Have you ever wondered why are Teslas made so cheap? Did it ever strike you why Tesla is able to lower their prices in competition with other EVs? What is the real secret behind Tesla’s low prices?
Are Tesla Cars Actually Cheap?
Yes! A Tesla Model Y costs now costs less than an average vehicle. Tesla has recently slashed the prices of their cars in a big way and this has caused outrage among other car companies like Ford.
Tesla has lowered their price three times this year. The Model Y now starts at $46,990 and with the EV tax credit, an EV can be bought for just $42,500. And to top this all Tesla’s Model 3 and Model Y cars qualify for full tax credit.
Check the full list of Tesla car prices here.
Tesla’s cheap prices mean two things. Their profit margin has lowered. But the low prices have boosted their sales too. So Tesla is not backing down as the number one electric car seller of the century.
If there was one thing that made people hesitant to buy an electric car, it was the exorbitant prices. But now, Tesla has made an EV more affordable than ever.
So this raises another big question among EV drivers. People are suspicious. Why are Teslas made so cheap?
Why are Teslas made so cheap?
There is only one reason why Tesla is able to lower their prices so much. A Tesla car is much cheaper to build than other Electric Vehicles. Their cost of production is low and that is why Tesla is able to offer the advantage to their consumers.
Tesla has always enjoyed a fat profit margin. They reportedly have about $15,653 profit per vehicle on average. And shockingly, this is five times higher than the profit margin of Ford. So why does Tesla have such a low production cost compared to other Electric Vehicle manufacturers?
One reason why Tesla cars have such low manufacturing costs is that they have heavily invested in new manufacturing technology that focuses on efficiency. Their vehicle designs are different from that of other Electric Vehicles and are specialized to improve economies of scale.
Tesla cars are manufactured differently from a regular car. They keep energy efficiency as a priority not only within their cars but also when manufacturing them.
In addition, their battery manufacturing and most other aspects of the supply chain are in-house. This means that they do have to pay more for supplies manufactured by other companies, and hence their lower production cost. This is crucial since the battery of an Electric car is arguably the most expensive component.
The Tesla car company is vertically integrated. They make as much as they cannot within their own factory. This gives them a lot of control over the cost of supply and production. What they don’t do, like mine their own raw materials are linked with long-lasting supplier contracts that help keep their costs stable.
Another reason why the production cost of Tesla cars are so low is that they use cost-efficient materials like aluminum and carbon fiber to reduce the weight of the car and make it more energy-efficient.
Some claim that Tesla cars are so cheap because they use cheap materials to build their cars. But cheap in a Tesla, only means low production cost and does not mean low-quality or flimsy materials. In fact, Teslas are known for their high-quality materials that are both commonly available and inexpensive.
Inexpensive materials are easy to use in a manufacturing chain as well as easier to ship. They can also be replaced easily if the car breaks down. An inexpensive vehicle part will be easier to find and mean less maintenance cost for the EV driver even many years down the road.
To Tesla, it does not make sense to use a more expensive material to build their cars when a cheaper material does the same function. Expensive materials just give bragging rights to exclusivity. It has no more use on the road than another material of the same function.
A lot of Tesla’s low production cost has to do with its innovative car designs and unique changes to the EV industry. for example, their decision to use large castings to replace small metal parts has added to their cost efficiency.
The introduction of the front and back mega castings in Texas, shockingly, got rid of 70% of the robots they previously needed. So in attempts to cut costs, Tesla not only resorts to low-cost materials but also cuts out large portions of their manufacturing processes.
This is the case not only in robotics but also with human workers. Most often, humans are replaced with robots to cut production costs. Very little manual labor is used in the Tesla car manufacturing process. And this is also one of the reasons why it takes a Tesla just ten hours to manufacture a car while it takes a VW nearly 30 long hours.
Furthermore, Tesla cars have fewer moving parts than a regular vehicle. Thus, fewer parts translate to a lower cost of production.
Most people thought that the cost-savings in buying a Tesla spring from the money saved on gas. And this money covers the initial purchase cost of a Tesla. But, now after Tesla has lowered their prices so much, you are saving on the car as well as on gas. You could be surprised at the total sum you save at the end of five years with a Tesla.
And this is not all. Tesla cars are still actively trying to find new ways to lower production costs. They are reportedly testing new technology that would reduce the installation cost of batteries which would make their cars even cheaper.
Tesla uses the expertise of some of the best minds in the world to come up with innovative ideas to minimize costs. They plan to reduce their scrap rate which would further reduce the production cost and lower their prices.
Tesla is in hot competition among other Electric Vehicle manufacturers. Their practicality, speed of implementing a decision, and allowance for changes make them by far, the best EV company in the market.
So in comparison, other electric vehicle manufacturing companies really don’t stand a chance. They are tied down with cumbersome machinery, expensive materials, and complicated production processes. Other EV sales in the market are dropping like a stone. The only sales a company can hope to make are in internal combustion cars. In the field of Electric Vehicles, Tesla is an unbeatable giant.
In conclusion: Why are Teslas made so cheap?
Tesla cars are so cheap owing to their low cost of production. Most of their supply chains and manufacturing are in-house which allows them to control costs and production processes. They have replaced manual labor with more efficient robots and have cut down huge chunks of their manufacturing process.
In addition, they invest in high-end technology that focuses on improving their design and making cost-efficient processes in their factory. Tesla cars also use cheaper materials that are commonly available like aluminum to build their cars. All this has contributed to the shocking price slashes that make them one of the toughest competitors in the EV market.
*All pics are courtesy of Unsplash.com