Munro & Associates says it costs $2,000 more to make than BMW i3

ANTTI KAUTONEN
Oct 18th 2018 at 11:30AM

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We're written about car dismantling specialist Munro & Associates before: Manufacturing analyst Sandy Munro takes apart cars to find out whether they print money for their makers or cost them dearly. An earlier analysis of the Tesla Model 3 saw Munro critical of an early car's fit and finish, but appreciative of its electronics. Now, in an article by Bloomberg, Sandy Munro picks apart a black Tesla Model 3, with a few key points to note.

In the article, Munro blames Tesla's inexperience with automaking for squandering away a large portion of the car's profitability margin. The main issue is with body design, said to be engineered by people with no previous experience on car development. Munro says the Model 3's body is needlessly complicated with strengthening done in places where it isn't necessary and some sections crafted of multiple parts when a far simpler design would have sufficed, and that the weld points and rivets of the car's design make it unsuitable for heavy automation. As a result, the Model 3 costs some $2,000 more to build than a similarly priced BMW i3, says Munro.

The bottom of the Model 3 has a steel and aluminum frame, while the car's floor-mounted battery would already add stiffness to the structure by itself — meaning the Model 3 is, in Munro's view, heavier and more expensive without a distinct benefit. Another thing is the trunk well, which is made of many small sections that have been riveted and welded together, while other carmakers use a one-piece or stamped solution. Both of these things take time and money, and stand as testament of Tesla "learning the mistakes everyone else made years ago," as Munro says.

Reportedly, Munro sent Tesla a list of 227 suggested improvements, free of charge. Bloomberg says Tesla's response was that the company has already refined its production processes after this car was built.

Munro says the fully loaded Model 3 has a chance of an overall 30 percent gross profit margin, and that the lower-end cars stand at 10 percent. The particular Model 3 addressed in the Bloomberg article is a $50,000 car, with Munro estimating its total assembly cost at $34,700 — logistics and labor costs not included, and the estimate based on plant efficiency comparable to an average Toyota or GM plant. Munro hasn't been able to visit the Fremont manufacturing facility, so the estimated profitability remains an estimate.

The fact that Tesla employs 10,000 workers at the same factory where Toyota and GM sufficed with 4,400 is also mentioned. "There's no way you need 10,000 people even with three shifts and with a lot of work done in house," Munro says.

Still, he lauds the cars' advanced electric motor design, calling it a "game changer" that everyone should be benchmarking. In Munro's view, consistent profits are not unattainable for Tesla if the right, experienced people are hired to oversee the manufacturing process.

Tesla Model 3 Loses CR Recommendation Over Reliability Issues

Owners report problems with paint, trim, and electronics in Consumer Reports' survey

February 21, 2019

Consumer Reports can no longer recommend the newest Tesla—the Model 3 electric sedan—because members say they’ve identified a number of problems with their cars, including issues with its body hardware, as well as paint and trim. CR members reported these results in our annual reliability survey, which includes data on about 470,000 vehicles.

The Model 3 is a critical car for Tesla. It’s the automaker’s first attempt at a true mass-market electric vehicle (EV), and its long, bumpy launch into the consumer market starting in late 2017 was greeted by EV enthusiasts with a mixture of anticipation and frustration. The Model 3 rollout was plagued by numerous production delays and extraordinarily long wait times for customers who put down orders more than a year before delivery. Yet the small sports sedan has been received well by its owners, getting top marks in CR’s most recent owner satisfaction survey. It has also largely lived up to its promise as a highly competitive sports sedan, earning a respectable road-test score, which puts it not far behind the Audi A4 and BMW 3 Series.

But reliability has been a weak spot for Tesla. According to our survey results, problems with the suspension, especially with the 2017 model year, have been an issue for the Model S luxury sedan, while hardware problems—especially concerning its unique falcon-wing doors—have plagued the Model X SUV (neither is currently recommended by CR). And now our latest survey data has surfaced numerous problems reported by Model 3 owners as well, which is why CR has removed its recommendation for the vehicle.

“While Teslas perform well in Consumer Reports’ road tests and have excellent owner satisfaction, their reliability has not been consistent, according to our members, which has resulted in changes to their recommended status,” says Jake Fisher, senior director of auto testing at Consumer Reports.

Tesla currently holds the top spot on our list of brands that satisfy owners the most, based on their new vehicle lineup.

“In most cases, reliability issues will undermine satisfaction,” Fisher adds. “But when a vehicle has an enthusiastic following, like with Tesla, owners may overlook some issues. We’ve seen this with other vehicles such as the Jeep Wrangler and Chevrolet Corvette.”


Tesla’s Response

A Tesla spokesperson said the automaker has already made “significant improvements” to correct the issues that Model 3 owners raised with CR. “The vast majority of these issues have already been corrected through design and manufacturing improvements, and we are already seeing a significant improvement in our field data,” the spokesperson wrote in an emailed statement to CR. “We take feedback from our customers very seriously and quickly implement improvements any time we hear about issues.”


How CR Measures Reliability

CR gathers reliability data through an online questionnaire sent out each spring to members. The survey asks about any problems these members may have had within the previous 12 months with 17 aspects of their vehicles, including major systems such as the suspension and electrical system, as well as fit and finish issues such as paint and trim.

For the past few years, CR has been going back to car owners who did not answer the initial survey to gather additional information, and to include a greater number of the newest vehicles. These later responses have been incorporated into the ratings found in our annual April autos issue.

With the new data, CR’s sample size of 2018 Model 3s nearly doubled, bringing the total number of Model 3s involved to more than 500. These latest survey responses contained a relatively high number of reliability complaints.


What the Survey Found

Model 3 owners in our spring survey sample reported some body hardware and in-car electronics problems, such as the screen freezing, which we have seen with other Tesla models. The latest survey data also shows complaints about paint and trim issues. In addition, some members reported that the Model 3’s sole display screen acted strangely.

“The touch screen would intermittently begin acting as if someone was touching it rapidly at many different points,” one member wrote in. “This fault would cause music to play, volume to increase to maximum, and would rescale and pan the map in the navigation system.”

Some owners also complained about glass defects, including cracks in the rear window, in their survey responses.

In fact, CR experienced similar problems with its own Model 3. Earlier this year, our test vehicle developed a large crack in its massive rear window during a cold spell when it was parked outside.

When the Model 3 first came out in 2017, Consumer Reports gave it an average predicted reliability score based on the survey results at the time about the Model S because the two shared much of the same technology. The car maintained its average score for predicted reliability in October 2018 based on the experiences of Model 3 owners who completed our spring survey. The new survey data shows that the car has dropped from average to below-average reliability.

Tesla’s other models have suffered from below-average reliability as well, Fisher said. The Model S sedan has had an inconsistent history, being above average, average, and below average, with each downward move following in the wake of a hardware change made by Tesla. CR members report that they have the most trouble with loose trim, frozen or blank screen display, and suspension in 2017 models.

The Tesla Model S lost CR’s recommendation in October 2018 largely because of suspension problems. Tesla made air suspension and all-wheel drive standard in its 2017 Model S.

The Model X SUV has always had below-average reliability through its lifespan, with CR members reporting problems mostly with its hardware, and with its falcon-wing doors in particular. It has never earned a CR recommendation.

By contrast, CR members have reported few problems with Tesla’s unique electric powertrains, which may be due in part to their relative simplicity when compared with traditional internal-combustion engines.

Tesla launches long-awaited standard Model 3 starting at $35,000

Electric carmaker Tesla is finally launching its long-awaited standard Model 3 starting at $35,000 and shifting all sales online, the company said.

The company’s shares were halted, and Tesla suspended all orders on its website ahead of Thursday’s news. It also redirected users to a page teasing a mystery announcement CEO Elon Musk promised to reveal at 5 p.m. ET.

The base model of the Model 3 will have 220 miles of range, a top speed of 130 miles-per-hour and accelerate from 0 to 60 mph in 5.6 seconds, the company said.

“You can now buy a Tesla in North America via your phone in about 1 minute, and that capability will soon be extended worldwide,” the company said, adding that it is also allowing customers to try out the car before buying. It’s offering full refunds if a car is returned within seven days or 1,000 miles.

Tesla has been promising a $35,000 version of the Model 3 ever since the automaker revealed the mid-size sedan in 2016. But it’s prioritized the production of more expensive versions of the car in order to keep profit margins high. Musk has defended the decision by saying that making lower-priced versions was unprofitable and would cause Tesla to “die.”

More layoffs expected at Tesla as the company shutters most of its retail stores

February 28, 2019

In a surprise announcement on Thursday, Tesla said it was closing “many” of its 378 retail stores around the world as it shifts to an online-only sales model.

That will mean another round of layoffs at the electric automaker like affected some 7% of its workforce in January in a bid to cut costs following its production ramp for the Model 3.

Tesla did not respond to questions from Business Insider about how many stores will be closing, or how many employees might be affected.

“Shifting all sales online, combined with other ongoing cost efficiencies, will enable us to lower all vehicle prices by about 6% on average, allowing us to achieve the $35,000 Model 3 price point earlier than we expected,” the company said in a blog post.

“Over the next few months, we will be winding down many of our stores, with a small number of stores in high-traffic locations remaining as galleries, showcases and Tesla information centers. The important thing for customers in the United States to understand is that, with online sales, anyone in any state can quickly and easily buy a Tesla.”

On a conference call with reporters and analysts, Musk said the closings were the only way to keep costs down.

“We will be closing some stores and there will be a reduction in head count as a result,” he said. “There’s no other way for us to achieve the savings required.”

Exclusive: U.S. lawmakers introduce bill to boost electric car tax credits

April 10, 2019

WASHINGTON (Reuters) - A bipartisan group of U.S. lawmakers will introduce legislation on Wednesday to expand the electric vehicle tax credit by 400,000 vehicles per manufacturer, a provision that would give a boost to General Motors Co and Tesla Inc before the existing credit comes to an end for them.

The bill is sponsored by Democratic Senators Debbie Stabenow and Gary Peters, Republican Senators Lamar Alexander and Susan Collins and Democratic Representative Dan Kildee, the sponsors told Reuters ahead of its official introduction.

The bill could lift electric vehicle sales in a boost for automakers that have committed tens of billions of dollars to meet rising global emissions requirements.

The existing $7,500 EV tax credit, which allows tax payers to deduct part of the cost of buying an electric car, phases out over 15 months once an automaker hits 200,000 cumulative EV sales. GM saw its tax credit cut to $3,750 on April 1. Tesla’s tax credit fell to $3,750 on Jan. 1 and will end entirely at year’s end.

The bill dubbed the “Driving America Forward Act” would grant each automaker a $7,000 tax credit for an additional 400,000 vehicles on top of the existing 200,000 vehicles eligible for $7,500 tax credits. It would shorten the phase-out schedule to nine months.

The bill would also extend the hydrogen fuel cell credit through 2028. The bill is estimated to cost $11.4 billion, with all but $91 million of that tally to extend the EV tax credit.

“We have a cap that’s got to go up,” Stabenow told a group of automakers at a dinner last week. “I want to get this done as soon as possible.”

The proposal has strong backing from automakers, environmental groups and others, but will face opposition.

Last month, the White House proposed immediately eliminating the $7,500 tax credit, a move it said would save the U.S. government $2.5 billion over a decade.

Senator John Barrasso, a Republican who chairs the Environment and Public Works Committee, in February proposed legislation to end the credit and impose a highway user fee on EVs to pay for road repairs.

The bill is backed by major automakers including GM, Tesla, Toyota Motor Corp, Ford Motor Co, Fiat Chrysler Automobiles NV, Honda Motor Co, BMW AG, Nissan Motor Co, Volkswagen AG and utilities.

Both GM and Tesla have been lobbying Congress for more than a year to extend or expand the EV tax credit.

GM’s credit drops to $1,875 in October and will completely disappear by April 2020, while Tesla’s credit falls to $1,875 in July and expires at the end of the year.

The bill dubbed the “Driving America Forward Act” would grant each automaker a $7,000 tax credit for an additional 400,000 vehicles on top of the existing 200,000 vehicles eligible for $7,500 tax credits. It would shorten the phase-out schedule to nine months.