People keep forgetting about one thing: $7,500 Tax Credit will run out within the first few months of Gen III sales. Therefore, you have to exclude this number from your calculations. Elon was hinting that the car would cost mid 30s, so I would assume he is factoring in this tax credit. So you are now looking at a car with a base price of ~$42,000, which sounds more realistic. Remember Model S was supposed to start at under $50k and see how that turned out...
This is all spending a lot of time reading tea leaves and speculating expansively, but the most recent talk is "half the price of the Model S." The base MS is $69.9K pre-incentives. So that's $35K pre-incentives. The base MS is $62.4K post-incentives. So that's $31.2K post-incentives, or $38.7K pre-incentives. I think that's a pretty good estimate of where the G3 will be, though it wouldn't really bother me to have it be a bit higher. But if you're at $42K and no incentives, that's not really "half of the MS."
Basically, you still have to convince people that EV's are better than ICE and the only way to do that is to make a better car. The first thing people look at is numbers such as hp, torque, 0-60, etc. Elon said in an interview that the 40 KWh Model S was like a "hobbled horse" (i.e. too slow) and it did 0-60 in like 6.5s. He also said that Gen III will be a "compelling car". Therefore, Gen III has to be quick to compete with the 3-series. Base 3 series starts with 0-60 in 5.5s and that should be the baseline. The performance version has to be around 3.9s, and the mid version should be under 5.0s. Remember that these cars are smaller than model s and should be faster. Putting in a bigger motor and inverter is not that expensive, but the performance difference will be huge and that will create more demand.
BMW sells 400,000 3 series per year (100k in US) and Tesla initially wants to sell about 150k - 200k per year globally. This is not to compete with Camry that sells 400k per year in the US alone. That is still many years after the Gen III.
There is so much possibility with EV's, and I don't understand why some people here want to limit those possibilities. If Tesla can make a performance version that does 0-60 in 2.9s then it should, as long as it is safe and doesn't drain too much battery. I think that they will do this with the next roadster to compete with GTR.
Tesla needs to be synonymous with "better" and not "just as good."
The incremental cost to Tesla of the higher end cars is nowhere close to the incremental price. This is evidenced in Tesla's quotes and the fact that its margins are higher on optioned and higher-end cars.
For example, the Roadster Sport has a motor with a higher winding density and lower resistance.
"The chief differences between the base roadster and the Sport include the Sport’s new drivetrain software and a new stator in the car’s 375-volt AC induction motor with higher winding density and lower resistance, bumping the motor’s horsepower rating from 248 to 288 and the torque from 273 lb-ft to 295. In the suspension, remote-reservoir shocks offer 10 stiffness settings, and there are three positions for the anti-roll bars. Black forged wheels wear stickier rubber—Yokohama Advan A048s instead of Yokohama Advan Neova AD07s. There are also Sport badges on the rump and door sills. For all that, the Sport version adds $19,500 to the base price."
2010 Tesla Roadster Sport Car and Driver
Are there people who have been willing to pay the extra $19.5K, even if it didn't cost nearly that much? The data tell us yes.
As mama has told us, "Don't give it away for free." And that is what Tesla has done with the Model S too. Tesla was profitable in 1Q2013 in large part because it sold cars that were to early adopters - lots of Perfs and highly optioned cars. They have already said that margins will shrink due to the mix of the cars being more 60s and non-perf 85s. So the business model is a common one: offer the stripped, low end car for an eye-catching price, and then option it to a level at which you can make money. But in order to get people to buy the mid- or high-end car, there has to be a motivation. And having a 5.5 second, 250-mile base version doesn't get it done.
People can wish for such a car, but it is not going to be easy to make a G3 car that sells for a price in the high 30s pre-incentives, and Tesla will sell these cars like crazy without giving away the store in the low-end model. The car will also be compelling for reasons other than acceleration. TCO will be low. Supercharger access. Green creds. Styling.
As a result, while people may want their dream car, with 5.5 0-60 and 250-mile range, for $37.4K pre-incentives, that is IMO just not realistic. That car will be available, but it will cost more. And there will be a Perf that will cost even more than that, but will compete with the M-series.
Tesla shareholders should expect management to sell cars in a price-discriminating manner such as this. To do otherwise would not maximize shareholder value.
