We dive deeper into the potential powertrain and profit analysis surrounding the all-new mid-range Tesla Model 3.

We’ve had two very good articles on the Tesla Model 3 powertrain and implications on gross margin. Both are based on an analysis by Troy at Teslike (articles here and here).

In those article Troy predicts the size of the battery pack in Model 3 mid range and calculates its effect on gross margin. He predicts a slight reduction in gross margin based on his estimate of the mid range’s battery pack size.

Our results are slightly different. We think Tesla has reduced the pack size more than Troy’s prediction. We also think the mid range’s rear drive unit is lower power than the long-range drive unit. There are secondary savings as well in wiring sizes.

We are predicting a battery size of around 61 kWh usable and a rear drive unit with a horsepower closer the short range’s hp (220 hp).  Therefore, our cost savings associated with going to the mid-range version are slightly higher than Teslike’s prediction.

Our battery is predicted to be approximately 61 kWh usable with a cell count of 3446 cells (vs 4416 in the LR). Seems low? Remember that there is an extra margin in the LR battery pack. Tesla intentionally lowered the range on the long-range version from 334 miles (ref) to 310 miles. In the mid-range version, we are predicting they will eliminate that margin. There are also some secondary effects that result in a pack being slightly smaller: less weight due to the smaller pack increases range, less margin needed since there is no AWD mid-range version.  The mid-range version pack estimate is 17.3 usable kWh’s less than the long-range version and at 115$/kWh that results in a lower cell cost to Tesla of 1990$.

But, the battery is not the only savings in the mid-range version. We estimate the new mid-range motor to have 220 HP (reduced from 271 HP in the long range version). Why such a big reduction? ... Slower acceleration and a gear ratio change to help acceleration times since the top speed is lower in the mid-range version.

In addition to the savings in the battery and the motor/inverter, there will be savings in wiring as well due to lower currents.

So, Tesla has dropped the price of the mid-range version $4,000, but they have reduced the cell cost by around $2,000 and moved to a smaller motor, inverter, and wiring (based on our estimate). This should push the cost savings close to $4,000.

*This article was a team effort between the author and Keith Ritter.