Tesla Investor Day 2023 — Will This Change Everything?
Wednesday, March 1, 2023, may be an historic day for humanity. That is the day Tesla plans to unveil is Master Plan Part III. The Great And Powerful Musk has promised it will be a blockbuster event.
Master Plan 3, the path to a fully sustainable energy future for Earth will be presented on March 1.
The future is bright! pic.twitter.com/11ug0LRlbD
— Elon Musk (@elonmusk) February 8, 2023
Speculation is rampant that part of Investor Day 2023 will be the announcement of a third-generation Tesla electric vehicle platform which will represent a step change in automobile manufacturing. In fact, it could be a tidal wave event akin to Henry Ford’s original idea to make cars on an assembly line using standardized parts. The rumored new chassis would make use of injection molded structural elements that will slash the costs of production and make Tesla the most profitable automaker in history. It already makes nine times more money on each car sold than Toyota does.
Last month, Morgan Stanley auto sector analyst Adam Jonas, who has always been a Tesla champion, said in a research note that Tesla is now his top automotive stock pick. “Tesla’s recent price cuts are just the latest sign the EV market may be entering the ‘shake-out’ phase,” he wrote before adding the EV market is shifting to an era of under-supply to potential over-supply, marked by shorter delivery times, price cuts, and falling used car values. “[Tesla] still offers approximately 50% upside at materially lower execution and dilution risk vs peers,” the note said.
Writing in The Driven, Daniel Bleakley says the factor that will make Tesla king of the mountain is not lower battery prices, it is Tesla’s dramatically lower costs of production. “More and more evidence suggests that Tesla’s Investor Day event this week will mark the beginning of a new era in automotive manufacturing. One in which EVs are not only much cheaper to run and maintain than petrol and diesel cars, but also cheaper to make,” he says.
Cost Of Goods Sold
In the run-up to Investor Day 2023, Adam Jonas points out that Tesla’s current cost of goods sold using the second-generation platform that forms the basis of the Model 3 and Model Y is $39,000 per vehicle. He says the Tesla factory in Germany is producing 90 cars an hour and needs only 10 hours to manufacture each one. By comparison, each ID. vehicle Volkswagen produces in Zwickau requires 30 hours to manufacture. He expects that Tesla on Wednesday will unveil its third-generation platform, which he believes will lower the cost of goods sold to around $25,000. (Related story: Sandy Munro: How Tesla Gets To The $25,000 Car)
How is that possible? By a concept Musk calls “the best part is no part.” It’s an idea common in the computer industry but largely unknown in the auto industry. Using high-pressure injection molding machines is part of it. So is offering just a limited range of models. Building the same cars over and over again is simply less expensive than building a blizzard of models with an almost infinite number of options. All that complexity interferes with production efficiency, which raises costs. Eliminating redundancy and complexity is the driver of the manufacturing breakthroughs we expect to be announced on Investor Day.
The first is the single-body casting technique Tesla has pioneered. In most auto factories, an army of robots welds hundreds of parts together to make what the industry calls a “body in white.” It’s the bare frame before it’s painted and the powertrain, axles, suspension, wheels, doors, seats, and all the other components that go into making a modern automobile are attached.
Fabricating the body-in-white takes a huge amount of time, space, and money. Over the past few years, Tesla has completely revolutionized this process with the development of single-body castings using the largest high pressure die casting machines in the world. The huge casting machines Tesla has begun using are so large, the company’s materials engineers needed to develop a new aluminium alloy that would allow the molten metal to flow into all the intricate areas of the die before setting.
Adam Jonas says there are three key improvements those casting machines make possible.
- Reduced parts saving 10% mass and increasing vehicle range by 14%
- Reduced production area saving 300–1000 robots and 35% of manufacturing floor space. Model Y with single-body casings uses just 30% of the robots needed for the Model 3.
- High productivity and shorter production time. 80–90 seconds to complete a part that would take 1 to 2 hours with the traditional stamping and welding process.
Keys To Lower COGS
The second factor is the structural battery pack that Tesla is now using to build some Model Y cars in Texas. Jonas claims the castings, combined with the efficiencies that will result from using structural battery packs, will lower production cost significantly. He adds that Tesla’s $3.6 billion investment in building a new battery factory in Nevada that will have an annual capacity of 100 GWh demonstrates the company is already on the way to achieving the cost savings it forecast on Battery Day two years ago.
“Other than Tesla, no other EV name under our coverage has proven to make a profit on their EVs and some (Rivian and Lucid) have a materials) cost still well in excess of their average selling prices,” Adam Jonas said in his recent research note. “Everybody will need to cut price, but we don’t think everybody will be able to cut costs and fund the business without significant capital raises.” Morgan Stanley has rimmed its price target on Tesla stock to $220 but that continues to be one of the highest valuations for any auto company on Wall Street. “In a world of deflationary EV pricing, we believe Tesla can leverage their industry leading margins and manufacturing scale to grow the market and ‘tax’ the competition,” Jonas wrote.
It’s good to have a plan. As that famous philosopher Forrest Gump so famously said, “If you don’t know where you are going, you’re not likely to end up there.” Musk’s famous first Secret Master Plan has succeeded spectacularly. His Master Plan Part Deux? Not so much. It promised an explosion in Solar Roof installations and the advent of self-driving robotaxis that Tesla owners could use to generate significant revenue, neither of which have materialized.
The expectation is that the the third-generation platform with its significantly lower production costs might open the door to the less expensive Model C/Model 2 that many believe is in the pipeline, even though Musk insists the company already has too much on its plate to even think about a new lower-priced model. In two days, we will know more as CleanTechnica obsessively covers the Investors Day festivities.
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