Tesla Model three May Spin Profits Above $41K – And five More Surprises In Fresh Explore, Stock News – Stock Market Analysis
This Is Tesla’s Model three Break-Even Price Point — And five More Surprises In Fresh Investigate
The two thousand seventeen Chevrolet Bolt was showcased at the North American International Auto Showcase last year. (Steve Lagreca/Shutterstock)
- APARNA NARAYANAN
- Five/22/2017
What does a teardown of General Motors‘ (GM) plug-in Chevy Bolt expose? That electrified vehicles, including the upcoming Tesla (TSLA) Model Trio, could be profit spinners much sooner than expected.
X Autoplay: On | Off A team of UBS analysts recently took apart the Bolt, which they describe as the world’s very first real mass-market electrical vehicle with a range well above two hundred miles — and one with certain similarities to the Model Three. The analysts gained insights into the the future of mobility as well as what is in store for industries with skin in the game.
“This fresh generation of electrified cars has far-reaching implications for the global autos industry, but also for many other sectors, such as capital goods, chemicals, mining, technology and energy,” the analysts wrote in a May eighteen research paper.
Tesla shares fell 0.15% to 310.35 in the stock market today after slipping intraday to 306.80. The stock hit a record high of 327.66 set on May Two.
Here are some findings that astonished the analysts:
The Race To Profitability
The Bolt is a money-loser for General Motors but is poised to become a moneymaker by 2025. Using calculations based on the price, costs and margins for the Bolt, the UBS analysts estimate Tesla’s Model three will require an average selling price of harshly $41,000 to break even.
That is modestly higher than the Model Three’s estimated base price of $35,000. But buyers are likely to pay up for the bells and whistles, meaning Tesla likely will cross the $41,000 break-even for the Model three with ease, in the analysts’ view.
Takeway: Fears that Telsa will lose money on the mass-market, $35,000 Model three may be unwarranted.
IBD’S TAKE: Tesla is expected to begin Model three output in July, with mass production by year-end and continuing to accelerate in 2018. Here’s an in-depth look into whether Elon Musk’s Model three production plan is too quick and too furious.
Powertrain Cheaper
The Bolt’s electrified powertrain — its most expensive component — costs $Five,000 less than the analysts expected. An all-electric car and a traditional car with an internal combustion engine may cost toughly the same sooner than expected given the shrinking costs for battery packs and other EV modules.
Takeaway: By 2025, electrical vehicles could account for 14% of annual fresh car sales worldwide, with emissions-leery Europe a key request driver.
24 Moving Parts
More than half the contents of the Bolt are sourced from outside the traditional auto supply chain. In fact, the entire electrical powertrain and infotainment modules for the bolt are supplied by South Korean electronics giant LG.
The Bolt has a mere twenty four moving parts vs. One hundred forty nine in one traditional car, the Volkswagen (VLKAY) Golf. What it lacks in mechanical complexity, it makes up for in electronic refinements.
Takeway: Traditional auto suppliers stand to lose from the trend toward vehicle electrification.
Influence On Parts Makers, Dealers
The Bolt and its electrified ilk may help auto manufacturers turn profits relatively soon, if costs fall and volumes grow sooner than expected. However, these enormously low-maintenance vehicles could menace others.
Traditional suppliers, however, face competition from fresh entrants and dwindling revenue from some lucrative business lines — such as spare parts. Dealerships’ revenue from after-market service could take a 60% hit too.
Takeway: Electrified cars will disrupt the automotive industry, in some unanticipated ways.
Bet On Cobalt, Copper
The Bolt’s bod and chassis use far less metal and steel than the Golf, and far more aluminum and copper. It weighs 22% more than the Golf too, which is mainly due to the battery guts.
Battery and e-motor magnet request could spell a boom in materials such as lithium, cobalt, graphite and uncommon earths. Platinum, used in emission controls, could be the big loser.
Takeaway: Electrical cars will roil the vast global commodity markets.
Chips Under The Spandex hood
The Bolt has six to ten times more semiconductor content than the Golf. And that’s taking into account just its electrified powertrain — and not including semi components in infotainment and connectivity units.
Takeaway: Electrified and autonomous cars are a key growth driver for the chip industry.
EV Winners
Some potential winners from the transition to electrified vehicles, according to the UBS analysts: General Motors, Delphi Automotive (DLPH) and Texas Instruments (TXN).
Potential losers: Tenneco (TEN) and Subaru.
