Despite a decline in sales in Europe, Tesla is maintaining high margins thanks to very low production costs. Here is the strategy that allows this electric car manufacturer to reduce the prices of its vehicles.

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The electric car market is booming, but automakers are facing fierce competition and fluctuations in government subsidies. In Europe, Tesla's sales have recently fallen, partly because of lower subsidies like the green bonus in Germany. Despite this, the company remains the world leader with high profit margins, supported by particularly low production costs.

Tesla succeeds in producing its vehicles at a much lower cost than its competitors. According to a recent analysis by Bank of America, the manufacturer spends an average of $30,000 - about 27,300 euros - per car on raw materials, including batteries. This amount is approximately $17,000, or 15,400 euros, lower than the average cost of other electric vehicles and $10,000 or 9,100 euros lower than the industry average.

TESLA MAINTAINS REDUCED PRODUCTION COSTS THROUGH ITS INNOVATIVE PRODUCTION LINE
The reduction in production costs is an important asset for Tesla. Thanks to a simplified design with a small number of spare parts and efficient manufacturing methods, the company can regularly lower the prices of its cars. This is done without impacting its profits too much.

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For example, the Gigacasting technique used on parts of the Cybertruck, though eventually abandoned, was intended to produce one-piece body parts to further reduce those costs. This ability to minimize expenses allows Tesla to remain competitive with rivals like BYD, which manages to produce a similar car at a 15% lower cost.

However, Chinese competition remains a serious threat. For example, Leapmotor started production of its T03 electric car in Poland at a plant in Stellantis. This strategy allows the carmaker to bypass new European taxes on vehicles imported from China. By producing locally, the company can avoid tariffs ranging from 27.4% to 48.1%, giving it a significant competitive advantage. Tesla must therefore remain vigilant in the face of these developments and continue to innovate to maintain its leading position.

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Tesla has a secret weapon to lower the price of his cars, here it is in detail