Why is Tesla highly profitable?

 Many customers like Tesla for the following reasons:

a) It has leading battery technology
b) It has great software (to manage the operations) that can be updated "over the air"
c) It has an excellent design for the battery operated drive train

Many customer are willing to pay a premium price to own a Tesla.

There are many EV models from competitors that may have better specs than Tesla. Will Tesla maintain a lead over these competitors?

Many analysts overlook a key feature of Tesla - its manufacturing operation. It comprise of:

a) Tesla is able to produce a large volume of vehicles. For example, Tesla sold 1.3 million vehicles, compared to 122,000 for Nio, 112,000 for BYD and 95,000 for Volkswagon.

b) Tesla shows a healthy profit on its operations. Nio is still operating at a loss. The profit margin for BYD is quite low.

c) Tesla pays special attention to produce large volumes of vehicles at low unit cost. It offers a small number of models, but allows customers to select from a few options of each model. This allows them to achieve big economy of scale in production. The other manufacturers do not operate in this way.

While analysts and investors look at the specs of the models offered by the different manufacturers, few pay attention to the manufacturing method.

In my view, Tesla will continue to expand its sales significantly by offering competitive prices for its models and still maintain a high profit margin.

Tan Kin Lian
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