Tesla Model 3: In production, it costs $36,000

Tesla is known for its quarterly reports – which should be read very carefully. The company posted a profit of 5.5 billion dollars for 2021 – for the entire year. However, this also includes nearly 1.5 billion dollars in revenue that has nothing to do with building and selling cars, but rather with the sale of cheap CO2 credits, the so-called "regulatory credits," with which competitors can buy their way out of their CO2 fleet surpluses in a pooling arrangement with Tesla. These "credits" still sometimes come cheaper for competitors than reducing CO2 penalty payments.

So far, so legal. The balance sheet item "assets" appears less convincing. Here Musk already includes expected revenues in the balance sheet – something that in the U.S. is categorized as "accounts receivable," or "expected revenues." At the end of the year, this amounted to 7.9 billion dollars.

Which brings us to the third point, production: Here, Tesla was able to increase the production of the Model 3 and Y, which it always reports together, from 454,932 units in 2020 to 906,032 units – an increase of 99 percent. However, production of the Model S and Y fell from 54,805 units to just 24,390 units, a decrease of 55 percent. In total, Tesla narrowly missed the target of one million units with 930,422 units – in 2020, the figure was 509,737 units. But thanks to "Gigacasting," i.e., huge casting molds and new production methods, the company claims to have achieved profitability. Tesla writes: "Manufacturing is Tesla's crucial core competency. While electric cars have often been seen as structurally unprofitable due to the expensive batteries, we were convinced that innovations in manufacturing, specially made vehicles, and factories would solve the cost problems."

Under the item "COGS" (Cost of Goods Sold, including all incidental costs such as marketing and sales) per vehicle, these dropped to about 36,000 U.S. dollars for the Model 3 and Y in the third and fourth quarters of 2021. The production in China with lower wages likely also contributed to this. With the huge cast parts (for example, the rear of the Model Y is almost entirely cast as a single piece instead of being welded from multiple components), newly packed battery structures that are easier to assemble, and the 4680 battery cells, Tesla plans to further minimize production costs. Because Tesla also expects rising raw material prices.

The production costs of $36,000 (which is just under €32,000 when converted – and that is not so little!) mean that Tesla makes a profit of around $9,000 in the USA (around €8,000), and in Europe, it would be nearly €10,000. The Model 3 starts there at $44,990, and in Germany at €42,990. The Model Y, which should be only slightly more expensive to manufacture, currently starts at €56,990 – which should allow it to generate even more solid profits.

What does this mean?

The first Tesla balance sheets were deeply in the red – and quarter after quarter. The company could primarily earn through "CO2-pooling" with other manufacturers whose fleets emitted too much CO2. Additionally, there was the charging infrastructure and the solar business plus "special items". But now Tesla has established mass production and is also breaking new ground in this area. This suggests that they seem to have a handle on production costs. Particularly since €32,000 is still relatively low for a car that costs €43,000. Nevertheless, Tesla seems to be slowly moving into calmer and more stable waters. The Austin and Berlin plants are close to launching, and the plan for 2022 is to mainly focus on manufacturing, as raw material prices and availability are not likely to develop favorably.