Tesla Analyst Weighs In On EV Maker's Ability To Slash Vehicle Costs By 50%, Competitive Edge For Launching Robotaxi

Tesla Inc. TESLA shares reacted with a 5%+ drop in the session that followed its March 1 Investor Day. Commenting on it, Tesla bull Cathie Wood’s Ark Invest analyst said the event offered “no flash, all substance.”

What Happened: There was no shortage of important and exciting news from the event, said Ark Invest analysts Tasha Keeney and Sam Korus. As opposed to the expectations of many investors, who anticipated a “flashy glimpse” of its next-gen vehicle, Tesla shared “news more profound than a product prototype,” Keeney said.

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The analyst pointed to the “roadmap for continuous cost declines associated with scaling production.”

Costs To Be Cut In Half: Tesla will likely deliver on interdependent actions that would reduce vehicle costs by about 50% over the next five years, the analyst said.

Keeney outlined three steps that the company will take to accomplish this:

• 1) Producing 100% of the controllers on its next-generation vehicles.
• 2) Switching to a 48-volt battery architecture that will likely reduce power losses by 16-fold.
• 3) Using local ethernet-connected controllers to reduce the complexity of the wiring harness.
• “These electrical architecture changes should cut costs and give Tesla more control over its supply chain at the component level,” Keeney said. These steps will also help the company transition its manufacturing to a parallel assembly process, reducing manufacturing footprint and wasted time by 40% and 30%, respectively, she added.

The reduction in factory footprint, according to the analyst, will likely help Tesla accelerate Gigafactory production, increasing the scaling velocity of both its fleet and data engine.

Data Gives Edge Over Rivals: The analyst noted that relative to General Motors Corp.’s GM Cruise and Alphabet Inc.’s GOOGL GOOG Waymo, Tesla vehicles have traveled about 100 times the cumulative miles and have collected about 50,000 times the data. Ark’s research showed that data will be critical in the race to create and scale a fully autonomous taxi service, Keeney added.

“In short, Tesla’s vertical integration seems to have given the company an edge that may take its less-integrated competitors years — if ever — to replicate,” the analyst said.

Price Action: Tesla closed Monday's session 2.01% higher, at $193.81, according to Benzinga Pro data.

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