Site icon The Next Avenue

Tesla’s Model 3 Profit Margin is 35%, and It Can Double

The company specialized in market analysis Xingye Securities, has published a report in which it puts on the table the enormous success that Tesla has had in opening a factory in China. They are achieving a profit margin per unit sold without comparison in the market.

According to the report, for the Model 3 Long Range, Tesla would be achieving a 32% profit per unit manufactured. A figure that grows to no less than 35% in the case of the Standard Range Plus. Something that indicates that curiously, the cheapest version, is being more profitable.

These are data that endorse Tesla’s commitment to the Chinese market. Occurring at a time when car sales were suffering their first drop in decades, including electric car registrations. Something that did not discourage the North American manufacturer who managed to get the plant up and running in record time. Now we know the reason for this rush.

But undoubtedly, the most exciting part of the report is related to the potential yet to be exploited. For analysts, with an increase in components made in China, such as batteries that will begin to receive from the CATL and LG Chem plants located in the Asian giant. Tesla could still further increase its profit margin per unit, at least to double.

This will undoubtedly lead to a reduction in Model 3 prices in this market. This will allow Elon Musk’s to be more competitive while maintaining profit margins per unit sold that are the envy of the sector.

Tesla begins paperwork to produce Model 3 in China using LiFePO4 batteries. In addition to reducing costs due to the drop in battery prices, Tesla also benefits from the booming economy of scale of its models. This allows it to continue lowering the costs of other components in a trend that it is only picking up speed thanks to work on projects such as the German Gigafactory. Once again allowing Tesla to take a huge leap forward, with the subsequent impact on profit margins.

A competitive advantage that will soon be joined by another factor such as in-house battery production, which Tesla has been working on for some years. This will undoubtedly be a huge turning point for a manufacturer that despite calls from its president that the shares were overvalued, continues in a race this week is reaching the titles at $940. A record high for Americans that also occurs at a time of anxiety for most of the auto industry.

Exit mobile version