February 18th, 2020 by Chanan Bos
If only people understood, is what I keep saying to myself. If only they understood how unbelievably far ahead Tesla is. In the world of people who have studied this closely, however, opinions on Tesla’s large lead vary only slightly. The latest entity to give us a piece of its mind on this topic is the Japanese business publication Nikkei, as it recently conducted its own Tesla Model 3 teardown. The Nikkei Business Publications team was incredibly impressed by the technology. As far as we know, this is at least the 5th or 6th public Model 3 teardown, and they keep coming to similar results.
Nikkei Teardown Results
Nikkei and interviewed Japanese auto execs were especially impressed by Tesla’s hardware 3 computer, which the company custom designed. “It could end the auto industry supply chain as we know it,” Nikkei wrote. According to one of the engineers who performed the teardown and works at a major Japanese automaker, people involved were quoted as saying, “We cannot do it.”
Think about that for a moment.
The report further claims that industry experts do not believe the competition will be able to get this kind of technology from standard suppliers until 2025 at the earliest. However, the engineer who was quoted earlier believes that some automakers with vast financial and engineering resources could catch up if they wanted to, but these automakers likely won’t because they do not wish to vertically integrate like Tesla did. This is so that they don’t risk upsetting existing supply chains that currently lead to the production and sale of vehicles profitably. In other words, previously successful methods that depended on a large choice of competitive supply chains is starting to become automakers’ downfall, since the suppliers only need to outcompete each other, but don’t have to take on Tesla directly to get automakers to sign contracts.
According to the teardown, most components on the car included Tesla’s insignia and were made in-house, which is unusual for a car. The report concludes by saying that other automakers might not have a choice and might need to start following Tesla’s example in order to stay competitive.
Although we do not have access to the full report, we have managed to ascertain what else is in this report (thanks to some help from Google Translate).
- Part 1 — Tesla’s electronic platform is 6 years ahead of Toyota and VW
- Overhaul investigation revealed main components of Tesla Model 3
- Part 2 — Leading with integrated ECU*
- Few elite ECUs* compete
- Part 3 — Ability of automatic driving function
- Try automatic breaking when ACC* is activated
- Part 4 — Evolution of electric powertrain
- [something about battery replacement we can’t properly translate]
- Part 5 — Body design for mass produced vehicles
- Return from aluminum to steel
*ECU stands for electronic control unit, and by that they mean Tesla’s HW3 computer.
*ACC stands for Adaptive Cruise Control but may or may not be referring to Tesla’s Autopilot.
The four most important teardowns, revealed to the public, that took place before this one were by Wirtschaftswochem, Sandy Munro, Tesla, and UBS Investment Bank.
UBS had a pretty bad review of the Model 3. In its verdict, UBS stated that while Tesla is ahead of the competition, it does not have a very big lead over the rest of the industry. As our previous article discussing Model 3 teardowns mentioned, it’s very hard to try to get a cost estimate on a product from a heavily vertically integrated company like Tesla, which produces many of its own components in large part because the same products from suppliers would be too expensive. If you ask a regular supplier how much it will cost to make “insert random complex Tesla component here,” the price given will probably be really high or you might even get the answer that it cannot be done. It is often said that Tesla’s components meet or even exceed today’s military standards, and Sandy Munro even compared Tesla’s hardware 3 computer to something you might find in an F-35 military fighter jet. However, the important thing is that Tesla figured out how to make it for a much lower price (or else the car’s gross margin wouldn’t be as big as it is).
It’s important to keep in mind that UBS Investment Bank has always been bearish on Tesla. It is not one of the companies currently lending money to Tesla, and might or might not have something to gain if Tesla does not do well or as well as some of its other investments. In the company’s teardown report, UBS practically claimed that Tesla was likely lying about the vehicle’s gross margins. Apparently, though, UBS did not genuinely believe this since it did not report such a claim to the SEC.
Why Nikkei felt the need to do its own teardown remains unknown. What other interesting conclusions this teardown came to are unknown, for the time being at least. However, one thing is for sure: Japanese automakers like Toyota that are heavily betting on hydrogen fuel cells and hybrids perhaps need to start believing that they are in deep trouble if they don’t adapt. Will this Nikkei report help them to do so?
Related: Tesla’s Full Stack Disruption
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