Morgan Stanley estimates those margins to be close to 20%, close to the luxury segment of the auto market, even though its Fremont, California plant is considered the most expensive auto manufacturing plant on the planet.
Morgan Stanley estimates that the margins of the new Berlin, Austin, and other factories, or “gigafactories”, will be between 1,000 and 1,500 basis points higher than those of Fremont, so their share of production will increase, costs will increase. Production will rise dramatically fall and margins (assuming prices are kept under review) will skyrocket at the same time.
Will Tesla count all of these gains in profit? It’s unlikely, Morgan Stanley suggests, as its strategic priority will be to expand the availability of low-cost Tesla vehicles to as many people as possible.
Why then? Because Tesla sees even greater benefits in the future, not in the cars themselves, but thanks to their many “complementary” business possibilities: software, fully autonomous driving, subscriptions, insurance, robot taxis, and so on.
For this to work, Tesla needs as large a fleet as possible. Design and engineering will bring a new level of scale to electric vehicle factories, perhaps at a level, the industry has never seen.
“We view the electric vehicle market as highly deflationary activity,” Morgan Stanley analysts wrote in a recent note.
“Although it may take several years, we would be poised for Tesla vehicles to start at $ 20,000 / unit this decade. That’s half the current price of just under $ 40,000 for the base Model 3.
And others will be forced to do the same. “We also expect the price of some electric vehicles from different manufacturers to be as low as $ 10,000,” analysts said. “The profitability of the OEM (automaker) will be derived from the monetization of the customer through other sources of income, such as software, as opposed to hardware (the car).”
To give an idea of the scale of Tesla’s ambition, Morgan Stanley estimates that Tesla will spend about $ 27 billion per year by 2027 on annual R&D – that’s more than Apple currently spends and more than NASA.
“Investors are witnessing one of the most spectacular industrial ‘arms races’ of a generation,” the analysts write. “The mantra ‘batteries are the new oil’ is being implemented in the form of extraordinarily large budgets in public and private companies, research labs, and government-sponsored efforts.”
Morgan Stanley estimates that more than $1 trillion will be spent developing advanced battery materials and cell architecture and “industrializing their production on a tera-scale.”
And they believe that Tesla has a huge advantage in terms of innovation and scale, from the raw materials in the battery to the data that comes from the car.
“The battle for EV supremacy is still in its infancy… even in our own model, we may be underestimating the ambition and speed with which Tesla is industrializing the EV, its supporting infrastructure. And its revenue. of “Internet of cars” model”.