Legacy Automakers Face Pressure to Cut Costs Like Tesla: Analysts
Tesla and CEO Elon Musk’s plans to cut costs by 50 percent on its next-generation platform bring to light new questions for legacy automakers looking to catch up in the emerging electric vehicle (EV) sector.
Namely, experts expect Tesla to gain access to thousands in cost advantages over its rivals, all while competitors attempt to keep up with the company’s tear in the new industry, reports the Wall Street Journal.
“There is a clear path to making a…smaller vehicle that is roughly half the production cost and difficulty of our Model 3,” Musk said at a Morgan Stanley conference earlier this month.
The comments mirrored statements made at Tesla’s Investor Day event, in which executives pointed to the automaker’s next platform as a major attempt to drive down production costs.
UBS analyst Patrick Hummel noted the cost-cutting measures in recent discussion with Volkswagen officials regarding the ID.3. Currently, the ID.3 is roughly $40,000 in Europe and is only “slightly above break-even levels,” according to Hummel.
“I really struggle to see how VW is going to have an affordable EV that’s profitable to you in a couple of years’ time,” Hummel said.
“We are very aware that competition will become tougher,” Arno Antlitz, VW’s chief financial officer, said. “So we try to stay as fixed as possible on the overhead cost side.”
General Motors CEO Mary Barra was asked about matching Tesla’s margins and cost structures, by Rod Lache, an analyst for Wolfe Research in Feburary. She replied, “Our aim is to have industry-leading margins as we invest.”
Morgan Stanley analyst Adam Jonas, was convinced after Tesla’s Investor Day the automaker will have a significant advantage as it reduces costs. “In a race to the bottom, we seriously question how the competition can keep up,” wrote Jonas in a research note.
Tesla Shift Away from Rare Earths to Spur Magnet Race: Report https://t.co/fnxcauwdr0
— TeslaNorth.com (@RealTeslaNorth) March 20, 2023