Does anyone expect price cuts to the MS and MX when the Gigafactory comes online?

I expect them to continously add features and eventually larger packs, all while keeping prices the same (not lower) adjusted for inflation.

I think the new and affordable batteries are said to be 10% taller and 10% wider.
Because of them being taller, they possibly won't fit the S and X

Heart of Gold said:

I think the new and affordable batteries are said to be 10% taller and 10% wider.
Because of them being taller, they possibly won't fit the S and X

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IMO it could be the other way round. Because of them being wider, they possibly won't fit the S and X. But I am sure that Tesla will work out this issue and use the new and affordable batteries on the S and the X.

James Anders said:

Since the Gigafactory will be responsible for the affordable batteries needed for the Model 3 - does anyone think the drastically reduced battery cost will result in price cuts to the S and X?

Or will Tesla keep the price the same and pocket the extra profit?

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Neither really. The MS and MX are premium cars, they'll stay priced way up there (possible cuts, but not significant). They do however have pretty hefty profit margins already when compared to the rest of the industry, so what I expect is that the MS and MX will gain features, without increased price. example, longer range (maybe finally match an ICE for road trips) more luxury features (Automatic cruise control, ventilated seats, better quality materials, etc)

Heart of Gold said:

I think the new and affordable batteries are said to be 10% taller and 10% wider.
Because of them being taller, they possibly won't fit the S and X

Click to expand...

The new and bigger battery cells is for the GIII cars - Model 3 and Model Y (and perhaps a Roadster 3.0). But I don't think they will have any trouble making standard 18650 cells withe the same new chemistry for the GII cars (Model S/X). A bigger problem is that (if I guess right) the 18650 cells to the GII cars will not be made at the GF, but be made at other Panasonic factories. So it's not likely they will get the price reduction that Model 3 will get. At least not the first few years.

I expect that with the introduction of Tesla Model ☰ and the opening of the Gigafactory, the following will happen:

• The Model X will never have a 60 kWh version.
• The Models S 60 will go away.
• The Model S 85 will become the entry level version.
• AWD will be offered for the Model S, but only for Performance Plus versions.
• A higher capacity battery pack will be offered for Model S and Model X, somewhere above 100 kWh, but only on Performance & Performance Plus versions.
• Pricing will remain in the same general range for Model S and Model X, adjusted for inflation.
• Some day a new car model will appear to compete against BMW 5-Series, and Mercedes-Benz E-Class, but only after the Model ☰ is very successful.

Of course, as usual, I could be wrong.

I doubt prices will ever come down considering the fact that they will have to be constantly adding Supercharging stations to existing sites, and opening new sites, to meet demand. A picture was posted at noon on Saturday showing the Burlington WA Superchargers all full. Imagine what that will be like 2 years from now with even more Teslas on the road. The costs for additional stations, and the costs of the power to feed them all, should be used to fund expansion, if battery prices fall as a result of the gigafactory.

Well I'll be the differing opinion.

The Model S will become cheaper. The gross margin is very high right now. When the batteries are cheaper, it will be off the charts. Audi, BMW etc will have access to cheaper batteries also (even if not as cheap as Tesla). They have to compete.

While it is possible they will make a bigger Model 3 instead, I suspect they will just cut the price on the Model S. They will favor adding features for awhile but then they will cut the price.

They just cut the price last week with the warranty announcement. To me, that is a price cut but I can see how people would call that adding features.

Nissan chopped the price on the Leaf in 2013. Sales have roughly doubled. When battery supply isn't an issue, why wouldn't they drop the price? If they make a S85 for $40k and they can make 200,000 a year but only 50,000 buyers at $80k.... well you get the idea. When the Model 3 is only going to have $8k (my guess) of a margin, wouldn't they rather stuff that battery into an S and make $15k - by selling it at $55k.

I am going to guess that battery supply will still be the constraint in 2018. Make more money per battery selling a cheaper S than a Model 3.

I also fully expect the Leaf to get a price drop in that time frame also - when the tax credit runs out.

Canuck said:

I doubt prices will ever come down considering the fact that they will have to be constantly adding Supercharging stations to existing sites, and opening new sites, to meet demand. A picture was posted at noon on Saturday showing the Burlington WA Superchargers all full. Imagine what that will be like 2 years from now with even more Teslas on the road. The costs for additional stations, and the costs of the power to feed them all, should be used to fund expansion, if battery prices fall as a result of the gigafactory.

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i see tesla having a back log of charging stations that are in need of being built. the ground work they are doing now is good for the MS now but it will need to be on almost every street corner to make easier to use and not be clogged up all the time. like the rest of you i dont think the MS or MX price will drop untell they do a restyling on them.

Tesla has hit an existing price point with the Model S. They even raised their price after release to hit this price point. They aren't going to move it from that price point. They either will pocket the excess income, roll that income into future busineess developments (vehicle factory, battery factory, superchargers), or increase the base functionality of the vehicle.

I'm betting on increased supercharger locations, as well with additional standard features.

With a Model 3 I have a feeling that Tesla may shift the price point, and amenities slightly up (to MB C class costs if it follows Model S lead, and Tesla still have no 200 mile competitors) or down (to LEAF/other cost, if Nissan/other are really offering competition with 200 miles) once it is released.

But after they target a price point, they won't shift that vehicle out of the price point, they will feature up/down to keep it at the same point.

Just my opinion:

As long as Tesla is production constrained, why would they lower the price? This is not a cost+ pricing. Cost for Tesla does not mean they should lower the price. It could even reduce demand if the price was lowered (Veblen effect).

This is a premium car offered at a premium price. And people (including myself and a few others here) love it. Tesla delivers a top quality car, top quality service, charging, warrantee etc. The whole package is certainly worth the price.

Mass production Model III - other story. This has to appeal to other people and will have to compete with cheaper cars.

As far as I am concerned, keep the S and the X as the top notch offer; offer more affordable cars to the masses. Make all your offerings attractive to their respective audiences.

ElSupreme said:

Tesla has hit an existing price point with the Model S. They even raised their price after release to hit this price point. They aren't going to move it from that price point. They either will pocket the excess income, roll that income into future busineess developments (vehicle factory, battery factory, superchargers), or increase the base functionality of the vehicle.
I'm betting on increased supercharger locations, as well with additional standard features.

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Agreed. There is no compelling reason to decrease S pricing as battery costs drop as long as demand is strong and the competition is weak to nonexistent. I can see Tesla making some currently optional features standard in a few years. If they build the same features into every S the incremental cost becomes smaller and you can still hit your margins as battery costs drop.

Just because the batteries will be 10% taller does not mean they won't be compatible with the Model S and Model X. It's entirely possible that they just simply figured out a way to reduce the battery packaging on the top and bottom by 10% thereby making the overall pack dimensions the same.

I think it was the 2013Q1 Earnings Releases where Elon Musk did say that in the longer term they might seek to drop the margin. I think it was maybe by 5%. But that doesn't necessarily mean a lower base price.

The best chance of a price cut would be once the federal tax incentives run out. Rather than raising the effective cost of their cars by $7500, you might see a $5000 drop in base price to compensate.

Canuck said:

I doubt prices will ever come down considering the fact that they will have to be constantly adding Supercharging stations to existing sites, and opening new sites, to meet demand.

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I agree. I believe the Tesla Model S and Model X will always be the cash cow that supports the expansion of Supercharger installation worldwide. The Tesla Model ≡ will initially range from about $35,000 to $55,000 for base trim levels, and have another $15,000 or so of options that can be added to any of them. I think it would work out something like this for Generation III:

Sure, there is the outside chance that the Model S 85 would go down in price, to reside at slightly above the price point the Model S 60 occupied, while a Model S 135 would appear as the top-of-the-line version... But I think it more likely the Model S 60 will just go away, the Model S 85 will stay about where it is today, and pricing will simply be adjusted for inflation.

Something akin to the Apple pricing model where a price point is identified and held fairly steady in absolute dollars, maybe slightly declining in real terms, with features added as technology becomes available at commercially viable costs. Especially, as competition creeps in.

Red Sage said:

I expect that with the introduction of Tesla Model ☰ and the opening of the Gigafactory, the following will happen:

• The Model X will never have a 60 kWh version.
• The Models S 60 will go away.
• The Model S 85 will become the entry level version.
• AWD will be offered for the Model S, but only for Performance Plus versions.
• A higher capacity battery pack will be offered for Model S and Model X, somewhere above 100 kWh, but only on Performance & Performance Plus versions.
• Pricing will remain in the same general range for Model S and Model X, adjusted for inflation.
• Some day a new car model will appear to compete against BMW 5-Series, and Mercedes-Benz E-Class, but only after the Model ☰ is very successful.

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This. I want to believe all of this.

The Gigafactory is going to give Tesla and customers more options on price and capabilities. It can't happen soon enough.