Tesla still has one massive leg up on every automaker that could keep the EV price war going

Robotics arms installing the front seats to the Tesla Model 3 at the Tesla factory in Fremont, California.
Robotic arms installing the front seats of the Tesla Model 3 at the company's factory in Fremont, California.Mason Trinca/The Washington Post via Getty Images
  • Tesla is building electric vehicles for cheaper than anyone else.

  • Lower input costs allow Tesla to set prices lower in a price-sensitive EV market.

  • Still, Tesla's price-slashing method has started to show cracks.

Tesla is building electric vehicles for cheaper than anyone else, and it's giving Elon Musk's car company a leg up even as more competition floods the market.

Tesla's input cost per vehicle — the amount the company spends on components like metal, glass, battery packs, wheels, and tires — averages under $30,000 a vehicle, a new analysis from Bank of America found.

That's $17,000 cheaper than non-Tesla EV component costs and about $10,000 cheaper than the industry average including Tesla, the bank's analysts estimate.


It's cost savings like this that have fed Tesla's bottom line for years, driving industry-leading automotive profit margins that have allowed Musk to essentially control pricing for the EV market — and left competitors racing to catch up.

Even as Tesla's margins shrink and sales slow, the lower input costs keep Musk ahead of his legacy competition. Companies like Ford and GM are relying heavily on their gas-powered profits to fund their electric futures — neither company has turned a profit on its EVs.

Input costs are key drivers for how automakers set individual vehicle prices, so higher input costs will always lead to higher EV prices for consumers, putting anyone other than Tesla at a disadvantage in a price-sensitive green-car market.

Essentially, as long as it still costs Tesla's competition more to build more EVs, these legacy automakers will never win Musk's price war.

That's especially problematic for companies like Ford and GM as wealthy early adopters drop out of the EV market and are replaced by more frugal and practical green-car shoppers.

Still, Tesla's price-slashing method is starting to show some cracks.

The EV-industry leader is finally starting to feel the pressure of a slowdown in EV-segment growth, reporting disappointing sales and earnings in the first quarter of this year.

Tesla is expected to report June delivery numbers, a closely watched metric by investors, shortly after July 1.

Read the original article on Business Insider