First, you have to understand that Tesla lies all the time. It is a function of the company, but their lies are not what you think. Tesla understates the performance of its vehicles. For example, the Tesla Y has a state range of 360 miles...the truth is that it's closer to 420 miles.
Telsa announce late week that its new motors would not incorporate any rare earth metals...a huge issue since the vast majority are processed in China. What Tesla didn't announce was that for the past six months, its rotors no longer used copper, rather they are made of aluminum.
A Tesla Model 3 manufactured in 2017 and a Tesla Model 3 manufactured in 2023 look identical, open the hood look at the specs, look at the seats everything looks the same as it did in 2017, the magic is inside, fewer components mean lower costs.
Who benefits?
Well, first and foremost the customers who have not seen a massive increase in the cost of Tesla but so does Tesla. By the end of 2023, Tesla Model 3 will reduce the number of robots used in the assembly of its vehicle from 1,000 in the middle of 2022 to 400. This is a huge reduction in manufacturing costs. Monro Associates showed the different power loom between a Tesla and another successful car manufacturer, the Tesla power loom was no more than 10% the size of its competitor.
This is the magic, while everyone is focusing on what the right hand is doing, Tesla is changing everything else using the left hand. Everyone thinks that the Model 3 for 2017 and 2023 is more or less the same, for the user the experience is identical, but manufacturing costs have dropped, and usability has increased.
It gets much worse, at Tesla things are backward compatible, and model compatible, which means that the transformer on the Model Plade is backward compatible with not only the 2023 Model 3 or Y but also with the 2017 Model 3.
What this indicates is that Tesla's innovation is to reduce manufacturing costs. In addition, almost everything has been brought back in-house. The difference is that changes can occur quickly. As an example, the wire looms are manufactured (by robots) in-house. Ford's wire looms are manufactured by a Mexican-based subcontractor, that employes the methods used by Ford over the past 30 years (as you might guess there are no robots here). If Ford wants to change the form of the wire loom it has (a) get internal engineering approval, (b) be redesigned, and (c) a new contract has to be drafted with the Mexican supplier.
The key here is past investments and time out of the door. At Ford, a minor change to a model can take up to five years to be implemented (if it is at all). When Tesla was told that it's rear section for the Model 3 was a dog's breakfast it took Tesla 6 months from hearing the criticism to changes being implemented on the new model 3 vehicles.
The problem for other OEMs is that they are focused on what Tesla is doing today, and not on what Tesla is engineering today. Moreover, aside from Volkswagen (VW fired its CEO and replaced him with a petrol head... VW's future in the electric car business is now seriously in doubt) few EV manufacturers are even breaking even, never mind making money. It is estimated that Tesla's margin on each vehicle is around 15%.
Peter Zeihan said that two of the problems of EVs were the availability of rare earth metals (not complicated but done in North America instead of China), and the demand for copper, for all the electric motors. As of June 2023, ALL of Tesla's new vehicle electrical motors will not use either copper or rare earth metals. In an instant, Tesla's innovation again showed that they are very aware of the challenges that EVs represent, but instead of saying someone else will solve the problem, they are solving it.
Don't bet against Tesla, it's a mug's game!
Please note this is not an endorsement for buying shares in Tesla that (even at the current price levels) are in the nosebleed zone in terms of Enterprise Value (EV is 48 while its only 10x at Toyota)
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