Despite a drop in sales in Europe, Tesla maintains high margins thanks to very low production costs. Here is the strategy that allows this electric car manufacturer to reduce the prices of its vehicles.
The market ofs electric cars is booming, but manufacturers face fierce competition and fluctuations government aid. In Europe, Tesla’s sales have recently fallen, partly due to lower subsidies such as the ecological bonus in Germany. Despite this, the company remains the world leader thanks to high profit margins, supported by particularly low production costs.
Tesla manages to produce its vehicles at a much lower cost than its competitors. According to a recent analysis by Bank of America, the manufacturer spends on average 30 000 dollars – around 27,300 euros – by car in raw materials, batteries included. This amount is approximately 17 000 dollarsor 15,400 euros, less than the average cost of other electric vehicles and 10,000 dollars or 9,100 euros less than the industry average.
Tesla maintains lower production costs thanks to its innovative production line
The reduction of production costs is a major asset for Tesla. Thanks to a simplified design with a low number of individual parts and efficient manufacturing methods, the company can regularly lower the prices of its cars. This is done without much impact on its profits.
For example, the technique of Gigacasting used on parts of the Cybertruck, although ultimately abandoned, was intended to produce one-piece body parts to reduce these costs even further. This ability to minimize expenses allows Tesla of stay competitive against rivals like BYD, which manages to produce a similar car at a 15% lower cost.
However, Chinese competition remains a serious threat. For example, Leapmotor started production of its T03 electric car in Poland, at a Stellantis factory. This strategy allows this car manufacturer to circumvent new European taxes imposed on vehicles imported from China. By producing locally, this company can avoid customs duties ranging from 27.4% to 48.1%, which gives it a significant competitive advantage. Tesla must therefore remain vigilant in the face of these developments and continue to innovate to maintain its leading position.
Source : Business Insider
