The engineering firm Munro & Associates made waves recently when it tore the new Tesla Model 3 apart both literally and figuratively. The company dismantles and studies cars and other products, and CEO Sandy Munro was very vocal about his feelings regarding Tesla’s newest electric vehicle. He said the build quality was like a Kia from the 90s. Now, the company has completed its analysis. While Munro’s opinion on the fit and finish hasn’t changed, he has expressed downright shock that the Model 3 is highly profitable for Tesla.
The initial Munro & Associates analysis of the Model 3 called out issues like clunky door handles and windows that bounce around inside the door panels. The exterior panels of the Model 3 also drew Munro’s ire. The gaps are substantially larger than the more expensive Teslas — even conventional cars that cost thousands less look more polished on the outside, according to Munro.
To say Munro & Associates was skeptical of the Model 3 early on would be an understatement. Now, Sandy Munro says he’s “eating crow,” but not because the Model 3 has better polish than he initially thought. The company has determined that it’s very profitable for Tesla. It’s probably the most profitable electric vehicle on the road right now.
Munro gives Tesla credit for the way it has integrated the electronics and lowered manufacturing costs as a result. The improved battery technology also impressed the team. They estimate the 20 percent larger battery cells in the Model 3 offer 50 percent more total power. Even the little things like electrochromic rearview mirrors are a marvel of cost-efficiency. Munro & Associates estimates Tesla pays $29.50 for each mirror, whereas the BMW i3 is $93 and the Chevy Bolt is $165.
With the full report done, Munro & Associates says Tesla is earning more than 30 percent profit on each Model 3 sold. That’s considered a very high profit margin for a conventional gasoline-powered car, but no one else is anywhere close with electric vehicles. And yes, you have to cut some corners with the fit and finish to get there. Still, Munro says his opinion of the Tesla Model 3 has changed. The impressive systems integration makes this a sustainable vehicle for Tesla.
This analysis is based on the upgraded Model 3 with the long-range battery and enhanced autopilot, which costs around $55,000. Munro is hesitant to speak to the profitability of the $35,000 base model, but it should have most of the same efficient electronics. It might not be 30 percent profit, but Tesla is probably still making plenty on each unit.
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