Tesla Model 3 SR+ vs. German Competition In The US — & How That Makes The Tesla Network 100% Possible

May 15th, 2019 by  


Dear Elon,

My youngest daughter wants a Tesla named after her. Her sister has the Model S. She is hoping for a Model A, smaller in size than a 3. Seems fair. She says the Model A will be able to serve food on tables any time you want. Of course, it will have full self-driving and pick her up and drop her without us being there. It’s going to be really fast, like all Teslas. She added a hiding spot in the car for kids this morning. Lastly, she wanted a response from you, since she thinks we have a special connection. I said I would do my best and write you a note the next time I wrote an article.

AI/Men,

Vijay Govindan

The Setup

In my last article, I had a request to compare cash vs loan and lease options in France, Italy, Germany, and Spain. Commenter EE1 requested, “Would love to see this article and analysis redone/continued side by side with BMW 3 Series, Audi, and compact Mercedes.” I thought performing that analysis for the US would be a good step for doing it for the main four in Europe. (Check out the spreadsheet here and change assumptions as you wish.)

Four vehicles were compared — the Tesla Model 3 SR+, Audi A3, BMW 330i, and Mercedes-Benz C300. I aimed for popular cars from each company (I could have gone with the BMW 320i, but I think the 330i is more popular. Similarly, for Mercedes-Benz, I went with the C300, which is more popular than the A-Class.) The difference this time is that I included payments, depreciation, insurance, maintenance/repairs, fuel costs, and incentives in my calculations. It is complete. No hedging here.

For the insurance numbers, I calculated each vehicle separately for Progressive and Geico. The averages were taken and I used those as my premiums for the first 12 months. My location was the famous 90210 zip code. Each year after, insurance premiums were increased by 3.5%, which is similar to what Edmunds does. I used a married couple to estimate the premiums.

Tesla Model 3 vs. Audi A3 vs. BMW 330i vs. Mercedes-Benz C300 — Insurance Premiums

Figure 1: This chart is why Tesla Insurance is needed.

For depreciation, I used the numbers from Edmunds. If 2019 cost of ownership numbers were unavailable, I used 2018. I used the same chart for calculating maintenance / repairs costs. After the first 5 years, I used the 5th year for depreciation percentages and maintenance for years 6 to 9. Since the Model 3 is new, I used a Tesla Model S Long Range (LR) and scaled the numbers lower to account for the cheaper price of the Model 3 Standard Range Plus (SR+).

For fuel, I made the following assumptions: Fuel economy numbers are from fueleconomy.gov. I used 20 cents per kWh for electricity and this handy site from AAA for California gas prices. As of May 8th, regular was $4.098, mid-grade $4.248, and premium $4.358 a gallon. As my mix for local versus highway, I chose 80% local and 20% highway. Each way I would drive 16 miles to and from work, or close to 15,000 miles a year. This works out to $750 a year for the Model 3, $2,300 a year for the A3, $2,350 for the 330i, and $2,700 for the C300.

Similar to before, I calculated the net present value (NPV) at 36 months, 72 months, and 108 months. (Link to Wikipedia page on NPV here — thanks, Are Hansen). The vehicle is sold after 9 years. Beverly Hills has a 9.5% sales tax for autos. This was added also.

Base price plus destination charges and sales tax for the vehicles were used.

  • Tesla Model 3 SR+ = $40,700
  • Audi A3 = $34,295
  • BMW 330i sedan = $41,245
  • Mercedes-Benz C300 sedan = $41,400

Why is all the detail necessary? In the interest of science, I want to be transparent about what I am doing, in case anyone wants to do it again (I pity you if you do — really). The federal tax credit of $3,750 was included but local California credits and rebates (mentioned elsewhere on CleanTechnica) were not included.

The Elevator Pitch

Figure 2: NPV for all vehicles at 3, 6, and 9 years.

If you have been reading CleanTechnica for more than a month, you know the Model 3 has an excellent total cost of ownership (TCO). Paul and Zach write about it often. The difference between the Model 3 SR+ and the premium German makes is very wide. Only the A3 has a slight advantage after 36 months, and then the Model 3 pulls away.

That said, the Edmunds numbers showed a 28% depreciation for the Model S in the first year (I did not expect that). I redid the numbers, using the C300 depreciation figures for the Model 3 of 22%. I don’t agree with the numbers — I think they are much too high, based on demand for the Model 3 and lack of Model 3 entries on used car sites. It also goes against what Kelley Blue Book has forecasted about the Model 3.

Figure 3: Revised Model 3 numbers with lower depreciation in year 1 (red bar).

Across the board, the revised Model 3 numbers are better than the competition.

Why does the Model 3 win in every timeframe?

  • The Model 3 is much cheaper on fuel, maintenance, and repairs
    • Other items such as payments, depreciation, and insurance are similar for all four vehicles
    • A switch to lower depreciation, matching the C300, helps the Model 3
  • The A3 had the cheapest monthly payments but the highest insurance costs
  • The 330i had the most expensive depreciation in year 1 (almost 37%!)
  • The continued high values for fuel, maintenance, and repairs for our ICE friends offsets the savings from not making payments
    • In the case of the A3, depreciation, insurance, fuel, and maintenance are more than the savings from not making a payment
  • If vehicles weren’t expensive enough, the other non-value added expenses end up being more than the payments on each car

How Bad Are The ICE Numbers?

Another way of looking at the ICE numbers is using the average cost per mile driven. This shows the clear advantage Tesla has over its ICE competitors.

Figure 4: Values closer to zero are better for average cost per mile driven.

Just for kicks, I did the same excluding the first three years.

Figure 5: Values closer to zero are better. The difference between Tesla and gasoline competitors gets larger in this graph.

We can see how shrewd it is for Tesla to lease the vehicles and take them back after 3 years to put them into the Tesla Network. Most of the depreciation is gone, insurance will be less, and payments for the cars almost complete. These off-lease vehicles will be big moneymakers in the Tesla Network.

I give Elon credit. He said leasing is lower but purchase is recommended. When was the last time you heard a CEO of any company tell you information that was better for the customer? When was the last time you heard a CEO say “check out my competitors and buy them if you like them better?” I would say never. This drives Wall Street batty and customers love him for his honesty and humor.

Is the Tesla Network Feasible?

According to Tesla’s Autonomy Day presentation, yes, wildly so. Frugal Moogal summed it up nicely here. I am including two slides below that he mentioned.

Figure 6: The net present value of a single robotaxi is close to $200,000!

Figure 7: We can use the analysis we have above from the SR+ to back into some numbers.


Item Amount % of total
Robotaxi Revenue $46,154 100%
Tesla’s % $16,154 35%
Gross Profit $30,000 65%
Cost Of Operation $16,615 36%
Net Profit $13,385 29%

Figure 8: $1 per robotaxi mile driven, Tesla’s cut is 35%, empty miles are 50% of total, cost of operation for all miles is $16,615 / ($46,154 * 2), approximately $0.18/mile for an individual robotaxi owner.

I have some issues with the above. If I do a net present value analysis using a 4% interest rate and $13,384 net profit over 11 years, I only get $117,255. This is a far cry from the NPV of $200,000 mentioned above. To match the cost of ownership above, I have to make these drastic assumptions for monthly costs:

Payment -$441.52
Depreciation $0
Insurance -$300
Maintenance / Repairs -$22.77
Fuel $3600 -$120

Figure 9: This is excluding the $5,000 down payment to purchase an SR+. Yes, depreciation would be $0. This doesn’t look feasible.

That leaves me to believe the numbers Tesla presented are from Tesla’s point of view.

Item Amount % of total
Robotaxi Revenue $30,000 100%
Tesla’s % $0 0%
Gross Profit $30,000 65%
Cost Of Operation $8,308 28%
Net Profit $21,692 29%

Figure 10: Tesla network, 1st try, from Tesla’s perspective — $0.65 per robotaxi driven mile, ~46,000 miles driven as a robotaxi, $0.18 cost per robotaxi driven mile.

These numbers make more sense — if Tesla only uses vehicles that are off-lease in the Tesla Network (I calculated $0.16 cost per mile for a SR+ that is returned to Tesla after three years of leasing).

When I run an NPV for $21,692 in net profit for 11 years and 3% interest rate, I get $200,712. I presume my numbers have 0% chance of being right, but it does show something close to these numbers could match Tesla’s estimate.

Final Thoughts

  • Using NPV, we treat each car as an investment, with a goal of minimizing the negative expense.
  • I used realistic, if not harsh, numbers to calculate the NPV of a Model 3 SR+ over 9 years.
  • Depending on how strongly you think the SR+ will depreciate, the Model 3 is close to or better than German competitors in cost over 3 years, using US numbers.
  • If you hold the SR+ over 6 or 9 years, it is substantially cheaper.
  • Most of this difference is due to lower fuel, maintenance, and repair costs for the Model 3 SR+.
  • Tesla Insurance will add to the cost savings.
  • From Tesla’s perspective, it makes a lot of sense to add off-lease Model 3s to the Tesla Network.
    • Tesla can thus easily meet the numbers mentioned on Autonomy Day.
  • A price of 65¢ per robotaxi mile would devastate ridesharing competitors, which would be charging 4× to 5× more per mile.
  • Due to the low cost of fuel, maintenance, and repairs, a Tesla Network robotaxi would be very profitable for Tesla.
  • We can make some guessed about the profitability of an individual owner adding their car to the Tesla Network.
    • It seems like the profitability to individual owners will be much less than if Tesla owned the vehicles.
    • But, Tesla has many ways for an owner to monetize the Tesla network.
  • I will use the same vehicles as the reference for a future article on French, German, Italian, and Spanish costs to own. We’ll also look at lease costs for each of the vehicles.

To play with the numbers yourself, you can download a copy of my spreadsheet here. Look at the “US with German comparisons” tab, along with the “Tesla Network calculations” tab.


If this article helps you decide to order a Tesla, take advantage of my Tesla referral link to get up to 5,000 miles of free Supercharging on a Model S, Model X, or Model 3. (If you order before May 28th, 2019 we both get 500% more Supercharging miles than the normal 1,000 miles and five more chances to win a Founders Series Model Y or Roadster.) Here’s my code: ts.la/vijay59877

If someone else helped you more with your purchase, please use their referral code.


Disclaimer: I currently own Tesla shares. A recent discussion with $TSLAQQ folks confirmed they are more worried about Tesla’s finances and profit than advancing the world towards sustainable energy. This article is my opinion and is not meant to be investment, financial, or car buying advice. Please see a properly licensed financial advisor to discuss investments. Follow me on Twitter @vijaygovindan17. 
 





 

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About the Author

Vijay Govindan is interested in sustainable living, financial education, and the intersection of astrophysics and climate change. Rick and Morty fan. Follow him on twitter @vgovindan17



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