Tesla is one of the most disruptive companies to come onto the scene in the recent past. The Tesla line of EVs has been a game-changer but why are Teslas so expensive? Well, we will delve into this very subject and give you the reasons for this.
I would imagine that the last person to make as big an impact on the automobile industry is the late Henry Ford. He changed the automobile industry with his vision of making the automobile, or more accurately, the ”horseless carriage” affordable for every American household.
With singleness of purpose and iron will, he was able to make that dream a reality, starting with the Model T leading to the juggernaut that Ford Motors is today. Just like Mr. Ford, Elon Musk, the founder of Tesla has a mission to eradicate the internal combustion engine.
The benefits of electric cars will be felt more by our children and grandchildren when they inherit a cleaner environment. This, among other things, is what drives him.
Why are Teslas so Expensive?
In short, Teslas are expensive because it is an electric vehicle which comes with many costs such as batteries to power the vehicle, electric motor, and charging technology that requires extensive research and skilled labor which comes at a cost.
Reasons Why a Tesla is Expensive to Build
So, exactly are Teslas so expensive to build? When you look at it from a historical point of view, the price of Teslas has gone down and Elon Musk is looking to produce a $25,000 replacement for the model 3. There are several reasons why the price of a Tesla has been so high. Let’s look at some of them here.
The Battery
First of all, the battery is one of the most expensive parts of Tesla vehicles second only to the motor. The materials used to produce lithium-ion batteries are mined in different parts of the world.
The cost of procuring these materials is difficult to bring down due to the nature of the supply chain. Until such a time when the cost of these key inputs can be brought down, the cost of manufacturing batteries for Teslas will remain high.
Electric Motor
The electric motor on Teslas is the most expensive component. Replacing a battery pack on a Tesla will cost you about $5,500 to $6,000 while the electric motor will cost you $9,000 or more.
In an industry that is, by all intents and purposes, still growing, components for these vehicles will most likely cost an arm and a leg.
This is mainly due to the fact that the different components aren’t being mass-produced at a scale that allows for a drop in prices. This takes us to the next point:
Limited Production Capacity
Though there is a huge demand for Teslas and production capacity has grown significantly over the years, there are not enough factories producing Teslas. They actually have a long waiting list stretching as long as 2 years.
Elon Musk, the Tesla CEO announced plans to build Giga factories in different parts of the world in order to push up the production of vehicles.
New Technology
Traditionally, new tech is always expensive when it first hits the market and prices generally go down with time as production processes improve. Most of the tech used in Teslas has to be specifically made for them. There are several companies that Tesla engages in for this purpose.
This makes it even more expensive to produce a Tesla as there are many different suppliers for the different components.
Excessive Demand
There is no doubt the demand for Teslas is huge. This in itself allows them the flexibility to price higher as there is more than enough money in the market. You would think that buying second-hand would allow you to get a Tesla cheaply. This is not the case.
The cost of purchasing a Tesla is usually slightly lower and in some cases, higher than the original price. The only cheap way of buying a Tesla is getting one that is damaged and then rebuilding it.
That process is a challenge though considering that the expertise needed to put together a Tesla car is mostly limited to their own personnel and a few other authorized dealers.
However, if you have the technical aptitude, you can buy one that is accidentally damaged then put it back together.
Plans to Bring Prices Down
As the demand has risen and cries for a cheaper Tesla have come forth, Elon Musk has promised a Tesla for $25,000 in the near future. This is a far cry from the first Teslas that retailed for $109,000 and went up to as much as $200,000 at some point.
If they do manage to bring the price down that much, then Tesla’s cars will be able to compete favorably against other combustion engine vehicles on the market. Cutting the cost of inputs is not possible at this point in time. Another route they could take is to streamline the production process.
This is what Tesla has opted for. They have partnered with battery and other competent manufacturers in addition to bringing these processes under one roof. This significantly cuts down the cost of bringing a Tesla vehicle to the market.
Related: Why are Mercedes G Wagons so Expensive
Conclusion on Why Teslas are Pricey
I hope you now understand the reasons why teslas come at a hefty price tag. It would seem that this is the approach that Elon Musk is taking towards his dream of making electric cars an everyday part of every household. At the rate they are going, it doesn’t seem so farfetched that electric cars will be the new norm. Hummer has released an electric version and it won’t be long before
Robert Anderson is a world class motorhead who rebuilt his first carb at age 10, his first engine at age 15, and completed his first full hotrod build when he was just 18! Previously, he has ran a part warehouse, delivered pizzas, and managed the service department for a $20 million/year revenue dealership. Robert knows cars like few others and he is passionate about sharing his knowledge.
