Tesla #1 in cost control? They say no

The newly revamped Tesla Model 3 is almost here. According to details released so far, the new model will eliminate the temperature sensor and determine the temperature based on location data and weather station forecasts.

Additionally, the Model Y will eliminate the six ultrasonic radars on the front and rear surrounds, according to the Ministry of Industry and Information Technology (MIIT) filing data.?

Tesla, which reported a net profit of $12.6 billion last year and a gross margin of 28.5 percent, is still frantically making cuts to further reduce production costs.?

There is a ****ing knowledge in the automotive industry that the ability to systematically reduce costs is one of the most important core competencies of car companies.?

So when Tesla, which lowered its price to an all-time low and incidentally kicked off a price war, put out the grandiose claim that production costs could be halved again, a large number of people worried for the domestic new energy brands: how can this be fought?

That's why, in recent interviews, how to deal with Tesla has become one of the topics of conversation.

After a round of chatting we realized that the Tesla in the eyes of car company executives is far less scary than the Tesla in the mouths of melon eaters.

Polite ones, such as Feifan Auto CEO Wu Bing. "The market is big enough, there's always a place for us."

Less polite ones like Li Bin, chairman of Azera, who argued that "Tesla's low cost comes at the expense of user experience." ?

Also, Pole Krypton CEO An Conghui said, "Integrated die-casting we are also using, and the tonnage and the area of the pressed product are bigger than Tesla."

Shaw Yong, deputy general manager of GAC EAN, said, "Simply compared to cost saving, the Chinese are definitely the best at it."

Ideal Motors CEO Li Want also said on Weibo, "BYD's whole-vehicle cost management is significantly better than Tesla's."

01 Minimal vs. Extreme

Musk is a believer in minimalism.?

A recent teardown video comparing the Tesla Model Y to a new domestic model in the same price range has been circulating online.?

Taking the two cars completely apart, one obvious comparison is that the Tesla's entire wiring harness, is much shorter.

In a car, even just adding a button requires an extra wire to connect. And Musk, who hates to take out all the hardware...?

The Model S integrates almost all of its controls with a single 17-inch screen; by the time you get to the Model 3 and Model Y, the center gauges are gone, and the dual blinker button wouldn't even be there if it weren't required by regulation.?

This philosophy greatly reduces the use of hardware and wiring harnesses, and has contributed to Tesla's reputation as a rough-and-tumble car.?

The Tesla "rough house"?

There are a lot of people who appreciate the extreme simplicity, who recognize Tesla's philosophy, and who believe in the power of software to replace much of the value of hardware.?

But let's think about the question, if a domestic new energy car made its interior look like this, would consumers buy it?

Li Bin's judgment is that it will not, "Tesla has its brand premium in." ?

Consumers' expectations of domestic new energy are definitely the more solid the materials used and the more luxurious the interior, the better.?

The ideal refrigerator, color TV, big sofa, every day was spit out shallow, no technology, but the sales are just not convinced.?

Weilai crazy burning money to engage in power exchange, community, was questioned not business, but most of those who have experienced it said good.?

The just-launched Feifan F7, with its left-handed screen genes and right-handed Bach cockpit, can also make a lot of consumers exclaim what Model 3 to buy?

Feifan F7 Bach cabin

In addition to the visible interior, this dismantling of the car comparison, but also proved that some invisible places, independent new energy in the material is also more sincere than Tesla?

For example, the former uses more soundproofing materials to improve NVH, more cast aluminum chassis parts to improve range and toughness, and a stronger design in the body structure.

So Li Bin says: "Tesla's low cost, at the expense of user experience." Not entirely without merit.?

In mid-March, Li Bin was interviewed by Automotive Production Network about Tesla

What's there is there, and what's not there is not there, and it's not something that can be replaced by software. The difference in assisted driving is perhaps more indicative of this.?

The number of sensors carried by a new domestic powerhouse in the same price range as the Tesla Model Y will usually be around 30, with lidar, millimeter-wave radar, cameras, and ultrasonic radar all paired up.?

And the Tesla Model Y has only 8 cameras, 1 millimeter wave radar and 12 ultrasonic radars, and these 12 ultrasonic radars will be replaced by 3 cameras soon. Some foreign media calculated that this could reduce Tesla's cost per car by another $114.?

Behind the use of a more streamlined sensor scheme remains Tesla's confidence in its software capabilities, but that confidence would be a bit of a toady in this country.?

In China, FSD has not progressed at all as well as it has in North America, with low uptake rates and "castrated" versions.

The main reason for this is that China's regulations are much stricter when it comes to autonomous driving. At the same time, Tesla's thin sensor setup is a bit inadequate when it comes to China's extremely complex road conditions.

A common phenomenon presented in various intelligent assistance comparison tests is that ?

Without the assistance of LiDAR and high-precision maps, Tesla's perception ability and execution logic are slightly inferior to that of autonomous head new forces in more complex road conditions such as on- and off-ramps and congested lane changes. In addition, Tesla's progress has been slower in terms of the city pilot assisted driving function.?

These all mean that Tesla's early stand as the benchmark of intelligent driving is being impacted. Even if it requires less hardware to implement the same features, consumers don't care about that, they're just paying for the ultimate experience.

Beyond that, back to the wiring harness issue, in addition to the fact that it requires less hardware to connect itself, Tesla's use of a more centralized electrical and electronic architecture drastically reduces the use of ECUs, and further shrinks the overall vehicle wiring harness.

Traditional cars, almost every function requires a separate ECU control, the total number of ECUs will generally reach more than 80, the wiring harness connecting the ECUs up to several kilometers, and the more functions the longer the line will be, such as the Audi A8, the total wiring harness is more than 6 kilometers long.?

But Tesla has consolidated its many ECUs into an integrated computing module and three body control modules, each responsible for ECU data processing in a nearby area, greatly reducing the amount of chips and wiring harnesses used.?

Such a centralized electronic and electrical architecture is one of the trends in the evolution of automotive intelligence, but the biggest resistance to its rollout doesn't come from technology.?

A software engineer from Yigatron argued. "Such a system would eliminate the supply chain system that traditional car companies have cultivated for decades." ?

It is true that there are dozens of ECUs on traditional cars, and behind each of them stands a supplier, and there are too many interested parties involved to change them, which is one of the burdens of the reforms of traditional car companies.?

And without the historical baggage of new forces, new brands, the pace of evolution to a centralized electronic and electrical architecture will be more rapid.

Taking Azera as an example, its current cross-domain converged electronic and electrical architecture is not complicated, mainly divided into body, power, chassis, intelligent driving, and cockpit control domains, which is much more streamlined than that of traditional cars.

And the next-generation centralized electrical and electronic architecture for the entire vehicle that it is planning will also be implemented using a centralized computing platform plus regional controllers.

Azalea's electrical and electronic architecture plan?

In short, Tesla's subtractions, consistent from the inside out, save where they can, supported by software capabilities.

To a certain extent, this approach can be accepted, is the first-mover advantage and brand appeal to Tesla's "privilege". Volkswagen and Toyota used to have similar privileges in the days when fuel cars were the norm.

No "privilege" of domestic new energy brands, can only add and subtract the combination of the optimization of electronic and electrical architecture and software algorithms at the same time, the configuration and service to pull full, in order to fight against Tesla's brand advantage.

A familiar script, history is indeed a cycle, but this time the effect is much faster.

It is important to know that Tesla's successive price cuts from the second half of last year are not a mercy, a gift of welfare, but an inevitable result of the drastic reduction of orders in hand, and the external competitive pressures it faces may be greater than expected.

02 Leave the scale talk about cost is a hooligan

Musk's minimalism, not only in the end of the product, but also in the factory. The widely known integrated die casting is one of the most representative stories.

In 2020, Musk began using an integrated die-casting process to produce the Model Y's rear frame, and the resulting benefits include:

The rear frame, which was originally made from more than 70 parts that were stamped and welded, and which took at least 1-2 hours to complete, was molded by one-piece die-casting in less than 2 minutes;

Welding shops typically require hundreds of workers, while one-piece die-casting shops require only 20-30.

Tesla has publicly stated that integrated die-casting technology has saved the Model Y about 20 percent in manufacturing costs.

At an investor day earlier this month, Musk also drew a big new pie. At the top of the pie was a new kind of production model, based on putting together only a few die-cast parts and assembling the entire body like Lego.

Large integrated die casting machine

Perhaps because the results are truly remarkable, integrated die casting is being held in extremely high regard online. But in fact the principle of this process is not complicated.

"High-temperature metal heated into a liquid or semi-liquid state is allowed to enter a mold, cooled and set, and then demolded to get the desired shape." Our ancestors used a similar method to cast bronze as far back as BC.

In the 1950s, British toy companies were already using one-piece die casting to produce toy cars, which legend has it that Musk was inspired by.

Even within the automotive industry, Musk wasn't the first to utilize one-piece die casting. He just expanded the application of integrated die casting from small parts, to large volume structural parts.?

At present, there are already a lot of new energy brands following up on this technology, Azalea ET5, Pole Krypton 009, High Hopper HiPhi Z and other models have already realized integrated die-casting of the rear frame.

An Conghui said, "From the effect embodied in the 009, the tonnage of our die-casting, die-casting out of the product volume, area are bigger than Tesla, in the future, we will apply this technology to other models."

Geely 2022 financial report will be, An Conghui in an interview about integrated die casting

Of course, not everyone recognizes the process's ability to reduce costs. For example, Li Bin, in the case of his own ET5 already using integrated die casting, he still said, "It doesn't reduce costs much."

The fact is, integrated die casting is not suitable for all enterprises. That's because the process completely sacrifices part flexibility and versatility while increasing production tempo and efficiency.

The frame is different from the chassis, after all, and even if the set is as good as the Ideal L series, its rear frame is still more or less the same.

So different models, you have to change different molds. And large die casting molds can easily be more than a hundred tons, to be on the crane to change.

Tossed once, and then restart is 10 hours to start, which is enough time to produce hundreds of die castings.

So in order to avoid waste, large die-casting machines are usually used to produce only one type of die casting, while the host factory must have a pop-up model to digest the bursting capacity of the die-casting machine.

Some professionals have measured, to 10 days as a cycle, a one-time continuous production of 5000 die casting, at least to meet this scale, in order to let the integrated large die casting machine in order to achieve a more economical use of the state.

According to the 10 days, 5000 die casting this data to project, the car company at least need to have a yearly sales of 180,000 models to support the explosion, only cost-effective use of large one-piece die casting machine.

In 2022, the only new energy vehicles in the Chinese market that can meet this condition are BYD's Qin, Song, and Han; Tesla's Model 3 and Model Y; and the Wuling Hongguang MINI.

Among these models, the Model Y, which is an integrated die casting machine, is one of the most expensive and the best seller. .

Seeing this, one should be able to understand why Li Bin says it doesn't save money when it uses integrated die casting.

In fact, Krypton's integrated die-casting is also still in the pilot stage, An Conghui is optimistic about this technology is also based on its future sales scale of Krypton has very good expectations.

See, integrated die casting does not mean absolute cost reduction and efficiency, he has a very high scale threshold. In fact, in the automotive industry, leaving the scale of talking about costs are rogue behavior.

Today's Tesla, in addition to integrated die casting, the production side of the production side of the many innovations that have been held up to the altar, but all of this is based on the basis of the scale effect it has achieved.

Don't forget that Tesla is also on track to start turning a profit in 2020, after more than 500,000 annual sales.

On the importance of scale, we can also look at BYD's financial results in 2022.

In 2022, BYD's revenue was 424.061 billion yuan; of that, 324.691 billion yuan was from its automotive business, with a gross margin of 20.39%, corresponding to full-year sales of 1.825 million vehicles.

And Tesla's figures for the same period were 561.110 billion yuan in revenue, of which 492.230 billion yuan in revenue from the automotive business, with a gross margin of 28.5 percent, corresponding to full-year sales of 1.31 million vehicles.

If you just look at the gross profit margin for automobiles in the most recent quarter, BYD is at 22.8 percent and Tesla is at 25.9 percent, basically at the same level.

Taking into account the huge gap between the two in terms of the average selling price of a car, BYD's cost-control ability can also be said to be very good.

Li Xiang, the "king of buckling," said on Weibo, "BYD's vehicle cost management is significantly better than Tesla's."

This also shows, to some extent, that if it's on a comparable scale, there's every reason to believe what Xiao Yong said. "No one knows how to save costs better than the Chinese."

In mid-March, Xiao Yong was interviewed by Automotive Business Network about Tesla

Furthermore, since ancient times, the world has judged heroes by their successes and failures.

As today, people praise Musk for his disruptive innovations on the product and production side.

If Azalea ever reaches the same size, there will be countless articles about how brilliant Li Bin was in spending so much money on customer service.

If Xiaopeng reaches the same size, there will be countless articles praising He Xiaopeng's obsession with smart driving.

03 In conclusion

It is important to recognize that, whether it is streamlining the configuration or changing the production method, Tesla has built a very deep moat with unique innovations and and sufficiently heavy investment in R&D.?

From 2017 to now, its single-car production costs fell from 84,000 to 36,000, and there is still room to continue to go down.?

But is Tesla's route the only solution for innovative disruption in the era of new energy vehicles? I'm afraid not.

As Wu Bing said, the new energy track is wide enough to accommodate a variety of ideas and pursuits.

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