Expecting Continued 8-10% Annual Cost Reductions for Tesla $TSLA

Supply Chain expert, Jeff Lutz, expects Tesla to continue 8-10% annual cost reductions from $36300 for the Model Y at the end of Q4 2023.

This could range from 6-12% or more if there are external global issues.

If we project 9% annual cost reductions for each of the next three years then this would be:

2023 $36300
2024 $33003
2025 $30060
2026 $27355

The anticipated and estimated cost reductions.
2024 cost reduction $3267
2025 cost reduction $2973
2026 cost reduction $2705

About $800-1000 of this would be the expected battery price reductions.

An Average of $800 per Year in Lower Battery Costs for 60 kWh Tesla

CATL has new rectangular LFP batteries. The LFP EV battery price will be less than $56 per kWh within six months. It is a bigger rectangular battery with each one being like six Tesla 4680 batteries.

The LFP battery price in China is currently $70 per kWh.

China’s EV makers (CATL, BYD) are targeting two 0.1 rmb drops ($14 per kwh each). Each 0.1 rmb drop is US$840 for a whole 60 kWh pack.

The price is heading to $36 per kWh as early as next year.

They EV LFP battery prices at the start of 2023 were $110-124 per kWh.

Tesla should be saving about $2000 in battery costs right now compared to last year. Tesla will be saving $800 in LFP battery costs within 6 months and another $800 within about 18 months.

Unboxed Process Will Reduce Costs by 30%

Caresoft, a company similar in some ways to Munro Associates, tear down vehicles in order to reverse engineer and perform cost analysis.

The CEO of Caresoft analyzed the legacy assembly line, the Tesla model Y assembly line and the Tesla next generation line.

Tesla unboxed parallel modular manufacturing process will reduce costs by over 30% from the current leading Tesla Model Y process.

Tesla is the top benchmarked company. Chinese companies only benchmark themselves and Tesla. The Chinese car makers are not benchmarking Toyota anymore.

Chinese consumers want a new car which visibly looks different than it did three years ago. They want to say they have arrived with a new car. Tesla needs to put cosmetic changes so that people know that the buyer has a new car.

Chinese carmakers are looking at the Caresoft analysis of the unboxed process and there are at least two who are looking to copy the unboxed process.

1 thought on “Expecting Continued 8-10% Annual Cost Reductions for Tesla $TSLA”

  1. Brian, have you heard/read anything about reducing the cost to repair a Tesla vehicle that has been struck by another vehicle? I am sure Tesla is working on it, and I’ll bet there is a training system being developed for body shop mechanics, but I haven’t seen/read anything lately.

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