How does Tesla control costs and make profits?

 How does Tesla control costs and make profits?

In China ,Following the price reduction of MODEL Y by more than 70,000 yuan, MODEL 3 dropped another 15,000 yuan without warning.  Despite Tesla's price drops again and again, Tesla's net profit in the second quarter in 2021 was 1.14 billion U.S. dollars. This is due to its good cost control. Tesla wants to achieve the same or even lower price than fuel vehicles. But at the same time we have to think about why Tesla can drop prices? The author believes that there are mainly the following points:

1.The process is subtracted. Eliminate complicated processes, such as integral molding and die-casting of parts.

One-piece molding of die-casting parts reduces the process and saves time. One die-casting processing time is 80 seconds to 90 seconds, replacing the original 70 parts with two, which may be one in the future. Reduce the cost of production lines, such as molds, conveyor belts, manipulators, etc. Reduce labor costs, while reducing floor space.


2.Subtract parts, such as millimeter wave radar.

The existence of millimeter-wave radar is sometimes hinders the system's judgment. When encountering manhole covers, buildings, and bridge shadows, the system will misjudge that there is an obstacle and brake (phantom brake). Choosing the current pure vision autopilot solution also saves costs.


There is also a 4680 battery for non-polar ears. The modular design is removed and the battery is directly put on. The material is reduced and the weight of the whole vehicle is reduced. At the same time, the newly developed 4680 battery has a higher energy density and battery life can be increased by 16%.


3.About 70% of the parts of MODEL 3 and MODEL Y can be shared.

When designing the two models, shared parts together were taken into consideration. 40% of the two parts are fully shared, and 35% of the parts can be shared after adjusting the specifications.


4. The localization of parts and components, especially batteries, has a lower purchase price.

From the Panasonic 18650 to LG Chems 21700, to the CATLs lithium iron phosphate (LFP), the purchase cost has dropped and dropped, and Tesla will manufacture some 4680 batteries by itself in the future. At the same time, Tesla also produces its own chassis electronics, sensors, power devices, chips, etc., which also saves costs.

5. Tesla has its own factory, not like NIO.


6. Scale effect can share R&D costs and lower purchase prices.


In 19 years, when Tesla was still in a difficult period, according to an email written by Musk on May 16, 2019, the company urgently needed to pay attention to cost control in order to achieve breakeven within 10 months, that is The time before the funds of company are exhausted.  Now Teslas has been realized, and it is still profitable.