Justin Pritchard / Associated Press

UBS analysts disassembled a Tesla Model 3 to compare it with other electric vehicles.

"Tesla delivered the best powertrain at the lowest cost," the investment bank told clients.

But the car's "next-gen, military-grade" tech is the reason the base model will never turn a profit.

Tesla has struggled to ramp up its production of the Model 3, which it has promoted as its first mass-market car.

But with no $35,000 base model even available for pre-order, UBS analysts took it upon themselves to tear down a Model 3 to take a look under the hood — literally — and they say the sedan's powertrain blows competing models from BMW and Chevrolet out of the water.

"All in, Tesla delivered the best powertrain at the lowest cost," a team of USB analysts lead by Colin Langan said in the first lap of its three-part tear-down series.

The investment bank said its takedown engineers "were crazy about the powertrain, highlighting next-gen, military-grade tech" that appear to be "years ahead of peers."

"The Model 3 appears to have been built with a goal of simplifying the engineering, removing components, and building things as modularly as possible," UBS said.

"The inverter was embedded into the e-motor and gearbox. More impressively, the battery management and charging electronics merged the DC/DC converter, on board charger, and power distribution module into one simple unit."

But that same excitement has them worried about the base model, which they say will lose about $6,000 per vehicle based on what they've seen.

"The Model 3 we disassembled was $49,000 which included the 75 kWh battery (+$9,000) and the high end trim (+$5,000)," UBS said.

"We estimate this model has a factory variable margin of ~29%, a gross margin of ~18%, and an operating margin of ~7%. However, the incremental margins on the options are high. We assume the base version at $35,000 would lose about $5,900 per car."

And while Tesla is counting on the Model 3 as its gateway vehicle to mass adoption across the world — and profitability for its own balance sheets — there's still no word from the company on when the base model, $35,000 version, will be available. Currently, the cheapest model available on Tesla's website is the $49,000 rear-wheel drive version.

Still, compared to BMW's i3 and the Chevy Bolt — which retail for $44,450 and $36,000, respectively — Tesla is the hands down winner, according to UBS.

"Through the teardown of the battery and drivetrain, we saw numerous advancements and innovations within the Model 3," the firm said.

"The technology in the battery pack appears to be ahead of all current production EVs and the BMS operates within tolerances not seen in others. The focus on modularity and compact design also suggests potential for automated production…. More importantly, the overall performance is superior with much better power, torque, and acceleration."

Read more about UBS' Evidence Lab:

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