Tesla's Profit Per Vehicle Means That We Can See Massive Price Cuts And Still Outpace Margins
Tesla average almost $10K per car in income last year. This will come down with the price cuts.
In this video I discuss how GM and Ford usually around $2,000 and $1,000 respectively. This gives Tesla an enormous advantage.
▶️ 3Speak
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It's something the other companies can't match and Tesla can do it because everything can be made with their own hands. They can combine things together and cut down costs. The competitors just can't compete unless they put in just as much work and that would still takes years to make.
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Summary:
In this video, the speaker discusses an important metric for Tesla that is often overlooked - net income divided by the number of vehicles sold. He compares this metric for Tesla, Ford, and General Motors over the past six years, highlighting Tesla's significantly higher profitability per vehicle compared to its competitors. The speaker emphasizes that despite potential concerns about price cuts and profit margins, what matters ultimately is the company's profitability. He explains how Tesla's ability to sell more vehicles at a lower profit margin can still lead to increased overall profitability due to fixed costs remaining constant. The speaker also mentions Tesla's potential market share growth and additional revenue streams resulting from putting more vehicles on the road.
Detailed Article:
The video starts with the speaker addressing an often overlooked metric for Tesla - net income divided by the number of vehicles sold. He points out that while some Tesla enthusiasts and YouTubers focus on this metric, it is crucial for understanding the company's financial health. The speaker compares Tesla's performance to that of Ford and General Motors over the past six years, noting a significant decrease in sales for both Ford and General Motors. This sales decline was primarily due to their shift away from sedans to focus on pickup trucks, where they believe they can generate higher profits.
The speaker delves into the profitability per vehicle for each company, with General Motors managing to achieve around $2,000 per vehicle while Ford struggles to reach $1,000. In contrast, Tesla's profitability per vehicle stands out, reaching $5,500 in 2020 and almost $10,000 in 2022. This massive difference in profitability per vehicle showcases Tesla's strong financial position and efficiency compared to its competitors.
Although there are concerns surrounding Tesla's recent price cuts and their impact on profit margins, the speaker argues that what truly matters is the company's overall profitability. He explains how even if Tesla reduces its profit per vehicle by 25%, selling more vehicles can lead to increased profitability due to the constant nature of fixed costs. This strategy aligns with Tesla's aggressive pricing and market share expansion, potentially offsetting any decline in profit per vehicle.
Furthermore, the speaker highlights the additional benefits Tesla gains from putting more vehicles on the road, such as increased data collection, higher service center profitability, and market share growth. He concludes the video by emphasizing Tesla's strong profit margins and maneuverability, hinting at the future introduction of the Cybertruck and how Ford and General Motors are aware of the profitability of pickup trucks compared to sedans. This positions Tesla favorably for further success in the automotive market.
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