LTLFTcomposite said:
Here's something I've never understood about the world of business and finance:
Apple can build an iPhone for $14 and potentially sell it to a market of 2B people for $800. 98% profit margin is wonderful, making $786 on each unit sold, doesn't get much better than that.
Uhh, you are WAY off on those amounts. $14 might be only enough to cover assembly and testing costs but nothing else. Components aren’t free, nor are the R&D costs nor tooling costs.
Every time a new iPhone comes out, various groups create estimates as to how much it costs Apple to produce. Example: https://9to5mac.com/2016/09/20/649-iphone-7-estimated-to-cost-apple-220-heres-the-component-breakdown/. (Of course, Apple has always said the estimates floating around the press are wrong. I don’t doubt they could be off by at least 5 to 15% but IMHO, they should be within 20-50%.)
From the above
Apple typically makes ~38% gross margins as a business, of which the iPhone makes up the majority of its sales. Manufacturing cost for the iPhone 7 is estimated at $220.80 by IHS but note that this is not the total cost of the product from Apple’s perspective. It also must incorporate packing, shipment, taxes and marketing costs. There is also the matter of software development, employee salaries, and further R&D financing to consider.
Although Apple is paying more than the $220 baseline, even after all of the additional costs, it is still likely raking in profits of about $250 per unit...
LTLFTcomposite said:
Now lets say Tesla can only make a 10% margin on each Model 3. Selling a car for $35k that cost $31.5k to build. Wharton guys would say that's a sucky low margin business, not where you want to be.
98% sure sounds better than 10%... but the profit on each Model 3 unit is nearly five times that of the iPhone! Seems like I'd rather be selling Model 3s. Aside from the relative ease of producing $14 iPhones in volume what am I missing?
From https://www.apple.com/newsroom/2017/05/apple-reports-second-quarter-results/ and https://www.apple.com/newsroom/pdfs/Q2FY17DataSummary.pdf, last quarter, Apple sold over 50.7 million iPhones, accounting for $33.249 billion in revenue.
Last quarter, they had $52.896 billion in revenue and net income of over $11 billion (see https://www.apple.com/newsroom/pdfs/Q2FY17ConsolidatedFinancialStatements.pdf).
From http://ir.tesla.com/secfiling.cfm?filingID=1564590-17-9968, last quarter TSLA had about $2.696 billion in revenue but lost $330 million to generate it. They delivered 25K vehicles that quarter.
And to add some more stats, I don't know how often users typically get new smartphones these days but in the US previously, due to (former) 2 year contracts, lots of people wouldn't keep them for more than 2 years before selling/trading in then upgrading. That seems to have stopped with people now needing to pay full price but possibly spreading out payments over 1-2 years. In comparison, the average age of vehicle on American roads is about 11 years.
I doubt you'll find many 10 year old smartphone still being actively used. First iPhone turned 10 recently and it's a dinosaur: little storage, fixed focus camera w/no flash, no 3G (and AT&T, its launch carrier shutdown its 2G network), stuck on iPhone OS 3.1.3 at max when iOS is up to 10.3.2, thick w/a low-res small screen, etc.
From http://www.hybridcars.com/june-2017-dashboard/, for the US, an estimated (due to Tesla, BMW i3 and Fiat 500e), 8,814 BEVs were sold/leased in the US out of 1.464 million autos. For CYTD, it was 44.2K out of 8.4 million. http://www.goodcarbadcar.net/2017/07/us-auto-sales-brand-rankings-june-2017.html gives you how much of an idea each major automaker does in the US in a month and thru June.
http://www.goodcarbadcar.net/2017/07/june-2017-ytd-us-vehicle-sales-rankings.html gives you an idea of volume of each model. (e.g. Ford F-Series truck sales were 77.895K for June. 429K units YTD.) The US is no longer the biggest auto market anymore (about 17 million in a year per https://autoalliance.org/economy/facts-about-auto-sales/). China is.
The largest automakers in the world (e.g. GM, VW and Toyota) each sell about 10 million vehicles/year worldwide.
http://www.autoblog.com/2017/03/21/porsche-17250-profit-per-car/ pointers to some automakers profits per car.