Tesla’s car prices have dropped due to its industry-leading development cost margins. According to a report, the company reduces costs by upgrading and building more factories. The automaker’s battery-related efforts, in-house growth, and upcoming platform announcement make for stellar margins.
According to the company’s Chief Financial Officer Zachary Kirkhorn, Tesla is reducing production costs further to make electric vehicles (EVs) more accessible. He said that comparing the flagship Model S and Model X to the Model 3 and Model Y, Tesla has already cut EV costs by 50%.
Tesla revealed how it will cut vehicle and production costs by another 50% in the next 5 years. According to Ark Invest, Tesla is taking the following steps to do so:
- Produce 100% of controllers in next-gen vehicles
- Switch to 48-volt battery architecture
- Use local ethernet-connected controllers
- Transition to a parallel assembly process
Tesla is gradually taking on more tasks in-house. The presentation detailed Tesla’s expected 48-volt architecture and demonstrated future assembly.
The local ethernet-connected controllers will simplify Tesla’s wiring harnesses, which are already simpler than the competition based on the learnings of various experts. Ark Invest added:
These electrical architecture changes should cut costs and give Tesla more control over its supply chain at the component level. They also will enable Tesla to transition its manufacturing to a parallel assembly process, slashing its manufacturing footprint and wasted time by 40% and 30%, respectively.
It bears mentioning that, currently, the cheapest Tesla — Model 3 — costs $44,000. If Tesla’s claims of a 50% decline are to be believed, then after 5 years, Tesla’s price will be the same as a mid-range Toyota Corolla. This prospect will be a major breakthrough for Tesla as well as the EV arena.
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