Why Are Tesla Cars So Expensive?

Summary

Tesla, led by Elon Musk, dominates the electric vehicle market with luxury cars like the Model X and Model S, but affordability remains a challenge. The Model 3, starting at $37,000, aims to reach a broader audience. High production costs, including complex lithium-ion battery manufacturing and global sourcing of rare minerals, contribute to Tesla's price. Despite high initial costs, Tesla owners can save significantly on fuel and maintenance, with the potential for further price reductions as production scales up and new models like the Model Y are introduced.

Takeaways

• 🚗 Tesla is a leading electric car manufacturer known for its luxury status and high price points.
• 💸 The initial Tesla models, like the Roadster, were luxury items and status symbols, setting a precedent for high prices.
• 🌟 Elon Musk's influence and Tesla's innovative technology have contributed to the brand's popularity and stock value.
• 🔋 Tesla's vehicles are more expensive to manufacture due to their modern design and the use of advanced, fast-evolving technology.
• 🏭 The limited number of factories capable of producing Tesla's vehicles leads to a supply-demand imbalance, affecting pricing.
• 🔬 Lithium-ion batteries, a core component of Tesla cars, are powerful but complex and costly to produce, contributing to high costs.
• 🌍 The global supply chain for lithium and cobalt, essential for battery production, involves geopolitical challenges and environmental concerns.
• 🚙 Used Tesla models maintain high value due to limited supply, durability, and continuous software updates that keep them competitive with new models.
• 💰 The total cost of ownership for a Tesla, including insurance and charging, is still generally lower than that of conventional cars, despite a high initial price.
• 🌐 Tesla's expansion plans, including the construction of Gigafactories, aim to increase production and potentially lower costs in the future.

Q & A

Why are Tesla cars considered expensive?

Tesla cars are considered expensive because they have been positioned as luxury items since their inception, with high-end features and cutting-edge technology that comes at a premium price.

What was Tesla's first car model and how did it set the tone for the brand?

Tesla's first car model was the Roadster, which was sold in 2008. It set the tone for the brand by being one of the first fully electric cars that catered to the need for speed, becoming a status symbol among the wealthy and environmentally conscious.

How does the reissued Tesla Roadster compare to the original in terms of price?

The reissued Tesla Roadster is expected to top out at a shocking $200,000, which is significantly higher than the original model, indicating a substantial increase in price.

What is the most affordable Tesla model mentioned in the script?

The most affordable Tesla model mentioned in the script is the Model 3, with a starting price of $37,000 for the standard model.

What is the significance of the Tesla Model 3 in the electric car market?

The Tesla Model 3 is significant as it quickly became the fastest-selling electric car in history, selling 800,000 models by the end of 2020, making it a game-changer in the electric vehicle market.

Why is Tesla's market share limited despite its popularity?

Tesla's market share is limited because, despite its popularity, the cars are expensive to produce due to their modern, constantly evolving design and fast-changing technology, which is only produced in a limited number of factories.

What is the Tesla Gigafactory and what is its role in the company's production plans?

The Tesla Gigafactory, also known as Gigafactory 1, is a large-scale manufacturing plant under construction in Nevada that produces Tesla vehicles and batteries. It plays a crucial role in Tesla's production plans by aiming to increase production capacity to meet the high demand for their electric vehicles.

What challenges does Tesla face in manufacturing lithium-ion batteries for their cars?

Tesla faces challenges in manufacturing lithium-ion batteries due to the complexity of the process, the need for careful handling of flammable materials, and the requirement for specialized facilities, which contribute to the high cost of production.

Why are used Tesla cars typically more expensive than other used cars on the market?

Used Tesla cars are typically more expensive because of their limited supply, high demand, and the fact that they are built to last, resulting in fewer trade-ins. Additionally, Tesla cars often receive software updates that keep used models competitive with newer ones.

What is the impact of Tesla's proprietary technology on the cost of insurance and repairs?

Tesla's proprietary technology leads to higher insurance and repair costs because repairs often require specialized knowledge and parts, which can only be obtained through Tesla's own repair shops, leading to higher premiums and service costs.

How does the cost of charging a Tesla compare to the cost of fueling a traditional gasoline car?

The cost of charging a Tesla is significantly lower than fueling a traditional gasoline car, with the potential for Tesla owners to save more than 80% overall compared to gas prices, especially if they have access to free charging stations.

Outlines

00:00

🚗 Tesla's High Costs: The Luxury Electric Car Market

Tesla is renowned for its luxury electric cars, with Elon Musk's influence making it a social media sensation. Despite their desirability, high prices make them inaccessible for many. The Roadster, Tesla's first model, set a precedent as a luxury item, and the reissued model is priced at $200,000. While more affordable models like the Model X Performance and Model S are available, they still carry a hefty price tag. The Model 3, introduced in 2017, is a more budget-friendly option at $37,000, yet remains expensive compared to similar cars. The high costs are attributed to Tesla's unique, high-quality components and the company's ambition to dominate the electric vehicle market, not just compete in a niche sector.

05:02

🔋 The Complexities of Tesla's Battery Production

Tesla's electric cars are powered by lithium-ion batteries, which are high in energy density but challenging to manufacture due to their flammable electrolytes and voltage limitations. These batteries are more complex than those in portable electronics, requiring careful construction. Tesla's custom batteries slow down production compared to traditional cars. The mining of lithium and cobalt, essential for these batteries, presents geopolitical challenges, with most cobalt coming from the Democratic Republic of Congo and lithium from various regions worldwide. The geopolitical implications of mining these materials and the volatile political situations in some countries add to the complexity and cost of Tesla's battery production.

10:02

💸 The Financial Aspects of Owning a Tesla

While new Teslas are expensive, the used market also reflects high prices due to the limited supply and durability of the cars. Teslas are updated with new software, maintaining their value. The Model 3 has one of the highest satisfaction ratings, contributing to its high resale value. The upcoming Model Y, an electric SUV, is expected to be popular and may influence the prices of smaller models. However, owning a Tesla involves more than the initial cost; insurance is higher due to the specialized repair needs and proprietary technology. Despite these costs, the total savings on fuel and maintenance can be significant, with electric charging often being cheaper than gas. The future of Tesla's pricing depends on component supply and production scale, with Musk aiming to make electric vehicles the dominant market force.

Keywords

💡Electric Car

An electric car is a vehicle that is powered by an electric motor, as opposed to an internal combustion engine that uses gasoline. In the context of the video, electric cars symbolize a shift towards environmentally friendly transportation. Tesla is highlighted as a pioneer in this space, with models like the Model S, Model 3, and Model Y being discussed as examples.

💡Elon Musk

Elon Musk is the CEO of Tesla and a prominent figure in the tech industry. He is noted for his ambitious projects and social media presence. The video mentions Musk's influence on Tesla's brand and his role in making the company a leader in the electric vehicle market.

💡Luxury Item

A luxury item refers to a high-end product that is not essential but is sought after for its quality, status, or pleasure it provides. The video discusses how Tesla's early models, like the Roadster, were positioned as luxury items, appealing to the wealthy and environmentally conscious.

💡Status Symbol

A status symbol is an object or possession that represents a person's social or economic status. The video suggests that owning a Tesla, especially the high-performance models, has become a status symbol due to the brand's association with innovation and wealth.

💡Model 3

The Tesla Model 3 is a more affordable electric vehicle compared to earlier Tesla models. It is highlighted in the video as a game-changer for the company, as it targets a broader market segment and has become the fastest-selling electric car in history.

💡Gigafactory

A Gigafactory is a large-scale, highly automated production facility designed to manufacture batteries, vehicles, and other components. The video mentions Tesla's Gigafactory in Nevada, which is part of Elon Musk's vision to increase production capacity and make electric vehicles more mainstream.

💡Lithium-ion Battery

A lithium-ion battery is a type of rechargeable battery that is commonly used in electric vehicles due to its high energy density and longevity. The video discusses the challenges and importance of lithium-ion batteries in powering Tesla cars and the complexities involved in their manufacturing process.

💡Affordability

Affordability refers to the cost of a product or service being within the financial reach of a particular consumer. The video explores the issue of Tesla's cars being expensive and the barriers this poses to making electric vehicles accessible to a wider audience.

💡Self-Driving Hardware

Self-driving hardware refers to the technology and systems integrated into a vehicle that enable autonomous driving capabilities. The video mentions that Tesla vehicles, including the Model 3, come equipped with such hardware, which can be updated regularly to improve functionality.

💡Used Car Market

The used car market refers to the trade of previously owned vehicles. The video discusses how the high demand and limited supply of Tesla vehicles affect their resale value, making used Teslas more expensive than average used cars.

💡Environmental Impact

Environmental impact refers to the effects a product, service, or activity has on the natural environment. The video script positions electric cars as a means to minimize one's environmental footprint, which is a key selling point for Tesla vehicles.

Highlights

Tesla is a leading name in electric cars and clean energy, with Elon Musk as its influential figurehead.

Tesla's stock value continues to rise due to high demand and popularity.

Tesla cars are known for their high price, often making them a luxury item.

The Tesla Roadster, one of the first fully electric cars, is a status symbol and is being reissued at a high price.

Tesla has models aimed at a broader market, like the Model S, which is more affordable than earlier models.

The Tesla Model 3 is the fastest-selling electric car ever, offering full self-driving hardware.

The Model 3 is priced more modestly compared to other Tesla models, making it more accessible.

Tesla's high production costs are due to the complexity and evolving nature of electric car technology.

Tesla faces supply challenges due to the limited number of factories capable of producing electric cars.

Elon Musk plans to build over one hundred Gigafactories worldwide to meet production goals.

Lithium-ion batteries, a core component of Tesla cars, are difficult to manufacture and contribute to high costs.

The mining of materials for lithium-ion batteries has geopolitical implications and supply challenges.

Used Teslas maintain high value due to limited supply and the quality of the vehicles.

The Tesla Model Y, an electric SUV, is expected to be popular and may influence the used car market.

Owning a Tesla can be cost-effective in the long run due to lower fuel costs compared to traditional cars.

Teslas can be charged for free at Tesla's own charging stations, reducing overall ownership costs.

Despite high initial costs, Tesla cars have seen a decline in price over time as production increases.

Transcripts

If you’re looking to minimize your environmental impact on the road with an electric car, there’s

probably one name on your mind - Tesla.

This powerhouse electric car and clean energy company is the biggest name in gas-free vehicles,

and its offbeat owner Elon Musk has made it a social media sensation.

It’s no wonder the Tesla stock - or stonks, if you prefer - keep rising on every index.

Everyone wants a Tesla, but there’s just one thing standing in their way - virtually

every model is very expensive to own, pricing many people out of the market.

So why are Tesla cars so expensive?

Ever since the first Tesla, the Roadster, was sold in 2008, these cars have been a luxury

item.

As one of the first fully electric car models to cater to the need for speed - with the

Roadster being able to reach a very illegal 125 miles per hour - it became a status symbol

among the wealthy and environmentally conscious.

The Roadster is being reissued in a new model soon, and will top out at a shocking $200,000

for those looking for the finest, fastest car Tesla has to offer.

So is the Tesla off-limits to anyone who doesn’t have a reservation at Elon Musk’s favorite

golf club?

There are a number of more affordable Tesla models, with the Model X Performance retailing

for around $100,000 - but that’s still more than many people are willing to pay for a

car.

In 2012, Tesla started releasing cars that were less geared towards the luxury market

and more towards the average driver, and their Model S cars resemble standard liftback sedans.

These can be had for as little as $69,000 - but good luck selling a budget-conscious

parent on that price point, no matter how much their kid wants to drive an electric

car.

Musk wouldn’t be satisfied until he conquered all sectors of the car world, and in 2017

Tesla fans with less money in their bank accounts saw their prayers answered.

The Tesla Model 3 was here to change the car world.

This fastback sedan quickly became the fastest-selling electric car in history, selling 800,000 models

by the end of 2020.

Like the more expensive models, it has full self-driving hardware that can be updated

regularly, and it works as a plug-in electric car like other Tesla models.

It comes in two models, a standard-range model offering 263 miles per charge and a long-range

model offering 353 miles per charge.

While the car delivers the same power and reliability of other Teslas, where it differs

is the price.

This Tesla finally brings the price down to a relatively modest $37,000 for the standard

model.

A far cry from the high-end early models, but still a good deal above what a similar

car might cost.

It seems like no matter what, Tesla products are never going to be fully affordable.

The reason why is complicated, and it might be the only Achilles’ heel in Musk’s business

plan.

While the company has a near-monopoly in the electric car market, Musk has bigger ambitions.

He doesn’t want to compete against a small sector of the market - he wants to fill the

road with electric cars and provide stiff competition for the classic internal combustion

engine-driven cars.

While his company keeps getting bigger and Musk is currently the richest man in the world

- unless he and Bezos have traded places in the last fifteen minutes - his monopoly essentially

makes him the biggest fish in a small pond unless Teslas start getting more affordable.

So why doesn’t he just lower the price?

The main reason is because Tesla cars aren’t just more expensive to buy - they’re more

experienced to make.

Standard cars are mass-produced in factories around the world, using technology that has

been perfected over the better part of a century.

Tesla’s “green cars” are driven by a modern, constantly evolving design and fast-changing

technology, and only a small percentage of the factories can make them.

That’s why while demand for Tesla cars is always high, supply doesn’t always match

that - it’s very common to see a long waitlist for popular Tesla products, especially after

a new model has been released.

Is there any way to speed up the production process?

Ending the bottleneck for Tesla projects that can lead loyal fans to wait months for the

new product - similar to the crush that made it nearly impossible for video game fans to

get their hands on a Playstation 5 - has been a priority for Musk.

He’s limited by physical space, as most of his factories are working at capacity.

But like with most challenges that face Musk, he’s thinking outside the box to solve it.

Get ready to meet the Gigafactory.

Tesla Giga Nevada, also known as Gigafactory 1, is currently under construction in Storey

County, Nevada and has completed phase one.

It produces Tesla vehicles and the batteries needed to power them, and employs over 6,000

people currently.

But that’s just the beginning of Musk’s plans - he estimates that to produce the number

of cars he envisions to make electric vehicles the dominant force on the market, Tesla would

need over one hundred similar Gigafactory facilities worldwide.

But that’s not the only reason these cars have a high price tag.

Tesla cars run on one powerhouse component at their core - the lithium-ion battery.

This rechargeable battery is just about everywhere these days, being found in many portable electronic

devices that can be charged by plugging them into a wall.

But those batteries are tiny compared to the batteries that power Tesla cars and can send

them racing at top speed.

They’re considered some of the best rechargeable battery models out there because of their

high energy density and low self-discharge.

But that power comes with a downside.

Lithium-ion batteries aren’t easy to manufacture.

The electrolytes in the material are flammable and can explode if damaged, causing damage

to the vehicle.

They also have voltage limits that need to be kept in mind during construction and use.

That means that the factories making them have to be careful during construction, and

Tesla makes some of their own custom lithium-ion batteries in their factories - slowing down

the process of building Teslas compared to other cars, which can plunk down a mass-produced

internal combustion engine in the chassis and call it a day.

But that’s not the only challenge in making lithium-ion batteries.

Lithium-ion batteries have advantages over other batteries, including containing less

toxic metals like lead and cadmium.

They mainly use recyclable metals like iron, copper, cobalt, and nickel, which cuts down

on their carbon footprint.

But the mining of these materials is a challenge in itself, and getting a sufficient supply

of lithium and cobalt means Tesla needs mining operations around the world.

Most of the cobalt supply is found in the Democratic Republic of the Congo in Africa,

while lithium is found in North and South America, China, and South Africa.

The hunt for these rare earth minerals has had geopolitical implications.

Every country sets their own standards for mining, with China and Europe having strict

regulations.

The volatile political situation in other countries means that a big mining investment

could go up in smoke if an unfriendly government takes power.

While Musk was never charged or directly accused of anything, many people speculated if his

lithium-mining operations might have been a factor in the conflict between Bolivia’s

left-wing government and the military that took power after the President tried to change

the constitution.

But surely there are other ways to cut the cost of a Tesla down, right?

While top-of-the-line new Teslas are expensive, many people turn to that time-honored way

of getting a car cheap - the used-car market.

It’s almost a rite of passage for new drivers to pick out a beater at the used car lot and

take it home to slowly fix up.

But with Teslas, it’s more complicated - and many eager buyers find that used-Tesla prices

are well above the average too.

Some old models are available at a deep discount, but if you want a Model 3, you can expect

to pay for it.

So how does the Tesla keep its value on the used market?

Used Teslas have the same problem as new ones - there aren’t that many.

These cars are built to last, but it’s rare for people to trade them in too quickly.

Combine that with the limited availability, and most of these cars are relatively new

and still on the road.

Tesla cars are also less likely to be discounted at the original sale point due to the high

demand and limited supply, so they’ll start at a higher price point.

Because Tesla cars are frequently updated with new software, used cars keep pace with

new ones, so owners are getting a great deal - and retailers know to charge accordingly.

The Tesla Model 3 has one of the highest satisfaction ratings of any car, so no one is looking to

sell it for a song.

But is there anything coming that might drive the price down?

Well, with new and hot products you can usually be assured of one thing - something newer

and hotter is coming along soon enough.

And Elon Musk was never one to rest on his laurels, so he’s already announced the next

big project from Tesla - the Model Y.

This is one of the first fully electric SUVs and seats up to seven, making it a popular

choice for families.

Retailing at around $41,000 for the basic model, it’s a good buy compared to the smaller

Model S, and demand is expected to be high as the new model rolls out in larger numbers.

That means there may be a lot of trade-ins, and anyone looking for a smaller model will

probably see prices decrease due to the new shiny model.

But the initial purchase isn’t the only place where owning a Tesla will rack up costs.

Teslas are considered among the safest and most secure cars on the market, but you wouldn’t

know it if you looked at the insurance prices.

Insuring a Tesla is more expensive than the average car, and the exact price will vary

based on other factors.

But the main reason Tesla insurance is so high is because these cars have high repair

and maintenance costs.

Because they’re made from expensive, proprietary technology, insurers know they’ll have to

go directly through Tesla to get them repaired - and the company has their own specialized

Tesla-approved body repair shops to make sure their cars get the special treatment they

need.

It seems like no matter what you do, you’re going to be paying a lot for a Tesla.

So why do people want them so much?

Many people want a more environmentally-conscious car.

Others want the status symbol of the coolest modern car on the market.

But there’s another financial reason that many people are willing to pay whatever it

takes to get ahold of a Tesla.

Unlike hybrid cars, which use gasoline in addition to electric powers, Teslas are fully

electric.

That means one major cost of owning a car - filling up at the gas station - is out the

window.

The cost of gas fluctuates all the time, but filling up the car can cost up to $50 dollars

regularly when gas is in the middle of its price range.

So how much does it cost to fill up a Tesla?

That depends!

Electric car charging stations are becoming more and more common, and it’s often possible

to charge Teslas at them for a modest fee - usually up to $25 for a full charge.

But Tesla also operates its own line of charging stations, and new Tesla models come with a

very valuable perk - unlimited free charging whenever you see one.

That means your cost for keeping your Tesla’s electric equivalent of a gas tank full can

be a whopping zero if you’re lucky enough to have stations in a convenient place.

So how much will you save overall?

If you don’t have Tesla charging stations nearby and need to use your home to charge

it, you can expect your electric bill to go up a good deal.

But even if you’re paying for charging because you don’t qualify for free charging or Tesla

ended the program, Tesla owners save more than 80% overall compared to gas prices in

most areas.

But that doesn’t solve one problem - the sticker shock when you pay for your Tesla.

The good news is, Tesla cars have declined in price significantly since they started

rolling out, as production ramped up and the technology advanced.

Will this continue?

It depends on the supply of the components, but Elon Musk is certainly acting as if he

believes his empire will continue growing.

After all, you can’t beat the traditional car if the average driver can’t even get

on the road.

For more on the Tesla founder, check out “How Protected Is Elon Musk”, or watch “Is

SpaceX Creating a World For Only the Richest People” for a look at Musk’s other big

project.