Industry News tesla-model-s-concept

Published on February 28th, 2014 | by Christopher DeMorro

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Flawed Study Claims Tesla Model E Will Cost $48,000

tesla-model-s-conceptElon Musk has always called for a $35,000 Tesla, but one research firm says that the numbers just don’t add up. Too bad the study makes flawed assumptions. But it’s still worth asking if can Elon Musk really deliver a 200-mile EV for $35,000.

Stanphyl Capital Management looked at Tesla’s profit margins on the Tesla Model S, and figured out that the cost to build a 60 kWh Model S is about $59,559. That means Tesla is earning over $10,0000 per car right off the bat, but it’s the additional options that drive Tesla’s profit margins to over 25%, or about $25,000 on every $100,000 Model S sold, $100,000 being the average transaction price.

So basically, Tesla is pulling down big numbers because it up-charges on optional features like you wouldn’t believe. Sounds like a typical luxury car maker if you ask me. But what happens when the electric automaker goes down market?

According to Stanphyl, most rumors suggest that Tesla is spending about $260 per kWh for the Model S, putting the battery cost for the 60 kWh battery at about $15,600. The Tesla Model E will likely need at least a 48 kWh battery to go 200-miles per charge, which would put battery costs $12,480. If the Tesla Gigafactory lowers battery costs the expected 35%, tit will cost just over $8,000 for the Model E’s proposed 48 kWh battery pack.

So far, I don’t have any problems with Stanphyl’s math, but then the last couple of paragraphs get rushed and hurried, without nearly as much supporting math. The study suggests Tesla could save around $3,000 per car via bulk ordering, $400 per car with smaller video screens or wheels, and another $664 in random savings, and Stanphyl thinks each and every Tesla Model E will cost around $48,000.

That’s right where they lost me.

I think the most obvious point to make here is that the Tesla Model E is an entirely new and different car from the Tesla Model S. It is likely to be smaller, lighter, less powerful, and less luxurious than than the Model S. Stanphyl seems to think the only difference will be in the battery pack size and cost, but the Model E is going to need less of everything; less aluminum, less leather, less of everything. The Model E may not even need a 48 kWh battery pack to go 200-miles.

There are other methods of keep the cost of a car down, and $8,000 for a major part of the Tesla’s drivetrain isn’t that far out of whack with many modern luxury cars. What do you think the engine of a new BMW 3-series costs? But Bimmer seems to make plenty of money off of their luxury sedans. So why not Tesla too?

That said, Tesla definitely has its work cut out for it. First off, it may not have the $7,500 Federal tax credit to fall back on by the time the Tesla Model E comes to market. Also, a $35,000 Model E only works if battery prices continue to fall, and with a reveal rumored for next January, time is definitely working against Tesla. But considering a $50,000 Tesla Model S was already sold (though swiftly cancelled), at least on paper Tesla should be able to pull this one off.

Source: ValueWalk




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About the Author

A writer and gearhead who loves all things automotive, from hybrids to HEMIs, can be found wrenching or writing- or esle, he's running, because he's one of those crazy people who gets enjoyment from running insane distances.



  • http://neilblanchard.blogspot.com/ Neil Blanchard

    I think “only” a 33-40kWh battery pack is needed to go 200+ miles. The Illuminati Motor Works ‘Seven can go 220+ miles at 60-70mph and still have ~10% charge left.

    That is with a 33kWh lithium (CALB) pack. Maybe add a bit more for heatpump and heated seats, but ‘7’ can go 200 miles with ~20% charge left, which is a decent safety margin already.

    The key things are lower aerodynamic drag, and better drivetrain efficiency. The IMW ‘7’ has ~92% plug-to-wheel efficiency (compared to ~85% typically for EV’s) and the Cd is <0.23.

    At 33kWh, that theoretical battery costs $8580.

    • http://www.insteading.com/ Jo Borras

      Based on the $156/kWh GM charges retail customers for its batteries, I’m at about $5150. $3K under your figure.

    • http://neilblanchard.blogspot.com/ Neil Blanchard

      Another important item to make EV’s have more range, and that is a direct heating defroster for the windshield. Ford had these in the 70’s and 80’s, so we know they are totally doable. Theirs was a molecule thick layer of gold on the glass that you can only see at the right angle from the outside – and it clears the windshield in a few seconds. No moving parts, and no noise, and it uses far less energy than a typical defroster.

      Tesla needs to do this, and all EV’s need this.

      • taliz

        I’d rather see them use ethanol for defrost and heating in cold wheater. Thats what Volvo did in the electric C30.
        Ethanol is much more efficient at producing heat than a battery.
        It obviously also has the added befinit that you wont reduce your range by heating your car.

        • http://neilblanchard.blogspot.com/ Neil Blanchard

          It adds another system go the car, and heat and fumes have to dealt with. You still need a fan, whereas a direct heating defroster and heated seats is no movings parts. You have to remember to fill the fuel tank.

      • Red Sage

        This sounds like what is on the Fiat 500e, though it is handled differently.

    • QKodiak

      Can 33-40kWh push a 5-seat 3,900 lb small luxury/sport sedan 200+ miles?

      It’s important that the Model E be able to compete with the BMW 3-series, Mercedes C-class, Audi A4, Lexus IS, Cadillac ATS, and the like. It can’t be ugly, underpowered, too small, has to handle well, and it needs to have plenty of available class-competitive features (HUD, AWD, heated/cooled seats, vehicle hotspot, active cruise control, blind spot monitoring, etc.)

      It should start at $35,000 and with options and a larger battery top out around $65,000. The Performance version would start at $60,000 like the M3, C63 AMG, and the ISF, and top out over $80,000.

      The average selling price of the Model E (Gen III) will probably be about $50,000. Even if each car cost $45,000 to build (which we highly doubt), they will still have over 10% starting margins.

      • http://neilblanchard.blogspot.com/ Neil Blanchard

        I think the stated goal of the Model E is seating four people.

        • QKodiak

          Could you please provide a source for this? Many people including my self like the Volt, but 5 seats is a need. Having 4 seats would exclude a large portion of those who would gladly plunk down the money for a Model E. For it to be a runaway success, it must have 5 seats.

          • http://neilblanchard.blogspot.com/ Neil Blanchard

            I remember reading that somewhere, a while back. It is still not even prototyped, so I don’t think anyone outside of the design team knows.

            If it only had 2 seats, that would definitely limit its market, but any 200+ mile ~$35K EV will sell well, so I think 4 seats would only be a minor affect. Though 5 seats is obviously better – that is why I’m building a 5 seat EV. :-)

            My family would be fine with 4 seats, but the Volt has quite limited height in the rear seat, that makes it a no-go for us. The center hump also hurts it’s practicality. Tesla will not have that challenge, at least.

          • haralampi nedelin

            there is no reason to offer only 4 seats, the volt has that because the battery is a T-shaped bar that goes through the midsection of the car. Tesla will most likely use the same type of cells under the car as they use in the model S.

      • Red Sage

        I’m thinking it would be a bit more like this:

        Model E 60, $35,000, 3600 LBS, RWD 300 HP/317 LB FT Torque,
        Top Speed 120 MPH, 0-60 4.5 Seconds, 260 Mile Range.

        Model E 85, $40,000, 3600 LBS, RWD 362 HP/325 LB FT Torque,
        Top Speed 130 MPH, 0-60 4.0 Seconds, 330 Mile Range.

        Model E P85+, $45,000, 3800 LBS, AWD 416 HP/443 LB FT Torque,
        Top Speed 140 MPH, 0-60 3.7 Seconds, 330 Mile Range.

        Model E P135+, $60,000, 3800 LBS, AWD 500 HP/550 LB FT Torque,
        Top Speed 155 MPH, 0-60 3.0 Seconds, 525 Mile Range.

        I’d expect the top-of-the-line P135+ version to be fully optioned at that $60,000 price. A P85+ might have a handful of options that might inch it toward a $55,000 price tag. A fully optioned 60 would probably max out at $48,000.

        The Tesla Model S 60 would be dropped with the introduction of this new line. People who went with the larger vehicle would likely have the 85 kWh battery as the base version. It would also have a P135+ release, but a P221+ would be exclusive to Model S and Model X.

        • QKodiak

          Very idealistic, and not realistic at all. Using Panasonic’s new 4.1A cells in the same size pack would yield a 100kWh battery pack for the range-topping, future Model S. That’s what’s possible with existing technology and is the logical next step. It would increase EPA range in the the Model S to 300+ miles. The 60kWh battery might be cut when the 100kWh one comes out.

          The Model E will be 20% smaller, lighter, more aerodynamic than the Model S. Those reductions will enable a ~50kWh battery to propel the $35,000 base Model E for 200 miles. The next step up since it it a gen III scaled down platform would be 75kWh for an equivalent range to the Model S 85.

          It is not in a car maker’s best interests to make their entry level vehicle perform to the same level as the higher end models. Higher performance, luxury, features, safety, etc are the incentives to buy the higher profit model. That’s why the BMW M3 is not as fast as the M5, and the Audi S4 isn’t as fast as the S7. Tesla’s no different. The Model E will have equivalent performance to other small luxury/sport cars. (0-60 in <7 sec.

          The same is true on price. The BMW 3-series and the Mercedes C-class start in the mid-$30,000. and when fully optioned up clears $60,000. The M3 and the C63 AMG maxed out top $80,000. I expect the Model E Performance to be in the same ballpark.

          • Ivor O’Connor

            “The Model E will be 20% smaller, lighter, more aerodynamic than the Model S.”

            What do you think the chances are of the Model E being more aerodynamic than the Volkswagen XL1: https://en.wikipedia.org/wiki/Volkswagen_1-litre_car#Production_version

            Currently Tesla’s CD is at .24 which put it ahead of the pack but since it came out Mercedes introduced the CLA model at .22 and Volkwagen introduced the XL1 at .189. I personally don’t think there is much chance of them doing better than the Mercedes which looks good and no chance of beating the VW which looks ugly. We are talking Tesla though so anything is possible.

            See: https://en.wikipedia.org/wiki/Automobile_drag_coefficient

          • QKodiak

            I didn’t actually mean 20% more aerodynamic as well. I should have rephrased it.

          • Ivor O’Connor

            Well I’ll continue to hope all future Tesla vehicles will have CDs under .20.

          • Red Sage

            Only the P135+ I listed is ‘unrealistic fantasy’. Should that lofty goal be managed, I guarantee it will match other contemporary sports sedans step-for-step in the street light, 1/4 mile, and top speed grand prix. Every other item I listed for a proposed Generation III vehicle is based upon statistics of existing technology. You forget that the GIII will be the primary, mass market vehicle in the Tesla Motors lineup. People who want a larger, more upscale vehicle will get the Model S, which will have a lower production schedule by design.

            For some reason, people just never hear Elon Musk properly. Perhaps he is just a bit too soft-spoken at times. But if you’ll listen closely, you’ll note that when he speaks of GIII he says ‘minimum’ when referring to a range of 200 miles. People always seem to infer that is the maximum intended range of the new car. Trust that his intent is to exceed that goal.

            Perhaps you should spend some time at both the BMW and Tesla websites. The ‘sweet spot’ best overall seller in the BMW lineup has always been the 328i. The 320i has only existed to satisfy those who don’t want to drive a Nissan Sentra anymore. The least capable motor from Tesla matches the performance output of the 335i. Why should they introduce a gimped motor with less output, when their stated goal is to prove electric cars are BETTER than anything else? That motor will have been on the market four or five years by the time the GIII is released, so it will be refined and proven by then. Economies of scale due to manufacturing in higher quantities will bring its price down so that it can be offered in the base vehicle of GIII.

            Just because the GIII will be smaller and lighter, does not necessarily mean that it won’t use the same battery packs as the Model S. There is only about a six inch difference in the wheelbase of a Model S and a BMW 3-Series vehicle.

            I’m pretty sure that the top-of-the-line BMW M3 blows the doors off the bottom-of-the-line BMW 5-Series car. My point is that Tesla will enable the bottom-of-the line GIII to blow the doors off every BMW through the 335i, and that its AWD varieties will smoke everything else in the BMW lineup.

            You forget as well that Tesla Motors is a NEW company that has no need to ‘protect’ any market segment from the other. They have a different philosophy than traditional automobile manufacturers. They want to deliver performance and safety across all their vehicles regardless of market segment. Luxury & convenience will be handled by varied trim levels and options packages, just as it is with the Tesla Model S today.

            Since people don’t pay attention to what Elon Musk actually says, it seems they somehow believe the GIII will be designed to compete against the Nissan Leaf, Chevrolet Spark EV, or Ford Focus Electric. The GIII will be designed to thoroughly embarrass those cars as the cobbled together travesties of modified components from existing ICE cars that they are as bottom feeders in the EV market. I suspect it will be offered in five-door hatchback trim, as is the Model S, but GIII won’t share the profile of those electrified econo-boxes. So it won’t be gimped with a sub-par battery, weak motor, or low-end drive-train.

            The Tesla Model S is basically an Expensive Performance Economy car. It costs a lot. It is fun to drive. It doesn’t use any gas.

            The GIII will be an Attainable Performance Economy car. It will not cost so much that it breaks the bank. It will be fun to drive. It won’t use any gas.

            We can only hope that someday Tesla is able to offer a truly Affordable Performance Economy car, to compete with the ICE version of the Ford Focus, Chevy Cruze, Hyundai Elantra, Nissan Sentra, Toyota Corolla, and Honda Civic.

          • QKodiak

            The reason I say the Gen III won’t have that kind of performance is cost. Tesla has to make money. It is more expensive to make a higher performing vehicle for a variety of reasons. They are going to want to create a BMW-like vehicle lineup someday. Because of that, they’re not going to ruin it by making the cheapest one just as fast, if not faster, than their higher level, higher profit margin money-makers (Model S & X). The entry level Gen III will most likely have a ~50kWh battery pack and smaller motor to keep down costs. The Gen III battery upgrade could be a 75kWh battery pack providing a similar range to the Model S 85.

          • Red Sage

            Going around in circles here… You say I’m being ‘idealistic’… What’s wrong with being that way about a company whose statement of purpose is to strive for idealism…? If your concept was true, that Tesla Motors will be content with ‘also ran’ status, then the Tesla Model S 60 would perform no better than the lowliest Lexus. Instead, it blows their doors off.
            This is a matter of philosophy. Tesla’s philosophy is to not just match, but surpass all competitors. That is the only way to make their mission relevant. Otherwise, they would just give up, listen to you, and make an Affordable Commuter Economy car, and nothing else.

          • QKodiak

            You totally misunderstand me. They need to be comparable to the vehicles in the price range because that’s where customers are happy, and Tesla makes the most profit. The fact that they are EVs automatically makes them superior. You want them to produce a $60-80K M3 equivalent for $35,000 and that’s not going to happen ever.

            Don’t be so jaded and look at reality. For the money, there are better performing cars out there than the Model S. The 60 and 85kWh Model S which do 0-60 mph from 5.1-5.9 sec. are not as fast or handle as well as some of the cars in the same price bracket. The same can be said of the 3.9-4.6 sec. Performance version. For instance the Audi S8 can scream from 0-60 mph in just 3.5 sec. as can the latest Mercedes E63 AMG S.

          • Red Sage

            You are tying performance to dollars. I’m not. Neither will Tesla Motors.

            The only way they will remove performance as a primary function of their vehicles is if they deign to go extreme low end, to release ridiculously limited ‘city vehicles’ and commuter cars for use in tight, congested areas such as China, India, and some European metropolitan areas.

            Once again, that is NOT the $35,000 market they intend to target, if ever.

            Jay Leno once said, “The last days of old technology are better than the first days of new technology.”

            That is, in order for anything new to take over a market, it really can’t be ‘just as good’ as the old stuff, it must be BETTER. Otherwise, no one will bother.

            The goal for Tesla Generation III is mass market adoption. Nothing less. To attain that goal at a $35,000 price point, Tesla must offer a vehicle that is in some way compelling enough to draw interest, capture the heart, and bring in the money with orders placed on the barrelhead. They cannot do that with an ‘also ran’ vehicle, with marginal performance, barely more than a Ford Focus Electric and less than a BMW 320i — at $35,000.

            Look back 25 years. Why was the introduction of a $36,000 Lexus LS400 so outstanding? Why was the same true of an Infiniti Q45? Simple. Both of them were luxuriously appointed, drove well, and blew the doors off cars that cost $15,000 more.

            The Tesla GIII must do the same, by having their $35,000 offering topple the $50,000 version of the BMW 335i.

          • QKodiak

            Tesla Motors is ALREADY tying performance to dollars. That’s how money is made. Personally, I thinko the Gen III will have comparable performance to the BMW 328i, 0-60 in <6 sec which is better than the 320i and a whole lot more than a Ford Focus EV which I have driven quite a few times.

            The main draw of EVs is the cost savings. Saving $2,000+ per year will get people interested, ONLY if the Model E offers 200 miles of range and Supercharging stations completely cover the US to enable traveling.

            Once the savings draw them in, the many other benefits of EVs will get them hooked for life: namely the convenience, practicality, safety, performance, handling, cleanliness, smoothness, quietness, instant torque available all the time, and whatever else you can think of.

          • Red Sage

            Man, I don’t understand why you aren’t getting this. Howzabout I put it a different way. Above, you said that Tesla Motors would some day want to have a product line similar to BMW’s. That proves my point right there — BMW has always used the same engine in multiple product lines!
            BMW Engines & Cars
            LITER 3-Series 5-Series 7-Series
            1.8 318i 518i –
            2.0 320i 520i –
            2.5 325i 525i –
            2.8 328i 528i 728i
            3.5 335i 535i 735i
            Sure, there may have been some slight tweaks to compression ratio, bore, stroke, final drive ratio, or transmission offered, but the power plant was basically the same at each displacement level.

            I don’t see anything to stop Tesla from using the battery pack capacity, motor, and inverter from the Tesla Model S 60 and dropping it into a 1,000 lbs lighter car as a 2017 Tesla GIII. That configuration should be able to smoke today’s BMW 335i xDrive Gran Turismo. And it would cost over $10,000 less.

            In 2013 the average cost of a new car was somewhere between $28,000 and $32,000 dependent upon the source. So it is not unlikely that would climb to the $35,000 mark by late 2016. If a car this capable can hit the market with significant range, around 250 miles, it could entice people who were considering a Camry, Accord, Maxima, Taurus, Malibu, Passat, or BMW 3-Series to go with Tesla instead.

          • QKodiak

            I get what you are saying, but I have a question for you. Why then did Tesla derate the motor for the 60 and 40 kWh Model S’s?

          • Red Sage

            Ooh, sneaky! So this is another way of saying what you said before… You just want me to say it for you. Nope. Ain’t gonna do it. Bottom line, the base GIII will demolish the BMW 335i. Count on it.

    • Red Sage

      The Honda CR-X Si was basically an Inexpensive Performance Economy car. It didn’t cost a lot. It was fun to drive. It didn’t use a lot of gas.

      The Tesla Model S is effectively an Expensive Performance Economy car. It costs a bunch. It is fun to drive. It doesn’t use any gas.

      The Tesla Generation III vehicle, typically called Model E, will fall somewhere in between. It will be a relatively Affordable/Attainable Performance Economy car. It won’t cost enough to break the bank. It will be fun to drive. I won’t use any gas.

      If Tesla Motors was interested in making an Affordable Commuter Economy car, sans Performance, they could do so easily. They could cobble together a neat little lightweight 2+2 hatchback, give it a 40 kWh battery, limit its top speed to 85 mph, detune it to an 8-second 0-60 and leisurely 17-second 1/4 mile time… all to insure it could reach 200 miles of range even with the dumbest New York Times writer behind the wheel, stick a $24,995 price tag on it, and call it a day. That would suffice, if their intended market target was a 1990 Hyundai Excel.

      Since they are going after the BMW 3-Series instead… things will be… different.

  • http://www.insteading.com/ Jo Borras

    Where did those clowns get such a ridiculously high cost per kWh!? Even at RETAIL prices, GM is nearer $156/kWh … are they suggesting that Tesla’s costs are higher than GM’s RETAIL PRICING?

    Madness- and people say *I’m* a bad journalist! LOL

    http://www.newgmparts.com/parts-catalog/chevrolet/volt/2012/base/1-4l-l4-electric-gas/hybrid-components/battery

  • egogg

    Even if it costs that much, subsidies will help. People would still buy them in droves.

  • ilikecheesedoyoulikecheese

    Tesla did not have a $50k Model S, unless you include the $7.5k tax credit. Maybe that is what they are calculating for the Model E, so about $42.5k actual sales price for the lowest end Model E.

    Also, their price per kwh is already lower than $200, so I don’t know why these analysts continue to use inflated numbers. Haven’t they been proven wrong enough?

  • Terrified

    Tesla has a few other reasons for lowering their initial profit expectations for building a more or less mass-produced Tesla… They are hoping to grow their re-charge station network nationally to ensure and enhance future growth and sustainability; and I’m not talking about the environment. Larger volume will make this easier to attain.
    A less expensive Tesla isn’t going to affect the model lines that they sell to their existing brand-conscious elite buyers… They don’t buy luxury plates to save money, they buy to impress.

  • Terrified

    The Illuminati 7

    • QKodiak

      That is a cool retro-looking car capable of incredible efficiencies and good performance. I wonder how safe it is.

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  • Red Sage

    The Tesla Motors Generation III vehicle will not be designed to compete against a Ford Focus Electric, Nissan Leaf, or Fiat 500e. It’s primary competition will be the BMW 3-Series. Since that marque is renowned for its handling and sports appeal, that is where Tesla will strike.

    People keep aiming their sights really, very low even when they are most hopeful about Tesla’s future. Do yourself a favor. Aim higher.

    The weakest motor that Tesla currently offers is a match for the BMW 335i in horsepower and torque. Don’t be surprised to see that as the baseline standard for a rear-wheel-drive Model E. Likewise, expect the ‘affordable’ Tesla series to have not less than a 60 kWh battery pack. It may be physically smaller than the current version, but will hold every drop of power. Expect the car to weigh around 3,700 lbs, right in line with the BMW 3-Series. Expect the base car to blow the doors off any Bimmer that doesn’t have an M badge.

    It will do all this, and will cost less than a BMW 328i. Sure, you will be able to add options up the whazoo… Just like you can on a BMW… To end up with a much higher sales price. But people who test drive an Accord, Camry, Maxima, or Taurus, then set foot in a Model E, will move up market fast. Believe it.

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