The Tesla Model 3 Is ‘Needlessly’ Complicated to Assemble, According to Analysts [News]

A firm specializing in production cost analysis had a range of criticisms for the Tesla Model 3.

Tesla has ramped up production of the Model 3 sedan in recent months, but at what cost?  A Bloomberg report follows Munro & Associates, a firm that tears down vehicles and analyzes how much they cost to build, and analysts contend the Model 3 makes a range of mistakes that ultimately hurt its profitability. To find out just how much a Model 3 costs to build, the analysts spend 6,600 hours in a warehouse outside Detroit picking it apart. Their findings concluded Tesla spends $2,000 more to produce a Model 3 than BMW spends building a similarly-priced i3.

The problem, states Munro & Associates founder Sandy Munro, is the company’s manufacturing inexperience. More specifically, the body’s design is too complicated. That makes it more expensive to build as a consequence. “They’re just learning all the old mistakes everyone else made years ago,” Munro told Bloomberg. For example, the steel and aluminum frame Tesla incorporates to enhance safety is an added cost. Why? The battery pack already lies in the floor and stiffens the vehicle, making the added stampings redundant. From a cost-effectiveness standpoint, the Model 3 is heavier, more complicated, and more expensive without much additional benefit.

 

Bloomberg also points to Munro’s analysis of the trunk well. Rather than using a single piece of aluminum or fiberglass, the Model 3 uses nine pieces. All the pieces are then riveted, welded and sealed together – a more complex setup than other automakers’ production models. In the end, Munro reportedly sent Tesla a free list of 227 suggestions to improve the profitability in their manufacturing process. The company responded that they have refined their production processes since the Model 3 started rolling off the assembly line.

Tesla has an edge on technology

Munro’s analysts see the Tesla Model 3 with a potential to gross 30 percent profit margins on the more expensive model. On the impending $35,000 entry-level version, those margins are around 10 percent. While CEO Elon Musk said in an August earnings call that the company is working to boost efficiency, one area they already have an edge is on technology.

Tesla’s battery technology affords the Model 3 a longer range than the Chevrolet Bolt and BMW i3. What’s more, the 75 kilowatt-hour battery in the Model 3 costs $1,000 less than the Bolt. It’s the same story with the electric motors. Instead of the $836 GM spends on a Bolt’s motor, according to Munro’s estimates, Tesla’s motor costs $754. Tesla also cut down on the amount of wiring it needs to run to all the electronics by concentrating them all in small circuit boards. That speaks to the company’s background as a tech industry giant.

Too many workers

Tesla currently employs 10,000 people at its Fremont plant. Munro contends that, based on the company’s target of 5,000 Model 3s per week, companies like Toyota and GM manage with far fewer workers. At peak production, those automakers build 450,000 cars a year with 4,400 workers. “There’s no way you need 10,000 people even with three shifts and with a lot of work done in house,” Munro said.

As it stands, not including labor, Munro estimated the cost to build a $50,000 Model 3 at around $34,700. Still, even throwing that in, the potential is there for the 30 percent margins mentioned before. It’s worth noting Munro’s analysts haven’t yet visited Tesla’s manufacturing facility, however. So at this point, the figures are estimates based strictly on their teardown and assumptions of efficiency.

While body design may need refinement, Munro does laud the company’s advanced electric motor design. “This electric motor is a game changer…Everyone should be benchmarking this.” As Bloomberg points out, the trick is for the company to build the Model 3 in such a way as to generate consistent profits. Refine and simplify the design and hire experienced executives, and Munro said, “[Musk]’s not far away from making money.”