When the Tesla Gigafactory is build in ~2016 - Will the Model S drop in price?

The difference in price between the 60 kWh and the 85 kWh is somewhere between $7000 and $8000, that works out to $280 to $320 per kWh.
I estimate that $23800 - $27200 of the Model S 85kWh is the battery pack. $27200 is 34% of the $81070 base price. $23800 is 29% of the $81070 base price.

The difference between $7000 and $8000 is the Michelin Primacy tire upgrade cost. Seems unlikely that those tires are really $1000 more than the base tires.
So the truth is somewhere in the middle.

Best guess.
If I were Tesla I wouldn't reduce the price of the Model S unless supply exceeds demand.

Yes once the Gigafactory is complete, they are going to recoup their investment by reducing the price of the hot selling Model S to $40,000 and take less profit. They might even throw in a second one free as a promotion, why not?

No they will not reduce the price. That would go horribly wrong, the resale values would drop forcing Tesla to do a mass buy back. Keeping the price up is in Tesla's interest. They will just offer different kind of cars for all price ranges. The Model S will always be their prime car and it will get refreshes of latest tech and more battery range ahead of the cheaper cars. Tesla will most likely make tiers and technology would trickle down those tiers.

evme said:

No they will not reduce the price. That would go horribly wrong, the resale values would drop forcing Tesla to do a mass buy back. Keeping the price up is in Tesla's interest. They will just offer different kind of cars for all price ranges. The Model S will always be their prime car and it will get refreshes of latest tech and more battery range ahead of the cheaper cars. Tesla will most likely make tiers and technology would trickle down those tiers.

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Absolutely. It's also a great way to extract more money from guys like me who like to keep a car for at least 10 years. If they come out with a 120 kWh battery upgrade three years from now, I'm in.

my guess is that as Teslas cost goes down, they will keep base price, but include some options in that base model (maybe tech package) and after battery cost goes gown far enough, move basic MS to 85 KWh while intruducing larger otional battery pack (110KWh would be my guess).

No. Besides the increased margins on Model S/X will aid Tesla in funding the major expansion of facilities that will be needed after the Model ≡ comes out.

Price will be determined by demand and sales, not by the wholesale cost of batteries.

Rebel44 said:

my guess is that as Teslas cost goes down, they will keep base price, but include some options in that base model (maybe tech package) and after battery cost goes gown far enough, move basic MS to 85 KWh while intruducing larger otional battery pack (110KWh would be my guess).

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I agree with this thought. Tesla has already proven the S can command the current price. As manufacturing costs go down I would expect more/new options to be included in the base with an eventual bump in KWH of the battery packs at the same price points (85 for the cost of a current 60, 110-120 for the cost of the current 85).

evme said:

No they will not reduce the price. That would go horribly wrong, the resale values would drop forcing Tesla to do a mass buy back. Keeping the price up is in Tesla's interest. They will just offer different kind of cars for all price ranges. The Model S will always be their prime car and it will get refreshes of latest tech and more battery range ahead of the cheaper cars. Tesla will most likely make tiers and technology would trickle down those tiers.

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Kbsilver said:

I agree with this thought. Tesla has already proven the S can command the current price. As manufacturing costs go down I would expect more/new options to be included in the base with an eventual bump in KWH of the battery packs at the same price points (85 for the cost of a current 60, 110-120 for the cost of the current 85).

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This makes me go back to a questions I have had in mind for a long time now. 3-4 years down the line, battery will get cheaper, and assuming MS price will not fall, MS will get much better. Does that mean the Model ≡ when it is released may just be a better car than the Model S we currently own?

In a few years, given less expensive batteries, I suppose we will be offered the chance to replace and-or upgrade our batteries, as others have suggested. But Tesla will be deciding how to distribute incentives between such upgrades of the battery, and upgrades of the entire car, somewhat as Apple and other computer makers dance between software and hardware upgrades. If the latest software is beginning to tax the processors previously in use, there will be a strong temptation to upgrade the entire vehicle or at least the electronics. For example, the self-driving car will require a lot more computing horsepower, though not much more electric power. And many on this forum has bemoaned the lack of plush seating, fancy safety systems, and other luxury accouterments that had to be omitted to fit in the expensive battery. We'll take our choice and pay our money for what we most want. I would hope that at least the up-charge for a larger battery would drop significantly if the incremental cost has similarly dropped, but there may be other options we would choose that keep the Model S pricey.

iffatall said:

.... Does that mean the Model ≡ when it is released may just be a better car than the Model S we currently own?

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I would venture to say not a better car, but a different car. Remember first of all it's a smaller car competing in a slightly different market. Will likely use less of the exotic materials such as the almost all aluminum construction in the S. But it will have updated electronics. If you look at the other premium brands (like BMW) the newer technology starts with their most expensive models and eventually trickles down to the smaller/less expensive models. There is nothing to indicate the new technology will not show up first in the S. Of course it will not show up in your existing model S.

thgchris said:

Will the Model S drop in price when the gigafactory comes into play or will Tesla simply take more profit for the Model S vehicles and use the less expensive batteries and scale to help sell the less expensive model at the $35k price?

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As long as they can sell every car they produce, with a backlog, and no real competition, they will not drop the price. Why would they? Would you, in their shoes?

thgchris said:

Whoa really? That's SOOOO AWESOME. I'd love to get a free Tesla. Where is your source? Your wisdom is so valuable to this conversation.

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I think your sarcasm detector is broken. Oh wait a minute, looks like mine is, too. :smile:

iffatall said:

This makes me go back to a questions I have had in mind for a long time now. 3-4 years down the line, battery will get cheaper, and assuming MS price will not fall, MS will get much better. Does that mean the Model ≡ when it is released may just be a better car than the Model S we currently own?

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Huh? "MS will get much better"?

Kbsilver said:

I would venture to say not a better car, but a different car. Remember first of all it's a smaller car competing in a slightly different market. Will likely use less of the exotic materials such as the almost all aluminum construction in the S. But it will have updated electronics. If you look at the other premium brands (like BMW) the newer technology starts with their most expensive models and eventually trickles down to the smaller/less expensive models. There is nothing to indicate the new technology will not show up first in the S. Of course it will not show up in your existing model S.

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I did mean to compare with the Model S I currently own, not the then Model S. Basically, I am just hoping to not be forced to envy a Model ≡ owner.

tga said:

Huh? "MS will get much better"?...

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I meant the Model S sold at the time of release of Model ≡ will be much better than the Model S we currently own. Is that not a valid assumption?

iffatall said:

I meant the Model S sold at the time of release of Model ≡ will be much better than the Model S we currently own. Is that not a valid assumption?

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I don't think so. Again, as long as they can sell every car they produce, with a backlog, and no real competition, they don't have a lot of pressure to innovate and improve the car or reduce the price. That doesn't mean they won't, just that they don't necessarily have to. With demand outstripping supply, and no competition, it's just good (short term) business sense to keep the price up and not add features.

Now if MB releases a 250 mile electric E-class, or GM releases a 250 mile electric Cadillac, either of which can use the supercharger network (or some other, equivalent, not-yet-developed fast charging network), that would be pressure Tesla to improve the price/features of the Model S. But I'm not sure I see that happening, at least not before the Model 3 comes out.

iffatall said:

I meant the Model S sold at the time of release of Model ≡ will be much better than the Model S we currently own. Is that not a valid assumption?

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The Model 3 will be better than the Model S we currently own in terms of price/performance.
EVs are at the stage where there is rapid improvement.
Just like digital cameras, flat screen TVs, cellphones, computers, solar panels have improved over the last few years.
100 years ago if you bought a gasoline car, the ones that were available 5 years later were better and cheaper.

Some of it is technology, but a lot of it is economies of scale. The more you make, the cheaper they get.

The Model S will not 'drop in price' with the advent of the Gigafactory. Tesla Motors will likely see a lower cost for batteries by that time, as production of Model S and Model X will top out in 2016 or 2017. So they will see an improved profit margin, and that will allow for the expansion of the Supercharger network. If, as I presume, the Model ≡ arrives with a 60 kWh battery pack as standard, there is a strong possibility that the Model S 60 will go away. If, as I hope, a higher capacity battery pack is offered, then the 85 kWh battery pack will become the entry level for the Model S.

I wouldn't expect Tesla to introduce a new sedan series between Model S and Model ≡ either. There will be no direct competitor to BMW 5-Series or Mercedes-Benz E-Class anytime soon, if indeed ever, from Tesla. They have no need for a 'tweener' vehicle offering.

I would like to reiterate that Tesla Motors does not make luxury cars. Everyone who is hoping for an 'improved interior' full of 'luxury accouterments' is likely to remain disappointed going forward. Tesla makes engineered interiors -- not crafted ones. You may get a better set of options to take care of some interior aspects, such as 'missing' cupholders, vanity mirror lights, grab handles and storage bins... some day. You will never get the cushy, buttoned down, folded leather, quilted, overstuffed interiors that are associated with 'luxury'. If that is what you are waiting for, you'd might as well put in your down payment for a Mercedes-Benz, Cadillac, or Jaguar product today. If you want that type of interior experience in a Model S, you'll have to invest in a trip to a professional vehicle customizer such as West Coast Customs. I'm sure they would appreciate your business.

richkae said:

The Model 3 will be better than the Model S we currently own in terms of price/performance.
EVs are at the stage where there is rapid improvement.....

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Yep, that's exactly what I am expecting (and dreading a little)