This is exactly what Mercedes and BMW does with the C-Class and 3-series. Both the C63 and the M3/M4 can easily be configured to over 100k. The base C-Class and 3-series start in the low 30s.
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Tesla BEV Competition Developments
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This is exactly what Mercedes and BMW does with the C-Class and 3-series. Both the C63 and the M3/M4 can easily be configured to over 100k. The base C-Class and 3-series start in the low 30s.
Let's assume some round numbers -- Model 3 orders are taken starting Jan. 2018 with initial deliveries in 3 months or less, Tesla sales volume of S/X in 2017 is 120,000, and capacity in 2018 for S/X/3 is 180,000. Tesla would benefit more from reserving space for 10,000 base configuration Model 3 deliveries 1Q-4Q to ensure the entry price promise is met than only selling highly optioned configurations.
That's not a good idea at all. Part of the reason one sells the highest optioned cars first is to prevent scalping (like what happened in China before the Model S was released there - grey market imports). If Tesla sells the base Model 3 for 35k before fulfilling orders for higher optioned cars they are selling themselves short. By selling the most expensive versions first, you prevent people from buying in advance and reselling at a profit.
Tesla can't charge above market prices (like a dealership can) so the next best thing is to sell the most expensive version first. This is how they got stuck with a bunch of cancelled P85+ in China when the P85D first came out. In 2018 there will be tons of used Model S's for less than 35k (there were a couple sold today from the CPO site for 35k).
Perfect. The big complicated thing to appreciate (that rarely is appreciated) is that the innovation to create an optimized EV product now is really hard - but that meeting that challenge head-on and overcoming it is insanely valuable both in terms of first mover advantage that starts compounding years earlier than follow on competitors and in terms of engineering heritage that will continually add a layer of excellence to new products all the way up the technology maturity curve. Waiting for batteries to enable suboptimal EVs to do what a Model S could do in 2012 is a losing strategy.
Tesla's first mover advantage is extreme in all sorts of ways. I think the Gigafactory is a one-shot deal based on Tesla being the first and only credible volume customer for automotive cells. Never again IMO will a cell supplier be negotiated into a junior role in a battery production facility. LG and Samsung etc, even Panasonic will demand to be the profit center in regards to any follow on efforts made by other manufacturers because battery makers, not engine makers are the gatekeepers to the future of automotive. Tesla is proof of it. As Musk says, quite rightly IMO, if someone comes up with a new battery tech who are they going to call first to try to get it commercialized? Faraday Future? GM? BMW? Toyota? I don't think so. The junior lithium deals are another example. Tesla can tie up the future before anyone else can can make a convincing case that they are even serious about EVs. Would anyone sign a 20 year contract to develop a lithium mine on the strength of the chance to supply the GM Bolt? No! Of course not. GM would have to buy the entire mine prospect and start a Gigafactory and if they did either of those things their shareholders would panic and rightly so because that would signal GM management's loss of confidence in the future of its core business - not helped by GM's prior fiasco with Envia and Nissan's failure to produce a functioning battery plant.
Tesla's future is ridiculously rock solid, if there was a wider appreciation of this then the competition to own a piece of TSLA would be greater than it is i.e. the SP would be higher. All of the cause for concern in the auto industry is rightly directed towards the hapless incumbents. I mention this because this is what the bears spend most of their time obfuscating. However, to paraphrase what Stealthology pointed out earlier, what matters to the short term is the the lag between now and when it becomes obvious that Q1, Q2, Q3 2016 will most likely be FCF positive and probably non-GAAP profitable as Tesla transitions out of it period of heavy development spending for Model X and into a period dominated by sales of its three product lines S, X and TE (while Model 3 and Gigafactory spend will be relatively muted prior to the big push to build out M3 production capacity - with M3 reservations in-hand).
What I would suggest that this means is that we know the long term prospects and the medium term. Short term timing relates to seeking an entry point prior to the medium term becoming generally obvious. (Personally I chose Nov 13 2015 @ $207 which I called on the basis of exactly the same thesis as I am suggesting here). If there will come a better chance than that my opinion is no, So far there has not been - but of course there is some time-value in taking it to the wire for those braver than I.
I think a lot of people here are forgetting that there are many people who've been wanting a Tesla, but can't afford one. Not only can't they afford a $70,000, they can't afford a $50,000 car. They can however afford a $35,000 car. So there is a market for the base spec car.
Heck, if you think about it, people are buying CPO Model Ss now in the price range of $40K to $50K. Is the Model 3 going to be so "good" that they are willing to shell out for a up spec. Model 3 when they could get a decent CPO S?
Heck, if you think about it, people are buying CPO Model Ss now in the price range of $40K to $50K. Is the Model 3 going to be so "good" that they are willing to shell out for a up spec. Model 3 when they could get a decent CPO S?
It is not about the $$$, it is about the range.
Price only comes into consideration when range is big enough.
Price only comes into consideration when range is big enough.
I don't see any indication that people here are forgetting that
. The question is what Tesla will do and when the model 3 at less than 40k configuration will be delivered. There is no question from most of us that the demand for a 35k car is much higher than for a 50k car but many here think that Tesla will be supply constrained already at 50k for years.
adiggs
Well-Known Member
Within the very large car market, the answer is yes, there will be people that want the bigger car and will get a used Model S. There will also be people that want a physically smaller car and they want all the doodads (they don't want a Model S at any price, and will effectively spend anything on a 3 sized car). The point is there are a lot of people with a lot of different needs in the market.
And as we get more options in the market (more pricing levels, more sizes, more body styles, etc..), then the currently distorted market can start normalizing. What I mean by currently distorted is that many of us define a full function car that happens be BEV as 200+ miles of usable range with a reliable high speed charging network. But car buying uses many more criteria than size of fuel tank and prevalence of fueling stations outside of BEVs. Today, using the above definition of a full function car, your option is effectively "large luxury sedan". Over the next few months, the options will be expanded to include "large luxury crossover / SUV" (with towing!).
With a car market that has 2 choices, people are figuring out how to make what they want, work with what's available. There aren't 10+ flavors of large luxury sedan to choose from - there's 1. There aren't any flavors of small-medium luxury sedan - but if you aren't constrained by garage size or something else (ignoring price), then large luxury sedan can do most everything a small to medium luxury sedan can do (anything except fit into small spaces really). And it can do most everything a small-large economy sedan can do (albeit at a much higher price).
And heck - some people that really want a truck can figure out how to get stuff done using the large luxury sedan; that's not usually a cross shopped choice, but when you start with long range BEV and reliable charging network, today that means the consumer has to adjust to what's available. And it's an easier choice using Model X (put the truck bed stuff into a trailer, and voila - crossover and truck in 1!)
You rightly dwell on the expense - there are lots of people that would cheerfully warp what they need and figure out how to get it done using a large luxury sedan. But they can't afford it. There is a gargantuan market of people ready to spend $35-45k for a car, not because the size is such a big deal to them, but because the price is a big deal to them.
There is also a market of people that want a smaller car than Model S, and are willing to pay much more than $50k to get all the bells and whistles. It's smaller than the $35-40k market for sure, but it's also big enough to keep Tesla busy building lots of cars for awhile.
My expectation is that Tesla will hit that $35k mark with Model 3. But if you want to buy a $35k Model 3, then you should mentally plan on waiting 1-2 years after launch of the vehicle for actual availability at that price.
You can probably shorten your time to access at that price by getting your reservation in as soon as they start accepting them.
And - as has been pointed out elsewhere in the thread, the prices on used Model S' are coming down. My claim for more than a year is that the first full function BEV for $35-40k won't be Model 3, and I now claim that it won't be a Bolt or anything else. The first full function BEV (200+ mile range with reliable fast charging network) priced at $35k-40k is or will be used Model S's. Availability of the first full function BEV at the $35k price point has apparently begun happening (I'm surprised at that - I would have expected another year or 2).
Get it now!
JRP3
Hyperactive Member
Of course it will be. Many people, (me included), don't want a large car like the Model S, and would rather have a smaller brand new car with zero miles on it than a used Model S a few years old with the 60K+ miles it would have to get it down to the $35K price range.
My SO doesn't want a Model S because she doesn't like big cars. Her last two cars, a 96 Subaru Outback, and 2013 Subaru Impreza are about the same size as a BMW Model 3, which is the size target for the Model 3. So the Model 3 will be right in her size range.
As for delays producing the $35K Model 3. I'm not sure Tesla will produce those last. One of the big features of the Model 3 is that it's the affordable Tesla for the middle of the market. For PR purposes I think they will have to produce the $35K Model 3 within the first year of production, though the point about people buying low end Model 3s and flipping them for a profit when supply is very tight is an good point. Tesla might be able to use that as a PR boost though.
As for delays producing the $35K Model 3. I'm not sure Tesla will produce those last. One of the big features of the Model 3 is that it's the affordable Tesla for the middle of the market. For PR purposes I think they will have to produce the $35K Model 3 within the first year of production, though the point about people buying low end Model 3s and flipping them for a profit when supply is very tight is an good point. Tesla might be able to use that as a PR boost though.
stopcrazypp
Well-Known Member
Count me in too. Even if the CPO Model S gets down to the same price range as a Model 3, I would still pick the Model 3 because the Model S is too big for my needs (esp. parking in the city). I don't mind buying used cars, but I would want a new Tesla just for the longer warranty.
To the previous discussion on who's doing what in the world of in-car computing, here's some coverage of what Microsoft is up to, with a good discussion on the play involved by major participants:
Microsoft refines auto strategy with productivity, cloud twist | ZDNet
Microsoft refines auto strategy with productivity, cloud twist | ZDNet
JRP3
Hyperactive Member
Doe Tesla really need to worry about some people trying to spin it if they don't? Tesla received negative press about the cost of the S and the X, didn't hurt them at all. If some people try to do the same about the cost of the Model 3 for a year or so, Tesla will still sell everyone they can make, and when they finally do start offering the cheaper version they'll sell all of those as well. To keep margins up and cash flow high I think Tesla won't be able to sell the lower cost version right out of the gate.
Agreed. Selling the lower cost version first just invites scalpers to take advantage. They should sell the highest priced cars first and then as demand wanes sell the lower priced version.
RobStark
Well-Known Member
It didn't hurt Tesla's bottom line but it hurt Tesla's brand equity.
Tesla continues to fight the perception that Tesla is a rich man's toy.
When the oil industry was fighting Jerry Brown's gasoline tax hike in California last year they ran TV commercials saying not every Californian can afford a Tesla. Eventually Latino Democrats from working class districts caved.
IF you want Tesla to be ubiquitous and not exclusive then this is a problem.
You don't wont average Americans and Europeans to remove Tesla from their shopping list because they perceive they can't afford one.
If all they read in the press is about $120k Model S and $60k Model 3 it becomes a problem.
stopcrazypp
Well-Known Member
That's only a short term effect though (1 year at most). If Tesla needs to release the more expensive version first to make cash flow work, I don't think they should hesitate. It is a long road ahead to 500k vehicles by 2020.
GM knowingly rejected ignition fix that would have cost 90 cents per unit, leading to at least 125 deaths
Wow. Beware, potential Bolt owners. Beware.
Elon recalled the entire fleet for one loose seat belt bolt that had a low statistical likelihood of being a problem elsewhere, and the Tesla Model S is the safest car ever tested. It's easy to see why Tesla has developed such goodwill, and GM has all but destroyed theirs.
Wow. Beware, potential Bolt owners. Beware.
Elon recalled the entire fleet for one loose seat belt bolt that had a low statistical likelihood of being a problem elsewhere, and the Tesla Model S is the safest car ever tested. It's easy to see why Tesla has developed such goodwill, and GM has all but destroyed theirs.
JRP3
Hyperactive Member
Does that hurt BMW, Mercedes, Audi, etc? Tesla isn't trying to sell a Yaris competitor. I don't think the connection between the oil industry TV ad and the tax hike is as clear as you imply, and I don't think Tesla should alter their plans because of such.
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