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Critic turned believer: Tesla Model 3 is highly profitable

by Drew Johnson

The Tesla Model 3 could have a profit margin in excess of 30 percent.

Tesla has more than its fair share of naysayers. But this week Tesla lost one after a teardown of its Model 3 sedan turned one of the company's most outspoken critics into a true believer.

Munro & Associates, a small firm in Detroit that specializes in tearing down new vehicles and analyzing all their parts, released a scathing report in April calling the Model 3 poorly built and expensive to make. But after reevaluating the Model 3, the company has come to a radically different conclusion.

Sandy Munro, founder of Munro & Associates, came away quite impressed with the Model 3's electronics. After a second teardown, he found the Model 3's electronic systems to be closely integrated and often times running multiple vehicle functions, thereby eliminating the need for duplicate — and expensive — electronics systems. In one example, Munro says Tesla is manufacturing its electronic rearview mirror for about $30, compared to about $165 for the Chevrolet Bolt.

Munro also spoke highly of the Model 3's battery pack in the interview with "Autoline After Hours." Munro found that the Model 3's new cells are 20 percent bigger than Tesla's previous battery, but contain about 50 percent more energy. In fact, Munro called the Model 3's batteries the best in the business right now.

After evaluating all of the new data, Munro believes that the Model 3 has a baked in profit margin of "over 30 percent." He added: "No electric car is getting 30 percent. Nobody."

Tesla is still ramping up Model 3 production but hit the milestone of producing 5,000 units per week in June. Tesla currently has about 420,000 reservations for the Model 3.