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Michigan-Based Consulting Firm Claims Tesla Model 3 is Most Profitable EV

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【Summary】After lambasting the Tesla Model 3 for its poor build quality, president of Michigan-based Munro & Associates, Sandy Munro, backpedaled and praised the electric sedan.

Original Vineeth Joel Patel    Jul 22, 2018 9:15 AM PT
Michigan-Based Consulting Firm Claims Tesla Model 3 is Most Profitable EV

The Tesla Model 3 hasn't become the star child of the brand yet. The Model 3 has been a pain for Tesla, as the electric automaker has struggled to reach its proposed manufacturing numbers for the vehicle. After months of setbacks, Tesla finally built 5,000 Model 3 sedans in a week, but it took a lot longer than Tesla CEO Elon Musk wanted. 


Then there's the issue of wait times. Tesla got an insane amount of deposits for a Model 3, but production woes and other things, has led to the automaker seeing a large number of individuals asking for a refund. The fact that Tesla hasn't started making the highly-sought after $35,000 Model 3 is also disconcerting. Some people believe that the $35,000 Model 3 may never exist, as Tesla's using the more expensive variants as a crutch to keep itself alive.  


While these could be seen as teething issues, the most detrimental aspect of the Model 3 that's holding the machine back is its build quality. Numerous outlets and organizations, including Consumer Reports, have run into issues with the Model 3's build quality. Munro & Associates' CEO, Sandy Munro, was awfully hard on the brand's most affordable model. 


Tesla Model 3 2.jpg


The Tesla Model 3 Was As Bad As A Kia From The ‘90s


Towards the beginning of the year, Autoline Network put out a lengthy video with Munro where the CEO skewered the Model 3 for its subpar build quality. In the video, which is a few paragraphs below, Munro seemed peeved with the electric car's fit and finish, pointing out door handles that are difficult to open, glass that seems to move around, and materials that appear to be glued on. Munro also points out the Model 3's atrocious panel gaps. 


"The gaps on this car are like – you can see ‘em from Mars. This is really, not so good," stated Munro in the video. The rear trunk's panel gaps were especially horrible. "If we look over here, I can barely get my fingernail in," said Munro. "And if we look over here…I can almost put my thumb in. This is…very unusual…The tolerance stack-ups on this car are just, like nothing we've ever seen before. Not since…the ‘70s or something." 


Then Munro seals the Model 3's fate by claiming the flaws are something "we would see on a Kia in the ‘90s or something." 



The Model 3's Electrics Were Found To Be Impressive


A few months later, Munro & Associates returned with another video with Autoline. This time, the company was in the midst of tearing down and rebuilding two Model 3 sedans to give everyone a better idea of how much it costs and how Tesla builds them. After butchering the Model 3, Munro still claims that the vehicle's build quality isn't "good," but did point out some of the vehicle's better attributes. 


Munro was impressed with the Model 3's Automatic Drive Module, its skateboard, and the density of the electronics on its circuit board. "The density of this population is like nobody's got," said Munro. "This is the technology we would see in really high end computers…this is spectacular." 


Another aspect of the Model 3 that impressed Munro was the vehicle's battery, especially its power density. The car's handling also impressed him, claiming that the vehicle "drives really well" and that "it felt balanced." 


The lengthy hour and a half video is directly below. 


Model 3 Becomes The Best EV On The Road


Munro & Associates have returned with Autoline for a new video, as the company continues to tear the Model 3 down. The company looks like it's removed everything down to the actual body and Munro's tune has changed. After being one of the electric car's most vocal critics, Munro applauds the vehicle and the automaker in the latest video. 


"The Model 3 is profitable," states Munro, "so I have to eat crow. I didn't think it was going to happen this way, but the Model 3 is profitable." Not only is the vehicle profitable, but Munro states that Tesla has a 30 percent profit margin with the electric sedan. 


That's staggering, as other automakers aren't seeing anywhere close to 30 percent with their EVs. General Motors' CEO Mary Barra stated that the automaker was hoping to make profitable electric vehicles by 2021. While Barra didn't state what the profit margin for the Chevrolet Bolt was, it's most likely not anywhere near 30 percent. 


"No electric car is getting 30 percent," Munro said. 


The next question then becomes, what is Tesla doing right with the Model 3? Munro is more than happy to answer the question now, as he's recently become one of the vehicle's proponents after looking at its underpinnings. 


One of the reasons for Tesla's profits with the Model 3 can be traced back to the way the automaker integrates its electronics into the vehicle. He points towards the Model 3's rearview mirror that costs $29.48. That's cheaper than the units found on the BMW i3 and Chevrolet Bolt, which cost $93.46 and $164.83 respectively. Who knew a rearview mirror could be so expensive? 


Jalopnik did a little more digging and found that Munro & Associates broke down a long-range, rear-wheel-drive Model 3 with the Premium Upgrade package and Enhanced Autopilot. When spec'd in that fashion, the Model 3 costs roughly $55,000. The claim of 30 percent gross profit was determined by looking into the manufacturing costs, subtracting those from the car's retail price, and dividing the difference by the retail price, states the outlet.


"We took the vehicle apart. We analyzed every part of the car…we developed a cost for the parts of the car," a representative from Munro & Associates told Jalopnik. 


As the outlet points out, Munro's calculations are missing a few important items, like marketing, the engineers' design time, as well as sales and dealer distribution. The only thing that Munro & Associates looks at is material and labor expenses. 


In the end, Munro claims that his feelings towards the Model 3 have changed drastically since the first video at the beginning of 2018. "Like I say, a lot of crow being eaten around here." 


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