re telling me is that the company is worth $10?
Tesla orders in China spiked last quarter after Beijing gave dozens of electric vehicle makers there a healthy tax break. The “purchase tax” exemption lowers the cost of buying a Tesla in China by around 99,000 yuan, or $14,000. The research predicts that Tesla will fail to capture a large share of the Chinese electric vehicle market, but that lower production costs will help the company achieve profitability.CNBC
They don’t need to dominate the market to make a lot of money. But they’ll do extremely well.
“We are of the opinion that the new Shanghai Gigafactory has the potential to show how inefficient Tesla’s current production assets are relative to competitors and see scope for the Shanghai Gigafactory to be one of the more profitable auto factories in the world,” the analysts wrote.CNBC
The most profitable auto factory in the world? Is that… good or bad?