Tesla’s Production Cost Per Vehicle Is $36K, Down From $84K In 2017

Tesla’s head of investor relations, Martin Viecha, has shared some interesting insight into the company at an invite-only Goldman Sachs tech conference in San Francisco on September 12.

Viecha took investors through Tesla’s next five years, explaining what to expect when it comes to battery supply and technology, as well as the cost of making vehicles. A person who attended the event shared details of the conference with Business Insider, including the potential for falling manufacturing costs per Tesla vehicle.

Viecha said that the per-vehicle cost of manufacturing is the most important metric to monitor in coming years, as it is a key indicator of how many cars a company can make and how big it can become.

He then revealed that in 2017, it cost Tesla $84,000 to make each vehicle. Remarkably, that cost has dropped to $36,000 per vehicle in recent quarters. Contrary to what most people might expect, Viecha said that almost none of the savings came from cheaper battery costs.

Instead, Tesla benefitted from better vehicle design to make manufacturing as easy as possible—such as the use of megacasts for big bodywork and chassis components of the Model Y—as well as new factory design. Viecha added that Tesla’s first factory in Fremont, California, is not a great place to build electric vehicles, noting that there are cheaper places for that, such as Shanghai and Berlin.

While Tesla has new factories in those locations, plus another one in Austin, Texas, the company wants to continue pushing the boundaries of how much it costs to produce an electric vehicle. As new facilities build more cars, they will be able to manufacture each vehicle for less than $36,000, which should be good for the company’s profitability, Viecha said. Mind you, that’s before battery savings from the 4680 program kick in.

At the moment, the Fremont factory accounts for about half of Tesla’s production, but as the Berlin and Austin plants’ outputs are rising, Fremont’s share of the total production will decrease.

Speaking of manufacturing, Viecha believes that EVs represent the third major revolution in automobile production, following the Ford Model T, the first automobile built on an assembly line in 1908, and Toyota’s cheaper production approach in the 1970s.

“EV architecture is so different from internal combustion engine, it allows for a third revolution in automotive manufacturing.”

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