Earlier this week, a report was released that revealed Tesla’s margins for the Model Y crossover in Shanghai. Guosen Securities, a Shenzen-based financial firm, found that Tesla holds a nearly 30% marginal rate on every unit. As the Model Y just recently began production and has become available for Chinese citizens to order, Tesla is already winning in 2021 as demand for the all-electric crossover is expected to be higher than the already-popular Model 3.
Peeking at the margins, it was reminiscent of the astronomical margins Tesla held early on with the Model 3 in Shanghai: 39.37%.
Breaking down the math for you all, an article I wrote earlier this week on the topic describes the price for manufacturing the vehicle and then compares it to the Made-in-Shanghai Model Y price for consumers.
“According to the Shenzhen, China-based financial firm, Tesla’s China Model Y only costs ¥237,930 (USD 36,852) to produce. However, its selling point gives Tesla a 29.4% gross margin with a price of ¥339,900 (USD 52,646.25). Due to the current demand for the all-electric crossover that just started being produced at Giga Shanghai, Tesla has plenty of room to come down. The company will likely do this after the demand is sustained for several months because the automaker did the same thing with the Model 3 after its initial gross margin was also turning Tesla a tasty profit.”
As a $TSLA investor, the margins made me feel great. Tesla is turning a sizeable profit on Model Y builds early on, and the margins are significantly higher than the automotive industry average, which sets around 8-10%. Holding 30% margins on any product, let alone a $52,000 car, is everything investors want. It means the company is pricing their vehicles to be competitive in a market where EVs are thriving, but it also means that Tesla is able to sell their car at a higher price while still being able to keep demand sustained.
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But it got me to thinking, does this mean that Tesla could technically drop the price of the Model Y in the future? The company would have the ability to still turn a profit and have a great margin that is higher than the auto industry average, but it would also create even more buzz for the car because it would be priced even lower than it already is. It is no secret that Tesla leads the industry in many ways, and a cheaper price tag for a Tesla EV would likely do a number of things that could be looked at positively: 1) Make a car more affordable, inching closer to price parity, and 2) Increase the number of vehicles on the road that dawn the Tesla T.
From an investor’s standpoint, it is tough to see an argument where lower margins are a good thing. We want competitive pricing, but why would we want it to be lower if the sales are there? Demand is healthy, there is no questioning that. Tesla showrooms in China were filled over the weekend with people looking to get a glimpse of the Model Y. Rumors have indicated that Tesla has already sold out of the car, showing that the vehicle was highly-anticipated and regardless of the price, people would buy.
Tesla showrooms get volunteer help amid Made-in-China Model Y launch
So what’s the big deal? Why would anyone want to decrease the cost of the cars?
From a consumer standpoint, lower prices are always better. Of course, wherever we can stand to save a few hundred, or even a couple thousand dollars on a car, we are going to do it. Of course, Tesla did away with price negotiations for cars (which is by far the most stressful part of buying a vehicle), so it’s not like owners can save money by wiggling down salespeople.
But looking at it from this point of view, Tesla has room to come down, and they’ve done it before. The Model 3, at the time of its release in China last year, was giving Tesla a massive 39.37% margin, and the price of the car was decreased five times in 2020. Based on estimations, Tesla could have margins around 25% on the Model 3 now, a nearly 15% decrease compared to the earliest projections.
There was wiggle room: Tesla did it once to reach the price point for government incentives, and others because production costs had gone down due to vertical integration. Grace Tao says there are probably no more price reductions in the future on the Model 3, but who knows what could happen.
The Model Y is a highly appealing vehicle due to its body style. Crossovers are some of the most popular cars on the market, and Tesla knows that. Elon Musk once said that the Y would overcome the 3 and be Tesla’s biggest seller. After the company released the Standard Range RWD variant on Thursday night, it is a good possibility to happen this year.
I think it is safe to assume that the Model Y will be a popular car in China just like the Model 3 has been. I think it is safe to assume that Tesla will really only battle with GM’s Wuling HongGuang Mini EV in that market this year. I also think it is safe to assume that Tesla isn’t going to adjust the price of the Model Y soon, considering the car just came out.
Moving forward, I think that consumers can assume that the Model Y will drop in price. Tesla will confirm that demand is healthy, and the company will continue to integrate parts of the car locally to save costs. This will bring the cost of the vehicle down anyway, so the price to the consumer will likely be adjusted accordingly.
There are advantages to keeping the margins high, especially with Tesla, because it is such a young company. Profitability will only increase, and Tesla will likely extend its consecutive quarter streak because of it. Tesla will make more money, sales will likely remain as demand is healthy, and shareholders will keep their smiles because the stock price will go up.
There are also advantages to cutting the cost: Tesla will move closer to parity with gas cars by adjusting the price, it will still have considerably higher margins than the auto industry average, and it will still make Tesla money, even if it is less.
I would love to hear your thoughts on the matter. I spoke to other investors, and they saw both sides as well, but of course, they felt the higher margins were more advantageous as their money is funneled into the company. I also feel that the high margins benefit me personally, but I would also like to see price decreases in the future to make the EVs more affordable.
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I use this newsletter to share my thoughts on what is going on in the Tesla world. If you want to talk to me directly, you can email me or reach me on Twitter. I don’t bite, be sure to reach out!
News
Elon Musk teases expectations for Tesla’s AI6 self-driving chip
This optimistic timeline for tape-out—the stage where chip design is finalized before manufacturing—signals Tesla’s push to rapidly advance its silicon capabilities.
Tesla CEO Elon Musk is outlining expectations for the AI6 self-driving chip, which is still two generations away. Despite this, it is already in the plans of the company and its serial entrepreneur CEO, who has high expectations for it.
Musk provided fresh details on the company’s aggressive AI hardware roadmap, spotlighting the upcoming AI6 chip designed to supercharge Tesla’s self-driving tech, humanoid robots, and data center operations.
In a post on X dated March 19, Musk stated, “With some luck and acceleration using AI, we might be able to tape out AI6 in December.”
With some luck and acceleration using AI, we might be able to tape out AI6 in December
— Elon Musk (@elonmusk) March 19, 2026
This optimistic timeline for tape-out—the stage where chip design is finalized before manufacturing—signals Tesla’s push to rapidly advance its silicon capabilities.
The announcement builds on progress with the predecessor AI5. Earlier in January, Musk announced that the AI5 design was “in good shape” and “almost done,” describing it as an “existential” project for the company that demanded his personal attention on weekends.
He characterized AI5 as roughly equivalent to Nvidia’s Hopper class performance in a single system-on-chip (SoC) and Blackwell-level as a dual configuration, but at significantly lower cost and power usage.
Elon Musk is setting high expectations for Tesla AI5 and AI6 chips
Musk highlighted that AI5 “will punch far above its weight” thanks to Tesla’s co-designed AI software and hardware stack, making maximal use of every circuit. While capable of data center training tasks, it is primarily optimized for edge computing in Optimus robots and Robotaxi vehicles.
For AI6, Musk envisions substantial gains. “In the same half reticle and same process node, we think a single AI6 chip has the potential to match a dual SoC AI5,” he explained.
The company is targeting ambitious nine-month development cycles for future chips, allowing rapid iteration to AI7, AI8, and beyond. AI5/AI6 engineering remains Musk’s top time allocation at Tesla, with the CEO calling AI5 “good” and AI6 “great.”
Samsung is expected to manufacture the AI6 chips, following deals worth billions, while AI5 will leverage TSMC and Samsung production. These chips will form the backbone of Tesla’s Full Self-Driving system, enabling safer and more capable autonomy, alongside powering dexterous movements in Optimus bots and efficient inference in expanding data centers.
Tesla to discuss expansion of Samsung AI6 production plans: report
Musk has also restarted work on the Dojo 3 supercomputer project now that AI5 is progressing. Long-term plans include in-house manufacturing via the Terafab facility.
By accelerating chip development with AI tools, Tesla aims to reduce dependence on third-party GPUs and deliver high-performance, energy-efficient solutions tailored to its ecosystem. Success with AI6 could mark a major milestone in Tesla’s journey toward full autonomy and robotics leadership, though timelines remain subject to manufacturing realities.
Elon Musk
SpaceX is quietly becoming the U.S. Military’s only reliable rocket
Space Force drops ULA for SpaceX on GPS launch after Vulcan rocket anomaly investigation halts flights.
The U.S. Space Force announced today it is switching an upcoming GPS III satellite launch from United Launch Alliance’s Vulcan rocket to a SpaceX Falcon 9, a move that is as much a reflection of Vulcan’s mounting problems as it is a validation of SpaceX’s growing dominance in national security space launch. The GPS III Space Vehicle 09, originally contracted to fly on Vulcan this month, will now target a late April liftoff on Falcon 9, marking the fourth consecutive GPS III satellite the Space Force has moved to SpaceX after contracts were originally awarded to ULA.
The immediate trigger is a solid rocket motor anomaly that occurred on February 12 during Vulcan’s USSF-87 mission. Although the payloads reached orbit and ULA declared the mission successful, the company characterized the malfunction as a “significant performance anomaly” and has since paused all military launches on Vulcan pending a root cause investigation.
“With this change, we are answering the call for rapid delivery of advanced GPS capability while the Vulcan anomaly investigation continues,” said Systems Delta 81 Commander Col. Ryan Hiserote. “We are once again demonstrating our team’s flexibility and are fully committed to leverage all options available for responsive and reliable launch for the Nation.”
The broader reality is that SpaceX’s reliability record and launch cadence have made it the path of least resistance for the Pentagon, and bodes well with Elon Musk’s plans to IPO SpaceX sometime this year. Its Falcon 9 is the most flight-proven rocket in history, and the Space Force’s Rapid Response Trailblazer program was specifically designed to enable exactly this kind of provider swap for GPS missions, and effectively building SpaceX’s flexibility into the national security launch architecture by design.
For ULA, the stakes are existential. The company entered 2026 with aspirations of finally turning a corner after years of Vulcan delays, with interim CEO John Elbon pointing to a backlog of over 80 missions as reason for optimism. Meanwhile, SpaceX’s contracts with the Space Force have given it a formal pathway to take on even more national security launches going forward.
The significance of today’s announcement extends beyond one satellite swap. It reinforces that America’s most critical space infrastructure, including GPS, missile warning, and beyond, is increasingly dependent on a single commercial provider.
News
Tesla Full Self-Driving gets huge breakthrough on European expansion
All documentation for UN R-171 approval and Article 39 exemptions has been submitted, with RDW now conducting its internal review. Approval in the Netherlands is expected on April 10, shifted from the original March 20 target, following 18 months of rigorous collaboration.
Tesla Full Self-Driving has gotten a huge breakthrough as the company is still planning big things for its European expansion, hoping to bring the impressive platform into the continent after years of attempts.
Tesla Europe has announced a major breakthrough: the company has officially completed the final vehicle testing phase for Full Self-Driving (Supervised) in partnership with the Dutch vehicle authority RDW.
All documentation for UN R-171 approval and Article 39 exemptions has been submitted, with RDW now conducting its internal review. Approval in the Netherlands is expected on April 10, shifted from the original March 20 target, following 18 months of rigorous collaboration.
Together with RDW, we have officially completed the final vehicle testing phase for Full Self-Driving (Supervised) and have submitted all documentation required for the UN R-171 approval + Article 39 exemptions. The RDW team is now reviewing the documentation and test results…
— Tesla Europe, Middle East & Africa (@teslaeurope) March 20, 2026
The process has been exhaustive. Tesla said it has logged more than 1.6 million kilometers of FSD (Supervised) testing on European roads, conducted over 13,000 customer ride-alongs, executed 4,500+ track test scenarios, produced thousands of pages of documentation covering 400+ compliance requirements, and completed dozens of independent safety studies.
The company expressed pride in the partnership and anticipation of bringing the feature to “patient EU customers” soon after approval.
Europe’s regulatory landscape has presented steep challenges for Tesla’s advanced driver-assistance systems. The EU enforces some of the world’s strictest safety standards under the United Nations Economic Commission for Europe framework, particularly UN Regulation 171 on Driver Control Assistance Systems.
Unlike the more permissive U.S. environment, European rules historically limited system-initiated maneuvers, required constant driver supervision, and demanded country-by-country or bloc-wide exemptions. Tesla faced repeated delays, with initial February 2026 targets pushed back amid RDW’s insistence that safety, not public or corporate pressure, would govern timelines.
Tesla Europe builds momentum with expanding FSD demos and regional launches
A former Tesla executive warned in 2024 that certain regulatory elements could slip to 2028, highlighting bureaucratic hurdles, extensive audits, and the need for harmonized data privacy and liability frameworks across fragmented member states.
Yet progress is accelerating. Amendments to UN R-171 adopted in 2025 now permit hands-free highway lane changes and other automated features, clearing technical barriers. Once the Netherlands grants national approval, mutual recognition allows other EU countries to adopt it immediately, potentially leading to an EU-wide rollout by summer 2026.
This European breakthrough is part of Tesla’s broader push into foreign markets. Full Self-Driving (Supervised) is already live in the United States and expanding rapidly.
In China, where partial approvals exist, CEO Elon Musk has targeted full rollout around the same February–March 2026 window, despite lingering data-security reviews.
Additional markets, including the UAE, are slated for early 2026 launches. These expansions are critical as Tesla seeks to monetize software amid softening EV demand globally.
For European Tesla owners, the wait appears nearly over. Approval would unlock advanced autonomy features that have long been available elsewhere, marking a pivotal step in Tesla’s global autonomy ambitions and reinforcing its commitment to navigating complex international regulations.
Elon Musk teases expectations for Tesla’s AI6 self-driving chip
SpaceX is quietly becoming the U.S. Military’s only reliable rocket
