Munro Talks Tesla Model 3 Motor Magic And Profit Potential


…and much, much more.

Sandy Munro, the teardown expert of Monro & Associates, is back. A guest on the latest episode of Autolinehe’s got more than a few things to say about Tesla, its high-flying Model 3 and how making this car in China will result in a windfall of cash. And that’s just for starters. We also learn some of the secrets of the Model 3’s motor and some of the other systems that make this all-electric sedan so special. The video (above) is long, but if you have an interest in the company, the car, or just electric vehicles in general, you’re going to want to make the time to watch.

Munro is joined on the set by David Welch of Bloomberg, who provides lots of insight as well, along with co-hosts Gary Vasilash and John McElroy. We’ll recap some of the more salient points here, but truly, this installment is chock full of interesting nuggets.

Things kick off with a bit of a recap. Munro talks about some of the things his company found wrong with the Model 3 design — mostly related to the engineering of parts of the body — along with the everything that was done right, which he says was everything else.

One of those things has to do with the motor design. According to Munro, the Model 3’s motivator takes advantage of Halbach arrays, which produces a stronger-than-normal field on one side of the magnet while reducing the other side to near zero. It’s pretty technical, but the final result is, compared with motors in competitors such as the Chevy Bolt and BMW i3 (vehicles Munro has also completed teardowns of), the unit is smaller, lighter, more powerful, and more efficient. To boot, it’s also cheaper.

Speaking of costs, one of the more interesting parts comes when the group starts discussing profit margins. Munro estimates the base $35,000 Model 3 can hit an 18 percent gross margin from the Fremont factory. He had previously stated the big-battery variants could achieve over 30 percent margins. As impressive as that sounds, Munro becomes especially ebullient when discussing the potential for profit when the mid-size sedan begins to be produced in China.

He thinks there is a lot of room for reducing margins once production begins at Gigafactory 3 in Shanghai. He posits that if the automaker doesn’t repeat mistakes made State-side, there is an opportunity to remove 20 percent of the cost of its U.S. counterpart. And that’s apart from an additional $300 he believes could be removed from the car’s “body-in-white” if it’s re-engineered.

This, along with the removal of government penalties for foreign production and the huge popularity of the Tesla brand in China, makes it easy to understand why he exclaimed at one point, “When he takes it to China, he’s gonna make a gazillion bucks.”

As we said, there’s a lot more than just this in the episode. The industry as a whole gets discussed —  why can’t other automakers mimic Tesla — the advantages of vertical integration, and even a bit about Rivian during the afterhours section. Enjoy!

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87 Comments on "Munro Talks Tesla Model 3 Motor Magic And Profit Potential"

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I believe Sandy still has Model 3 that was built roughly a year ago, would be interesting to see how many of their 227 suggested improvements have been implemented both today and perhaps a year in the future…

do you actually believe that Munro & A. has 227 pertinent suggestions to Tesla’s electric motors department ? or even 127 for that matter ?

It was 227 (or however many) suggestions for improvement of making the entire vehicle, not just the electric motor.

Not that I think all of Sandy’s suggestions are well-informed. For example, he apparently didn’t understand that the reason the bottom of the car is so heavily reinforced is to support the weight of the heavy battery. He said the battery casing could support the weight (as with Tesla’s previous cars), ignoring the fact that the Model 3’s battery pack has only a light plastic casing.

But certainly Tesla should look at Sandy’s suggestions. I have no doubt that some of them are useful.

IEV said its mostly body improvements…The 3s rear wheel well had 9 different pieces of metal with multiple way to attach each piece…They noted for comparison that a Bolt EV only has one stamped piece…They also weren’t fans of the huge amount of adhesives used yet I’m sure they’re already using less of that…

I’m sure some might be, but the Model 3 has the best crash test results, so some of those things that Munro is criticizing are probably contributing to the crash safety, with the tradeoff being a bit more complicated for manufacturing.

He explicitly claims it doesn’t help with crash safety…

Sandy critic the main body & fit & finished , praised the Motor design and electronics which is generations ahead of Old Auto. He did say much later” he had to eat crow” ,about some of his critizm of the Mod3 design.

This was an truly wonderful discussion yesterday; the talk on the cooling unit (pump) was unbelievable. Such a fresh perspective from Tesla.

I loved that too, especially the reason legacy companies would never do this: internal politics between the cooling system departments. I have lived through politics getting in the way of engineering at 2 different MegaCos I have worked at.

With improved prototyping speeds (that cost a fraction of what they used to), more car (and other) companies should really focus on integration. Modern design software has a lot of abilities to test it in the CAD stage, even before a rapid prototype is produced. To integrate stuff, is just a sign of a modern solution. If a company is too used to just buy parts from suppliers, and usually parts they can use in several models (to get huge cost reductions, lower number of different parts they stock (inventory control) and so on, they’re not thinking fresh. When they use a lot of separate units, they need more space in the engine bay, and may also result in weird locations of some units. Cars in general should also be designed in a way that not only makes production fast and easy, but makes it easy for a customer to change simple things like light bulbs. I’ve seen a car where you really have to take the front wheel of, and then access through (or take of) the wheel well arch liner.. and then you have some Volvo models where you just take out a pin, and the whole headlamp… Read more »

He harshly criticizes the model 3 for not utilizing the batteries for body stiffness, …

What if you don’t know what size of battery is going to be in the car?… So far there has been 3 in it’s short lifespan, there may be more. And that’s before we start talking about potential battery design changes..

Tesla did put a heavy, rigid metal case on the battery pack of all of its previous cars, even the original Roadster, and this did improve stiffness and body strength.

Tesla chose to do otherwise with the Model 3. It’s hard for me to imagine that Tesla doesn’t know what it’s doing in this area. Tesla must have had a good reason to make the change.

Yep, .. there’s more to the story.. Sandy says he did talk briefly to Elon about this, .. and Elon’s response was “Oh, we fired that guy”. …

So more likely is that Sandy was fishing (while playing dumb) for information (i.e. the real reason the car is so heavy/overbuilt) and Elon (not wanting to give the real reason up) brushes him off with the response.

/Munro is, after all, essentially a “car spy” who gets paid to root out company engineering secrets … which is a pretty cool job.
//the “puncture from road debris” problems may also be a factor

Thanks for the response, Carcus! But I confess to some confusion. What was it that supposedly caused Elon to fire some guy?

@ 20:30 in the video

(plus he thinks we’re barnacles, no communication, if they were a customer I wouldn’t be talking about them, etc. etc.)

Lol then he goes on to talk about Chrysler (one of his customers)

We will never know if there was such a guy, or if he was fired.

The overly complicated body design.

Elon did mention on the Q2 earnings call (IIRC) that they have a new design that is cheaper, lighter etc. — so the assertion that the original designer was fired seems perfectly plausible.

So I went and scanned and I see that comment from Elon in the Q2, … I don’t think that’s what he’s talking about. Sounds a lot more like production tweaking than a big redesign to make the batteries more a part of the structure.

/btw, .. my guess is that the car has a heavy structure so it can live a second life with a replacement battery at year 10, 12 .. whatever that time is. If the body is ‘stand alone structurally sound’ (without the battery) then they are free to put whatever battery size/design is the order of the day. —- a way to future proof the refurb

/btw, btw… IF my guess is correct, .. then that’s why this is such a hot topic. This would reveal how long Tesla is planning for the batteries to last. If the model 3 batteries are 20 year batteries, or even 15 year batteries, .. then I don’t think they would design forward towards a battery replacement, … the car would likely just be done at that point. But if the batteries are 8 — 10 year batteries, .. then you probably need some kind of a plan for battery replacement. (limit depreciation, protect the brand long term)

I don’t see how planning for a battery replacement would come in here at all. The structural properties of the Model 3 battery are mostly provided by the bottom plate — and there is no reason to change that with a new battery…

No. I don’t think you understand what I’m getting at.

. In the model s it is the framework in the battery pack that transfers impact loads through the rest of the car structure for crash protection.

Video 3

/ not mentioned in the video but I assume the heavy mass of the cells must be included in the mix
// I am talking about the structural properties of the entire car — as in a crash

///at 8:45 in the Munro video he says adding the battery to the model 3 body doesn’t change the stiffness of the vehicle

Guess comments aren’t allowed today on George’s counterpoint..?

I’m not buying the shipping cost argument. The packs are likely shipped by rail between Sparks and Fremont, additional rail weight won’t cost much.
If the end result is cars that weigh more, that will cost more to ship them (all over the world),.. a lot of this WILL be on trucks, and they will definitely hit you for the extra weight.

Looking at the contrasting pictures (model s battery vs model 3) … I wonder if they decided an exoskeleton was less fire prone in an impact than a battery endoskeleton — because the model s endoskeleton battery pack structural beams were cutting into the cells during a serious collision?

He is also a legacy car guy.

I heard his earlier tear-down of a BMW i3 and soon owned a BMW i3-REx. Everything he said was spot on except possibly durability (failed motor mount.) Otherwise, the car is awesome. So I’m thinking about pulling the trigger on a Model 3.

What I like about the I3 is the possibility to replace battery to one with more capacity, and use the old battery as a home powerwall. I would be happy to see f.eks. battery replacement for the Tesla S and X, at least I would know the cost to replace my 85 KW with a f.eks 100 KW after 4 years when warranty runs out, Tesla has the technology, they could simply make a drivein for changing your batteries somewhere I Europa, the model 3 is another story

BMW i3 2019: Consumer Reports Recommended.
5/5 stars reliability.

Gotta have more of this, really like Sandy, straight shooter no bull.

Yes, Mr. Monro is, but the guy from Bloomberg.
He still doesn’t understand why the shorts are attacked.
CleanTechnica has been documenting and scoring the insane Lies of the industry and the leader: CNBC.

What we know now is Wall Street makes it’s money on the Lie Spread.
An analysis of the attacks ( blatant lies ) and the attack on Fairfax Insurance, it’s clear only a fool would believe the vast majority of Wall Street analysis isn’t just BRIBED LIES.

So, yeah, Bloomberg calls us “Fans”.
But, we get the real info from reporters with integrity.
We don’t go with the flow of lies from the CNBC river, and Bloomberg itself with it’s 50% record of producing bull about Tesla.

The only question is why isn’t the SEC cracking down.

I guess if you’re in the industry and drowning in the river of financial lies every day, that must seem normal to Bloomberg.

Hattip to saghost/tacoma on GM-Volt for bringing up these cost perspectives too.
$4.95/hp — 285g/hp — 170 HP — BMW i3
$4.18/hp — 257 g/hp — 200 HP — Bolt
$2.92/hp — 179 g/hp — 258 HP — Tesla 3

The motors design, weight, HP, and price are pretty impressive. Looks like it even continues to these other components.comment image

Call me skeptical. The mirror comparison shows one example of a not true comparison – whereas the BOLT ev mirror i HAVE in my LT is not as fancy as the one in the Premier which they are comparing, and I’d think it would have more or less the same cost as Tesla.

The motor costs between the 3 vehicles are all comparable – I’d like to see some reliability figures here. I’m just not interested in buying the least reliable car.

A fair comparison would be the RED Paint I have for $395, versus $2500 for the ‘3’, and on my car the paint job was perfect. Almost an order of magnitude more expensive for a much lousier job.

The Roadster was apparently painted by LOTUS, who did a flawless job.

“The mirror comparison shows one example of a not true comparison…”

Maybe, and maybe not. The caption says the Bolt EV’s mirror has a backup camera display. But that function is covered in the TM3 by the main display, so isn’t needed in the mirror; and the function of the TM3’s main display showing the backup camera image adds no cost to the display. In that sense, it’s a true comparison, because Sandy is comparing the costs to build an entire car — not just a rear-view mirror.

But there may be other functions that the i3 and Bolt EV mirrors have which have no equivalence in the TM3. If so, then indeed it’s not a true comparison.

The Bolt EV premiere has a mirror that shows an optional live video feed out the back while driving so your view isn’t blocked by rear pillars. You get mirror perspective, but clean view. No real similar feature on Model 3.

You can turn the backup camera on at any time on the Model 3 when driving. Full rear view while driving

The comparison is about the cost of production, not the pricing chosen by each manufacturer. So your paint analogy is not relevant to the discussion at hand.

The point of that comparison was to show how good each company was at re-using product features.

In the case of the Tesla Model 3, for example, they could get away from complexity in so many other areas of the car by investing in an overpowered unified circuit board and large display. That design can absorb a ton of the functionality that normally hides behind separate systems with their own logic, connected together from multiple vendors and adding cost, complexity and points of failure.

$300 Body in White? Can someone explain?

A “body in white” is a bare auto body that has been welded together, before painting and before adding doors, hood, etc.

comment image

Sandy thinks there are ways to change the manufacturing of the body-in-white which would reduce the unit cost by $300.

That number rather surprised me, since it doesn’t seem worth all the fuss… Then I realised that maybe he didn’t actually say $300 to be saved, but rather “free hundreds of dollars”?…

Profit margin, saving $300 while you are making the car means the customer saves even more. Example: going all hog with a margin of 30% the mean a saving of $300 to the manufacturer would mean a savings of $390 to the customer if all savings are pass along.

And what is more likely to happen is all the saving are not passed but the customer still sees more than a $300 drop in price and the manufacturer’s margin increases at the same time.

$300 a car, with for example 150 000 cars a year – and maybe a 10 year production run for the car = $ 450 million in extra profit. Just on the body in white.

Ford’s savings on the PInto gas tank was $11/car

Welch’s viewpoint was steeped in how the stock market sees things, but that is based on tradition. He sees Tesla as a car company, and doesn’t see the battery production and Supercharger network as part of the value of the company. Sure, in a few years BMW and others will have more models of EVs just as good as today’s Tesla, but where will Tesla be by then?

Part of the vertical integration benefit is that that Tesla can provide OTA updates. Think about what Tesla has updated thus far on the Model 3; the braking algorithm, track mode, autopilot, etc… How can BMW offer an OTA update when one supplier is providing the autopilot module, a different supplier is providing the anti-lock braking module, another is providing the traction control module, etc…

Additionally, everyone seems to be undervaluing Tesla’s autonomy developments. Waymo has a market cap similar to Tesla based on autonomy alone, if Tesla is the first to crack the self-driving nut, and they may be because they can access the most data, the sky is the limit for the share price.

Tesla uses a standard Bosch braking unit in the Model 3, but still was able to do the OTA.

Waymo doesn’t actually have a market cap, since it’s not traded separately — but estimations range between $120 and $250 billion, i.e. way more than Tesla.

It is done by software/firmware packages like in other equipment that has OTA updates.
You can update for example 3 out of 5 systems, if only 3 has an update.
They may have a deep link server somewhere, that the unit can connect to – and check for updates. That part is tried and tested by a lot of companies for a range of products.
I don’t think other car companies even thought about OTA updates, since it was no benefit for them. No money to save. If the vehicle got an update once in a while during routine maintenance.

Security have to be in order with OTA updates. I’m sure hackers will love a new challenge. Some car manufacturers may be more vulnerable then others. Will be interesting to see. There is a potential risk.

Trucks have used OTA updates for their telemetry/system information system for years. I think they didn’t see the advanteges for them (or their customers) to add more features like Tesla. We see all car manufacturers will offer OTA updates of some kind in their new EVs.
They will start fairly fresh compared to Tesla, but I’m sure they have studied Tesla cars a lot.

He also seems to miss Tesla’s advantage in the software space.

The Supercharger network is an early mover advantage, but not all that valuable in the long run. Elon himself is very vocal about moats being useless.

What most Tesla bears are actually missing, is that even if established car makers can finally come up with competitive products, that doesn’t automatically stop Tesla’s growth narrative: in an EV market that grows more than 40% each year, competitors would have to grow *faster* than that to actually eat into Tesla’s market share. But none of the legacy makers seems to believe in this kind of growth keeping up, going by the targets announced thus far…

Munro isn’t all right. Some of his claims are out dated or just no longer true.

He just got stumped by the question on his opinion on use of Aluminum. The F-150 basically stumped him for so called “volume sweet spot for using aluminum”.

I don’t think he was stumped, he sounded like a man who was trying to remember what was public and private information before he responded.

That’s gotta be hard for Sandy when you work in both public and private domains.

I enjoyed this episode of Autoline daily after hours listenining to it during the podcast and making comments as well ,live during the discussion,and making comments in Youtube later I have often watched Sandy Munro for a couple of years , The man is interesting and so is his company . His company is often hired by the Chinese who are very interested in Leapfrogging Foreign Auto makers in BEVs bypassing ICE design, The Chinese aim to dominate in BEVs, they are not interested in ICE, they don’t see any future in 19th&20th century tech.

Yet he said that it was the Japanese, not the Chinese, who bought his report on the Model 3…

So, in 3-7 years we should see something from Honda.

A report can be so extremely detailed, and include a detailed 3D scan of every single part of the vehicle. If Honda wanted to, they could probably produce a clone (with a slightly different look) withing 12-14 month. Maybe even sooner – if they really push it.
There is no real development work needed. That has already been done by Tesla.
They have to set up a production line, and do a lot of work there. Give or take 6 month. Then they need to get the car approved, tune producton and so on.

I’ve seen Chinese companies copy a product and sell it in less then 3 month. A car is more complex, need an advanced production line and so on.

No matter how good it is, I am not going watch a 90 minute video. I read faster than they speak, unless there is a reason I would rather read. And reread sections to really understand. But every one seems to be putting more of their content in video and not much in writing….

It is a panel discussion. But yeah a transcript would be great.

This annoys me too. I will often search for some simple instruction on how to do something and find many 5 minute videos telling me how to do the thing. All I want are simple written instructions that can be read in just a few seconds.

While I agree that reading is more efficient, I find that watching a video requires less concentration… For this kind of discussion it’s a good medium IMHO.

On the Youtube video, go into options (three horizontal dots), and choose “Open transcript”, and read it.

Other than that, I don’t see how you are in any position to complain how people are providing their information, at no cost to you, other than maybe having to watch an ad.

Sandy s story at the end of the episode at about 1:37 about Kuka robots and its parent company Midea bodes well for those who take the Chinese manufacturing prowess and ruthlessness lightly for Old Detroit.

OMG, all four of them agreed that franchise dealerships are some kind of advantage. These guys are about as smart as Bob Lutz. lolz! Another important point they didn’t understand is why Tesla can do OTA software updates and OEMs can’t. Legacy autos have several separate computers for, engine, transmission, sound system, GPS. anti-lock brakes/traction control, All of these are from suppliers. Tesla combines all these functions in one computer.

Sandy Munro probably knows about the computer integration but didn’t bring it up.

He discussed the situation at length regarding the Superbottle though, which is essentially the same story…

It should be noted however that VW claims their MEB platform will have an integrated electronics architecture like Tesla’s, allowing for full OTA capability too…

They don’t mention “franchise”. They say that more dealerships are an advantage for sales — which is likely true, no matter whether they are franchised or fully owned.

For established brands, that already have a dealer network.
And yet, the dealerships seem to pick and choose what they stock and sell.
And they never mention the dealership hostility to EV’s and actually anything new.

That must be a US problem, since dealers in Norway for example will sell all the EVs they can get their hands on.

Not just a US problem. In a European comparison, dealers in Norway stood out too.

The truth is that once EVs reach a meaningful market penetration, the dealers *have* to adapt, or they go out of business. The problem is that outside of Norway, that penetration just isn’t there yet…

The legacy dealerships block the manufacturers from doing OTA updates. They want you to bring your vehicle in so that they can sell you another one.

Poor Mr Munro. He heaps praise on Musk and almost anything Tesla does and will still get burned to the ground by certain fans (who are doing nobody a favour btw) whenever he has a criticism, or improvement suggestion.

Unfortunately that’s true for anyone who ever publishes online…

In this case, it’s not entirely unprovoked though: the first time he talked about the Model 3, he made some overly negative statements about minor issues.

And yet, I’m reading these comments and no one has even lightly toasted Mr. Munro.

This man doesn’t do his homework. Again. The cars made in China will be for the Chinese market and SE Asia. They will not be imported to the US.

I don’t think he suggests China-built cars are coming to the U.S., he’s talking about the Chinese market.

Actually, he was talking about how the Chinese-made cars will make a lot of money *in China*. I don’t think he was suggesting that Tesla will be importing cars from China any time soon.

GM cut the Volt program, but they’re building the next version in China.
It it becomes necessary for Tesla to compete with Chinese EV’s imported into the US, they will either have to automate everything or import from China.

Thus far China has failed to produce attractive EVs (or other cars) at competitive prices for export. While their production capabilities keep improving, the wage gap is also closing — making it increasingly hard to gain an edge that would make it profitable to ship to another continent. At this point, I suspect their only chance to gain a significant edge is by taking the *lead* in automation. (Which is not out of the question, considering that they already did that with solar panel production…)

Actually, I think China only leads on solar panel unit cost.
Panasonic and other brands still lead in energy generation, and quality, especially quality.

I think the top Chinese makers are more or less on par?…

But that’s beside the point. I was talking about production automation. IIRC the first lights-out solar panel factory was a Chinese one.

Munro thinks Tesla is going to make a lot of money in China. I think China is going to take full advantage of Tesla for its own purposes and end up pi$$ing Musk off.

But Musk will still make money until then.

I guess this means they have been able to settle the legal dispute with (presumably) UBS?…

As much as these guys have a deep knowledge of the auto industry and an ability to dissect parts, throughout 80 minutes of watching I got the sense I was listening to dinosaurs who just don’t get it.
On a profound level they don’t perceive that oil got us this far, but that there is absolutely no reason that we ever have to burn something to propel ourselves ever again.
They ascribed a devotional cult of Elon when this has absolutely nothing to do with a man and everything to do with finally having a EV company making vehicles so attractive that people can’t not buy them. Until now we had EV mediocrity with no chance of causing ICE extinction.
They described the vision of charging an EV as from solar panels “cool” instead of essential to wean us from the FF world and now the most economically feasible ever.
I have the distinct feeling that as the ICE industry unwinds, so will autoline and Munro and associates.

What I don’t understand is why he talked so much about the motor magnets.. They are turned in different directions to get a special magnetic field effect. The technology behind the magnetic effect is absolutely not new, but the use in electric motors is not common – and may be a sign of Teslas skilled engineers, and their will to think new. Got to love that. To use common knowledge, and use it in a new way – that nobody has done before is great. I’ve seen it in tiny special motors (but still way less advanced), but have not seen it in larger motors, like industrial motors as far as I know. Maybe because price is more important then efficiency? They are after all connected to the grid. Tesla should maybe consider using their tech to improve larger industrial motors (they are expensive), since they could have made a profit for sure. It he had said it was cool, and he was impressed by the engineering I could not have agree more, but he seemed like he didn’t understand how they worked.. he is an engineer, isn’t he? He talked about it like it was technology from Area 51.… Read more »

Watched the whole thing. Sandy is hard to listen to sometimes, seems to go off on rambles and then probably takes a queue from somebody off camera to bring it back to the topic at hand. Obviously he’s good at what he does since companies are paying big dollars for what he produces, just not a PR or on-camera guy.