Tesla could cut production costs by 50% in the next 5 years

A lot of information came out of Tesla‘s Investor Day presentation, which was held on March 1. Of all that the manufacturer has said, the most interesting element has been its plans to build a sixteenth giga-factory in Mexico where the manufacturer intends to produce next-generation vehicles there. According to what some investment firms, such as Ark Invest, believe, the price drops we have recently seen from the manufacturer are only the beginning of a new offensive that could upset the entire automotive industry.

At the time of this writing, Tesla is already very efficient at auto production, to the point where it earns significantly more profit margins on each vehicle sold than some large, established automakers.

However, after listening to Investor Day, Ark Invest predicts that Tesla will be able to cut production costs by 50% over the next 5 years.

This prediction comes from several concrete analyses, based on what was said by the Texas giant during its presentation intended for its investors. On the one hand, we know that Tesla has finally streamlined Model 3 production to the point of making everything much more efficient on the assembly line, but also fixing the quality issues it’s been dealing with for the past few years.

But there’s also the fact that, unlike most automakers that rely heavily on parts suppliers, Tesla develops and builds more of its components, a habit that’s changing at almost an exponential rate within the company. Ark Invest has listed the steps that will allow Tesla to be even more profitable in the short and medium term, here they are:

• Tesla plans to build 100% of its vehicle charge controllers.
• Tesla will transition to a 48-volt architecture.
• Next-generation vehicles will be equipped with local Ethernet controllers.
• Tesla intends to move towards parallel-type assembly lines.

“Such changes in its production approach will allow Tesla to have much more control over its parts supply while reducing its costs. Its transition to a parallel assembly line will reduce its ecological footprint and production time by 40% and 30% respectively” – wrote Ark Invest in its report.

In short, Tesla plans to quietly abandon certain parts suppliers to develop everything in-house, while further purifying its assembly techniques, to waste far fewer resources and time building a vehicle. All this would allow it, according to what was predicted by Ark Invest, to increase its profit margins and thus reduce the price of its vehicles.

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