Teslas cost US$36,000 to make and cheaper model is on the way thanks to new Gigafactories

The price of the cheapest Model 3 now starts from US$46,990 while the average production cost of a Tesla vehicle is US$36,000, revealed the company's investor relations head. Speaking at a Goldman Sachs conference, Martin Viecha basically reiterated what Tesla already disclosed in a regulatory filing where it itemized its COGS (Cost of Goods Sold) expenses for 2021.

What was not previously known, however, is that Tesla is on its way to lower production costs even further and, eventually, come up with a mass market electric car before it launches its promised fleet of robotaxis. Tesla's first truly cheap mass market vehicle should arrive some time before 2027, as Mr. Viecha tipped that the company's two main goals for the next 5-year period are securing battery supply and lowering manufacturing expenses. Tesla is already planning its own lithium refinery and diversifying its 4680 battery suppliers to reach the first goal, but for the second it will need to diversify Gigafactories.

Tesla was able to slash the average production costs per vehicle from US$84,000 in the beginning of the previous 5-year period, to the current level without having the luxury of a decrease in battery prices. Most of the savings came from vehicle design and factory floor optimizations, added Tesla's financial exec. This is why he hopes that, when the relatively ineffective Fremont factory's share in the overall production falls, Tesla will be able to churn out much cheaper vehicles and pass those savings onto the end customer by introducing the affordable model that Elon Musk has been promising for a while now.

Currently, Tesla's Fremont plant produces roughly half of its vehicles, but with the expansion of the newer and modern Gigafactories in Berlin and Shanghai, its role hence the overall production costs per car will decrease. Even then, however, Tesla could wait before launching a cheap car as the Model Y and Model 3 are currently selling like hot cakes, he added. To prove his point, Mr. Viecha mentioned once again that the "Model Y will basically next year become the bestselling vehicle of any kind of all time in the world," knocking the Toyota Corolla off that particular perch.

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