The success of Tesla Inc.’s Model 3 is vital for the electric-car maker, but the figures that UBS Group AG came up with through consultations with engineers and industry research suggested that the long-awaited $35,000 base model the company initially planned to build is likely to lose money.

UBS analyst Colin Langan believed Tesla will not profit at the $35,000 the auto giant originally set to charge for an entry-level model built for the masses.

The Model 3 has to sell in the low $40,000’s to break even, according to Langan, adding that Tesla is a long way from the 25 percent growth margin target, unless the Palo Alto-based group will be able to sell the model well over $50,000.

Lead of the Model 3 Still Not Enough


With the help of a group of engineers, UBS disassembled three different EVS which included a new Tesla Model 3, a 2014 BMW i3, and a 2017 Chevrolet Bolt to provide an analysis of each car’s powertrain and battery, electronic controls, frame and body, as well as interior and safety features.  

They also examined and compared each part’s design, simplicity of manufacturing, and their production costs.

The team found that the electric powertrain of the $49,000 2018 Model 3 seemed to be far more advanced than its competitors, describing the mechanism to be a next generation, military-grade tech that is exceptionally simple and flexible and is years ahead of its peers.

Still, Langan said the costs were higher than expected and the cars would lose around $6,000 each at Tesla’s plan to sell an entry model at $35,000, reinforcing speculations about Tesla struggling to transform into the mass-market automaker it hoped to become.

As regards to production cost, Tesla also surpassed BMW and Chevrolet, although the Model 3’s lead was not that huge just as UBS had expected.

Since the announcement of the Model 3 in 2016, production plans for the vehicle have encountered delays as the company ran into problems with ramping up production of the Model 3.

Tesla Chief Executive Elon Musk stated in May that shipping the Model 3 at that price right away would cause Tesla to lose money on every car and die.

Instead, the EV titan chose to put its attention on higher-cost versions that generate better margins, which helped Tesla yield the profit in the third quarter of 2018 Musk said he expected. Profit margin of the $49,000 version was about 18 percent, according to Langan.  

The price for the cheapest Model 3 currently available is at $49,000 and can go up to $80,000 if buyers wanted to add options, but Langan deemed these prices unsustainable for a midsize sedan, such as the Model 3.

Despite the Model 3 being a battery electric vehicle, Langan said at least some of its buyers will also be purchasing midsize sedans with internal combustion engines that are priced in the mid-$40,000 range, like the BMW 3-Series.

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