Elon Musk has just presented Tesla’s financial results for the fourth quarter of 2023 and the past year. The good news is that manufacturing costs are coming down. Enough to reduce the prices of the brand’s electric cars even further? It’s not impossible, and we show you why.
Tesla has just released its financial report for the fourth quarter of 2023, which summarizes the past year. It was on this occasion that Elon Musk announced the upcoming arrival of the future affordable electric car (the famous Tesla Model 2 Redwood), planned to be sold from $25,000. But the billionaire also took the opportunity to discuss the models currently on the market, as well as their production costs.
The cost of production plummets
In the presentation of the financial statement, we can indeed read a very interesting sentence, accompanied by a very telling graph, entitled “ cost of sales per car“, which can be more or less simplified by ” production cost“. And as we can see, in just one year, it went from around $39,500 to just over $36,000.
In other words, Tesla has managed to drastically reduce the production cost of its electric cars, quarter after quarter. The American manufacturer also specifies that “ the cost of sale per vehicle gradually declined to approximately $36,000. We are now approaching the natural limit of cost reduction on our existing vehicles, but our team continues to attempt to reduce costs at all points of production, from raw materials to final delivery“.
Towards a further drop in prices?
In other words, Tesla will try to reduce its production costs even further. Enough to offer even more affordable prices for end customers? It’s possible. Remember that the manufacturer has been reducing the price of its electric cars regularly for several months. We can also see the consequence in the financial balance sheet, since the operating margin fell from 16% in the fourth quarter of 2022 to 8.2% in the previous quarter. We are approaching levels considered limiting by some financiers.
But the brand managed to do better than in the third quarter, when the figure collapsed to 7.6%. In any case, we see that Tesla still has a little room to be able to make additional discounts. Especially if the Texan manufacturer succeeds in reducing production costs in the coming months. This could for example be the case with the future restyled Model Y.
Elon Musk is not a magician
However, we must keep in mind that Elon Musk is not a magician, and that the next big revolution in terms of cost reduction will come with the future Tesla Model 2. Why? Quite simply thanks to its design and production which promises to be revolutionary if we are to believe the brand’s boss and the various rumors surrounding the project. All this, thanks to the Cybertruck which opens the way to certain unique technologies in the automotive field.
The competition has not remained idle, and it is also a reduction in costs which has allowed certain manufacturers like Renault to drastically reduce the price of electric cars as reported Numerama. Volkswagen can also be cited as an example. But we do not know if the costs have really decreased in all cases, or if it is a tactical maneuver to avoid being overtaken too much in this ultra-competitive market, dominated by Tesla and BYD, which plans a merciless price war for 2024.