The net profit of a single car is 60,000. Why does Tesla?

time:2023-03-22 author:Aviation stock
The net profit of a single car is 60,000. Why does Tesla?

Benefiting from factors such as the continuous expansion of production capacity at the Fremont and Shanghai factories, increased global deliveries, leading gross margin levels, and enhanced profitability of services and other businesses, Tesla's performance and sales have been soaring. Since 2019Q3, Tesla has achieved positive net profit for 12 consecutive quarters, and in the first quarter of 2022, it achieved a net profit attributable to the parent of $5.577 billion, exceeding the level for the whole year of 2021. Tesla's increased global deliveries of Model 3 and Model Y have significantly improved cash flow levels. As of the end of the second quarter of 2022, Tesla's cash and cash equivalents accumulated to $18.3 billion. In addition, in the first half of 2022, Tesla’s net profit per vehicle exceeded $10,000. How did Tesla achieve excess profits? Shenwan Hongyuan analysts Tu Yiting, Liu Yang and Pu Mengjie said that scale effect, supply chain cost reduction, business model innovation and technological innovation are the key factors for Tesla to continue to reduce costs and improve efficiency and create high gross profit levels.

1. Large-scale production dilutes fixed costs

The increase in vehicle production scale will dilute fixed costs, and Tesla's gross profit will show a better scale effect after the production scale of Volkswagen models is expanded. Take the Model 3 hill-climbing process at the Fremont factory as an example. The Model 3 began to be delivered in the third quarter of 2017, but due to the constraints of production efficiency and battery capacity, the Model 3 ramp-up process was less than expected. According to Tesla's quarterly report, in Q1 2018, the Model 3 production line was still in a state of negative gross profit. In 2017Q3, the overall gross profit margin (Non-GAAP, excluding SBC and ZEV) of the automotive business decreased by 6.3pct to 18.7%, and continued to decrease by 4.9pct to 13.8% in Q4. By 2018Q3, Model 3 production efficiency has improved, weekly production has climbed to 5,000 units, gross profit margin has increased to about 20%, and 56,065 Model 3 units have been delivered in the quarter. After the scale of mass production was expanded, the depreciation/amortization cost per vehicle dropped from US$15,600 in 2017Q4 to US$6,002, and the gross profit margin (Non GAAP) of the automotive business recovered to 25.5%. The reduction of depreciation and amortization and variable costs can maximize economies of scale, which is the key to the jump in gross profit per vehicle. Shenwan Hongyuan Securities further used the method of cost dismantling to find that the depreciation/amortization cost of fixed assets per vehicle brought by large-scale mass production decreased, which helped Model3 increase from -2.0% of gross profit margin in Q1 in 2018 to 17.6% in Q3, within half a year. Gross profit margin improved by nearly 20%.

2. Localization of the supply chain to reduce vehicle costs

Tesla mainly sells to North American, Chinese and European markets. Tesla has a Shanghai Gigafactory in China to meet local demand, and a Berlin Gigafactory in Germany To meet the needs of the European market, by localizing the supply chain and supplying the market nearby, and using local raw materials and components, production costs, shipping costs and customs costs can be significantly reduced. According to estimates by Shenwan Hongyuan Securities, the cost of the renewal of the Model 3 in the California factory is 212,100 yuan, and the cost of the renewal of the Model 3 in the Shanghai factory is 169,000 yuan. In 2020Q1, the Model 3 in the United States is priced at $38,990 (approximately RMB 269,000), and the Model 3 in China (after subsidies) is priced at 299,000. Based on this, the gross profit margin of the Fremont, California factory in 2020Q1 is about 15.5%, and the gross profit margin of the Shanghai factory is about 32.0%. According to data from the China Passenger Car Association, the Shanghai plant will deliver 484,130 vehicles in 2021, accounting for 51.7% of Tesla's total global deliveries. The Shanghai factory has strong production capacity, and the gross profit margin is higher than other super factories. By 2022Q2, the localization rate will exceed 95%. In 2021Q2, China's standard battery life version of Model Y will be launched. It is said that after the expansion and upgrade of the production line in July 2022, it can achieve a weekly production of 14,000 Model Y vehicles. The continued growth in production and sales of the two Volkswagen models will further highlight the cost advantage and profitability of the Shanghai plant.

3. Business innovation, software charges to increase the net profit of bicycles

Since the beginning of this year, the global power battery supply chain has continued to increase prices, and the prices of power battery raw materials such as nickel, cobalt, and lithium have risen sharply. The price of lithium carbonate material has skyrocketed 10 times since the beginning of 2021 and remains high. At the same time, the price of aluminum, an important raw material for new energy vehicle bodies, also rose by 37.5% year-on-year from the beginning of 2021. Under the general pressure of the industry with rising supply chain costs, Tesla's profitability has instead surged. The main reason is that Tesla has created a hardware pre-embedded + software charging service, breaking the traditional car business model and improving the profitability of car companies. Tesla has extended its revenue source from the traditional one-time sales of complete vehicles to after-sales software and intelligent service revenue, and obtained software revenue through self-driving packages, OTA paid upgrades, and Internet of Vehicles subscription services. With the continuous increase of Tesla's global ownership and user stickiness, software services will become an important force contributing to Tesla's revenue. According to calculations, Shenwan Hongyuan Securities expects FSD-related revenue to reach US$5.419 billion in 2025. In addition, carbon credit income is also an important factor in Tesla's positive net profit attributable to its parent in 2020.

4. The core technology is independent and controllable, and the black technology continues to reduce costs.

Relying on China's efficient and mature parts supply chain system, more than 90% of Tesla's parts are supplied locally. However, Tesla has achieved full-stack self-research on thermal management, motor control, motor, electronic and electrical architecture and intelligent driving solutions, and has mastered the initiative in evolutionary iterations. Tesla has implemented three major black technologies on the new Model Y: 4680 battery, CTC solution and integrated die-casting technology, further reducing costs and increasing efficiency: (1) The application of self-made 4680 batteries reduces the cost by 14%. (2) From the CTP large module battery solution to the CTC battery chassis integration solution, the battery cells are directly integrated into the vehicle chassis. The structured and integrated battery cell design reduces the weight of the vehicle by 10% and increases the battery life by 14%. , the number of parts decreased by 370, the unit cost decreased by 7%, and the unit investment decreased by 8%. (3) One-piece die-casting technology is used in the rear bottom plate, the front engine room and the battery box in the middle section. Shenwan Hongyuan Securities estimates that if the 4680 technology and integrated die-casting technology are fully deployed, the cost of the entire vehicle can be reduced by nearly 20%. After using 4680 battery, the cost is reduced to 434.1 yuan/kWh. Taking the average battery capacity of Model 3/Y of 55KWh as an example, the cost of a single vehicle battery can be reduced by 30,393 yuan. Taking the Model Y long-range version with a capacity of 77kWh as an example, the cost of a bicycle battery can be reduced by 42,547 yuan. Shenwan Hongyuan Securities stated that Tesla’s profitability recovery and explosion mainly come from two capabilities: ① the traditional scale effect drives the reduction of the expense ratio; ② technological innovation brings new space for cost reduction. The gain of the traditional scale effect runs through, dragging it out of the quagmire of losses in the early stage of Tesla’s capacity expansion, and in the period of sharp increase in production capacity after the Shanghai plant was put into production, the scale effect helped Tesla enter a new profit. era of high growth. Technological cost reduction and business innovation have been throughout Tesla's growth. It has been silently moistening things, continuously reducing the cost of a single vehicle, improving the gross profit level, and gradually widening the gap in the net profit margin of traditional car companies. The main point of this article comes from "Innovation is the Source of Excessive Profits: Detailed Explanation of the Enlightenment of Tesla's 60,000-yuan Net Profit of a Bike - A Series of Reports on the New Power of Zhilian Automobile (1)", the original author: Tu Yiting, Liu Yang, Pu Mengjie of Shenwan Hongyuan Securities This article From Wall Street news, welcome to download the APP to see more
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