Tesla China Factory 65% Less Expensive Than US Model 3 Production Line

The Tesla China factory was built in 10 months and is 65% less expensive (capex per unit of capacity) than the US Model 3 production lines.

Tesla is extending its lead and advantages over other car makers. Tesla is leading with batteries and is adding other design, technology (less wiring, better batteries) and other advantages. Tesla also does not have to spend on advertising to sell out all of the cars they are building.

Tesla China clearly benefited from the lower labor costs and vast construction capabilities in China. However, they also have made design improvements in the car, improved the factory design and improved the machines used in their factory.

The body of the Model 3 can be stamped in one part instead of 75 parts.

The wiring has been reduced from 3000 meters in the Model S to 1500 meters in the Model 3 and will be 100 meters in the Model Y.

It will be interesting to see what the factory efficiency and costs will be for the German Gigafactory and the next US Gigafactory. They will not have the lower China labor costs but they will have continued improvement in vehicle, factory and production equipment. In particular, the Maxwell Technology battery innovations will only need 6% of the factory space for the equivalent level of battery production.

Tesla Also Has About a $1000-4000 Per Car Cost Advantage Because They Do Not Have to Spend on Advertising

Regular car makers spend about $1000 per car on advertising. Luxury cars tend to spend $2000-4000 per car in advertising. Porsche has had a strong following and only spends $200 per car on advertising. Tesla does not spend on advertising and is able to sell all the cars that they are able to make. The Tesla Model X and Model S are in the pricing range of the lower luxury market.

19 thoughts on “Tesla China Factory 65% Less Expensive Than US Model 3 Production Line”

  1. Tesla has always intended to abandon the Freemont plant. It was obsolete right from the design stage. It was meant just to get production up and running at a budget price. They repurposed an existing plant, obtained on the cheap, and then spent a fortune trying to make it work. Burt it just doesn’t work.

    At 65% cheaper, the handwriting is on the wall. Tesla will abandon America just like Ford has.

    But what this article does NOT say, is that the Chinese workers have a lower pay scale, but on that money, have just as high (if not greater) standard of living than does an American worker. It’s called Purchasing Power parity – how much ‘stuff’ you can buy on your wages. China has a PPP much higher than America. Much lower wages, but they can buy a lot more with it.

    That’s what happens when you strip the profit motive out of prices. Everyone benefits. Workers have a higher standard of living, prices are absurdly low, and China still produces billionaires. Almost one new millionaire a day.

    Unless America changes its tune, China will totally dominate. And it is all because of American narcissism and stubbornness. Americans think they have the god-given right to be the best, without any effort, while China believes that being best is all about working hard at being better, and at being pragmatic about how you do it.

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  2. Like every other assembly line in the whole world that uses tents?

    No?

    Can we all just admit that the tent was a desperate hail-mary pass that worked and move on? Or do I need to ask why if the tent was soooo spectacular that the Tesla factories in China and Germany don’t use tents.

    Then ask how Tesla almost ruined themselves by needing to make a tent. Work upstream in the call stack to find out what failed. (hint: rhymes with “Dusk”).

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  3. “Their stated goal was to improve as much as possible the machine that makes the machine.”

    Yeah that was the marketing line and then we wound up with tents and St. Musk walking the production line so that he could bless/curse various aspects of the assembly line.

    The original attempt to make the “Alien Dreadnought” failed. Back to people moving things around and installing parts- where most every car company has been for decades.

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  4. I suppose that there must be some people in China capable of thorough documentation of industrial processes. And it certainly isn’t the people I deal with…

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  5. Yeah, I don’t want to appear pedantic (my desk looks like a constant tornado damaged scene) but I agree that “literally” is probably true. Every bit of foreign technology in China has been thoroughly documented and if there was an opportunity to replicate it (theft) they’ve done it. That includes ensuring the missing IP outside of China has been properly “acquired”.

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  6. I certainly don’t claim that there was no IP theft. My claim is that the statement “literally stolen every bit…” was overstating the matter.
    Normally I would be relaxed enough to let go by as just an overstatement, but if it’s described as “literally” then that’s just asking for pedantry.

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  7. yes. There is severe cognitive dissonance plaguing the Davos Man. The underpinnings of everything they think is true, is not true. There is no real rule of law, there are no rules of commerce, everything is up for grabs, and no one is safe. While Davos Man is coming to realization, the political class is still utterly clueless because they are still Kumbaya Man – the worlds problems can be solved if only they form a committee.

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  8. Correct. My colleague (German) worked with Siemens on the Transrapid maglev delivery and he argued there was never any intention for Siemens to transfer technology in its entirely for free to China so they could copy and patent it in their own country and then make their own and resell. Originally the contract was for a bigger line in China but it was scaled back down by them for the Shanghai to airport line only. (i.e. seduce Siemens for a big contract in China, send engineers to learn secret, demanded reduction in scope on contract, use SOE to make the other lines instead for cheaper $$$)

    It was simply too obvious for the German engineers working on the project.

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  9. uh, Doc, really? Very few companies that I know of actually transferred patent and trade secret rights. The China tech transfer “standard” agreements is about transferring production process, and some materials/component, on a license basis, but not the patents and designs, the IP itself.

    The bullet train is a great example. Kawasaki and Siemens “transferred” the production technology process (ie how to build the trains) to the Chinese JV. The Chinese then built the plant and reverse engineered the design and patented it (pretty easy as they were building the trains…). Also, they copied the control software (which is the core IP of a bullet train) ie theft, and patented that too. Then they started to make their own trains.

    So yeah, China is blatantly infringing on the rights they don’t have. VW exact same thing. Apple? Funny you should mention them. Xiaomi got their claim to fame from literally siphoning off part of Foxconn’s assembly line. But Apple didn’t really care because their IP is in the brand, not the phone itself (notwithstanding fights with Qualcomm and Samsung).

    So the term “technology transfer” needs to be looked at as “production method but not my trade secrets and patents”. Obviously nowadays companies realize that “tech transfer” in China means “everything”.

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  10. No. That is not true.

    1. A lot of the tech transfer was totally voluntary. Foreign companies signed over the tech in return for market access or something. Now it may be a bad, stupid, short sighted deal, but it is not literally stolen.
    2. I can name dozens of companies, from VW to Apple, that have not been destroyed despite producing in China for years.

    So your claim is just wrong. You might be gesturing vaguely at a real problem of tech theft and unfair business practices, but if so you need to be able to articulate your actual point correctly rather than wild exaggerations that are obviously false.

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  11. Well see how it goes. I mean Chinese companies and the state have literally stolen every bit of technology produced there by foreign companies then destroyed those companies.

    What could go wrong.

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  12. They are probably talking body exterior but looking at the car and the geometry, I think it must be a minimum of 3 pieces…unless you are going with plastic or fiberglass and a mold. Front end, back end, and sides/roof.
    The door frame is probably part of the structural cage and not included. Something in translation is probably amiss here.

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  13. The 3rd one (near Berlin) will probably be even better. Their stated goal was to improve as much as possible the machine that makes the machine.

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  14. The fact that this is the second factory probably helped reduce the price a great deal, from what I have read, Elon tried to initially make the first factory very highly automated, but then had to drastically scale the automation back, I imagine there was a lot of wasted money on unused equipment in the first factory.

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  15. The body of the Model 3 can be stamped in one part instead of 75 parts.

    The photograph shows a stamped part that looks much smaller than the whole body to me. Unless the design is fairly radical where every component is mounted on the left hand side doorframe.

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