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Looking at the Monthly Payments, and a Suggestion to Tesla to Unbundle the Options

Looking at the Monthly Payments, and a Suggestion to Tesla to Unbundle the Options

Now that we have the pricing let's make some assumptions about what the monthly payments will be on a Model 3. If you take a base price of a $35K loan (not lease), at 1.5% for five years (60 mo). Ignoring down payment, deposit, delivery fee and DMV fees for now. Also ignoring Full Self-Driving (FSD) since it doesn't exist yet. And skipping tax credit for the moment since it is a wild card. Using an online auto loan calculator you get:

Base price: $35,000 = $606 /month

Options (non cumulative)
Non-black paint:                      add $1,000 for a total of $36,000 = $623 /month  (or $17)

19" wheels:                             add $1,500 for a total of $36,500 = $632 /month  (or $26)

Premium Upgrade Package: add $5,000 for a total of $40,000 = $692 /month  (or $86)

Enhanced Autopilot:               add $5,000 for a total of $40,000 = $692 /month  (or $86)

Long range battery:                add $9,000 for a total of $44,000 = $762 /month  (or $156)

Add everything:                       $59,500 = $975 /month  (or $369)

 
 

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I'm penning this section because in my view most everything in the reveal was somewhere in the range of reasonability... except for the options bundling (and the paint and wheel choices). Whether it be for maximizing production speed, maximizing profits, or part of the anti-sell, having to buy 'B', 'C', and 'D' just to get 'A', none of the aforementioned reasons may justify the strategy.

Everyone bundles of course. Tesla does it with existing models. Chevy did it with the Bolt. To simply get the cool camera rearview mirror you had to shell out thousands for the premium package.

But does that make it right. Is it an optimal policy for both parties? Would it slow down the production line that much to give buyers more flexibility in options choices? Would Tesla really make less profit per car if they went a la carte (see below)? Are we going to have to pay $5000 to get any form of cruise control? And while we're at it does a white paint job really cost an extra $1000 over black? Couldn't we have a cooler looking silver wheel without having to pay for the 19" wheel option?

When "bundling" occurs in law making they call it 'pork barrel' spending; Forcing 'B' into a bill when all that's wanted is 'A'. "You take B, or you don't get A!". I've always felt a bit victimized by that strategy.

For myself, I'm tempted to say thanks but no thanks on options as they are currently bundled. The message being "Look please, I'm just not going for this $5k options package. You'll make a higher profit on the sale of a Model 3 to me if you let me get the Pano roof and the premium sound system, but not the electric seats or the special side mirrors. Offer me silver 18" wheels for $500 premium (or whatever) and I may jump on that too. And maybe not make paint color a profit center.

I'm stating this publicly not to start an argument. Rather, if such opinions are not expressed Tesla will not know as well what people are thinking. I know other reservists don't mind the way the options are configured. Perfect for whoever thinks that. It was pointed out Saturday that it was assumed some time ago a fully optioned Model 3 (including AWD and maybe FSD), could come in at about double the base price of the car. Pretty close. But on the other hand, would it hurt any Model 3 purchaser to have more rather than fewer choices? And isn't possible that with the Model 3 breaking through to a new economic strata that perhaps more options will be sold to folks who maybe can't swing several hundred dollars over that $600 base monthly, but perhaps can come up with just a little more?

Not to mention insurance.

Just sayin'

hoffmannjames | July 30, 2017

I see your point. However, bundling makes production much easier by cutting down on the different variations that they have to accommodate. Musk even joked that the Model 3 production will be in his words "production hell", so bundling is required to try to mitigate that problem as much as possible. If they unbundled everything, "production hell" would be even more unbearable. They have 500,000 reservations waiting, now imagine if they had to customize each one because customer X only wants A,B,C, and F but customer Y only wants B, D,F and G. It would be a total nightmare scenario.

PhillyGal | July 30, 2017

I wish they weren't bundling either. I wanted the glass roof but was dead set on textile seats. And have no need for premium sound. My ~$42k car is looking more like $60k if I want it sooner. I just don't know...
I get why they are doing it, but that doesn't mean I have to like it.

gavinmcc | July 30, 2017

Robotics should make ala cart easier...but I see it as twofold: 1. Yes it will make ramp up a bit easier and quicker to offer basically one car...and 2. Yes it is also largely about profit. Want something badly? Is demand high and supply low? Charge more. Don't haggle. It kinda sucks. It's kinda how it goes. (It could be worse...they could call the first 50k cars signature models and charge another 5k...people would buy them. But they want to sell first to employees for both bets testing and as a bonus to the staff).

Over time there will be changes in how options are ordered. There will be ways to get the car cheaper. And when the Toyotas and such come with EVs there might even be price cuts and/or haggling (probably not haggling, but you never know). But right now Tesla is the long range EV market and it gives them a certain amount of power of the purse.

We can speak with our wallets...I really wanted the 3 NOW...but after sitting a day I am thinking I might slow my roll. If the earliest I can get my 3 is spring 2018 for a model that is more expensive than I planned, we'll slow down and realize, summer of 2018 isn't so bad to get what I want....and really over 50k is not where I wanted to go...the fact that I am considering it just to get this car sooner is a testament to salesmanship and how easily my desires are, well not manipulated, but inflamed?

So I'm slowing my roll and forgoing the long range model...and hoping maybe there are a few changes to the process... maybe a glass roof only option. Maybe a 18" silver wheel option for less than 19" ones. I didn't want 19" wheels, but don't like the other rims...

But right now Tesla doesn't need to lower their prices or their profits...they have 500,000 customers waiting to buy. Some will pay more to get sooner, some will choose, grumbling, to wait.

G

csmith476 | July 30, 2017

Like PhillyGal, I want the glass roof,but the other stuff isn't necessarily worth the price for me.

I am a teacher, so price matters a great deal, and a ~$40k price is a lot different than a ~45k price for me. I also am not an early reservation holder (delivery expected in Summer 2018, so the tax credit status may also affect what I end up getting.

Non-negotiable for me is EAP, so I know I am spending $40k.

s7davis | July 30, 2017

Someone posted the configurator with a fully loaded model 3 right now with all options selected. Price came to 59,500.

Loan price would be if I remember correctly $832 I think it was for 60mos maybe it was 72 mos. @2.25% I believe. This is with the initial $2500 to down to order plus a total of 5k down payment. So technically making a 10% down payment.

This price for fully loaded is totally out of my range. Look like Standard version for sure for me. I kinda wanted the power seats and EAP. But not sure I will be able to afford both since that will add $10k to the price.

eeb9 | July 30, 2017

I'm with Philly - I really wanted the textile seats, but to get other things I like means that I'm stuck with fake leather.

The one and only thing that I dislike more than leather in a car seat is fake leather in a car seat. And seat covers are just tacky, unless they're custom-made for the car.

I really do understand the reasons why they are bundling - it makes things simpler to build and easier to plan. But you know something? mINi has had *complete* alacarte option selection since day one. Pretty much every MINi you see out there is unique - mass customization. And this for a car that runs just over half the cost of the Model 3...

*Every* option can be selected or deselected individually. There are *some* dependencies but they are logical as one option builds on another.

Tesla could do the same, given their very high degree of automation.

But yeah, I also understand the drive for simplicity.

I just really dislike being forced to accept X in order to get Y.

There. Rant done.

Tesla2018 | July 30, 2017

Back in the 80's I saw a car on the showroom floor (VW Rabbit Diesel)that had what I wanted except leather seats. Dealer told me that they would switch them out with the interior of another car.
A car I bought a few years ago didnt have the CD player as adverised on the sticker but a cassette player instead. Dealer said someone wanted a car with a cd player so they switched them out.
Right now Tesla has to pump out as many cars as they can so they have to do it the easiest and most profitable way. I dont want to pay an extra 14k for longer distance and a luxury oackage when all I want is a full glass roof. But enough people will pay so of course that is why Tesla is offerring the fully optioned cars first. It could have been worse and they might have made the 5k snd 3k automatic driving options mandatory.
However the tax credit might make it more feasible than to wait since its 6500 more now for both packages as compared to 5000 for just one when the tax credit expires.
I would go for the 9000 battery upgrade if it meant free supercharging for life since I keep my cars for about 15 years and the supercharger station and repair is within walking distance if I need servicing or a fast recharge after coming back from a long trip.
Does anyone know if Tesla gives free loaner cars when you bring yours in for servicing. I currently have to put my bicycle in my car and pedal home 5 miles from the Ford dealership whenever I bring it in for servicing.

Shock | July 30, 2017

The simple truth is that until they come close to meeting demand, they don't need to bend over and make it more attractive. I don't really care about the options package except that I need a power seat and I need XM radio and no other car in this price point charges $5k for that. The other stuff is nice but not enough I'd bother paying for.

IMO some of the stuff in that premium package has long since been standard in vehicles at that price point. Even my 2013 minivan that cost under $35k has XM and power seats.

I also think $8k for the autopilot is too much. Tesla is in a hard spot on that because they charged that amount for previous cars, and full autopilot isn't out yet, so it's a tough spot selling for less without pissing off previous customers, but paying 20% of the car's cost on a feature that doesn't even yet exist yet is ridiculous.

PhillyGal | July 30, 2017

It's also not totally inconceivable that Tesla will change up the package/offerings before many of us ever configure. They move more quickly than any major company I can think of.

eeb9 | July 30, 2017

I suspect that they monitor this forum pretty closely, and that they're getting a loud and clear message that even their most die-hard fans aren't thrilled with the approach they've taken so far.

Philly is right that they can confidently sell every car they make for the next year without changing a thing - but then they'll start to face new competition and have to sell into the general public.

Tesla can sell around a year's production, I think, before they face their full true reality check. Hopefully they'll start adapting well before then.

I love most of what they've done, and I look forward to owning my own. But seriously, FFS, Tesla - get your act together on this whole marketing/PR/Info management thing, and please come up with a way to have at least a few options available outside of the standard packages. Please?

ReD eXiLe ms us | July 30, 2017

Unbundle options? Sure. Once Tesla has a Capacity in the 3,000,000 to 4,000,000 units per annum range, and actually need to advertise.

warren_tran | July 30, 2017

I can't bring myself to pay $50k for a new car. I will wait for standard battery version.

The only feature I'm truly want is dual motor but it is so far out I don't think I can wait another year. Crossing my fingers and feets that Tesla can have it avaible by late spring.

I rather have performance model than paying for AEP.

adias.angel | July 30, 2017

I'm right there with you. I honestly don't mind paying for the things I want but to have "premium" interior thrown in there is awful. I hate the wood grain insert and anything except clothes seats are absolutely miserable in Michigan. I would love to see at a minimum interior options separated from features.

bmalloy0 | July 30, 2017

As someone who was hoping for a possibly-attainable $1k Cold Weather package, having it bundled in a bunch of other stuff I couldn't care less about for an extra (definitely unattainable) $4k is saddening, but I understand why they did it. They NEED this ramp to go off without any hitches, and anything they can do to ease that (like bundling) is worth it in my book.

Coastal Cruiser. | July 31, 2017

Looking at the other posts since making this one, it sure seems we’re going through a bit of an adjustment period. Member Texas Bob (who I assume is no relation to Sideshow Bob) made a good post on comparative pricing. Good arguments there testifying to the notion that the Model 3 is a great deal all round. I even ran some numbers on the battery upgrade (as best I could) and whereas a mile of additional range on a Model S costs about $300, the same mile of range on a Model 3 comes in at $100 /mile.

This post of course is not about pricing, it’s about bundling. Non-the-less I feel I have more context after reading others opinions.

For what it’s worth, I had two further realizations since the OP. First, I realized that one reason I’m feeling some antipathy toward the bundling policy is because I am “in love” with Tesla (not Elon, Tesla. Although I do have a bit of a man-crush on Elon. But don’t tell him.). I don’t want Tesla to behave in a way I’ve seen others behave (other car makers, and those weasels up on The Hill). Tesla IS different, they are very customer oriented (in addition to the core environment/sustainable oriented), and I want to be proud of the company. I want to be proud of the car I drive. I’m not saying bundling makes me feel unproud, but having to pay for what I don’t want in order to get what I do want kind of takes the edge off.

The second reason links to the first. It occurred to me, as a budding Tesla evangelist, to maybe take delivery on a base level car. The straight up $35K configuration. Or close to it. Reason being, when non-owners look at my car, get blown away, and ask how much it costs… I want to be able to say: “Only 35,000 dollars”. I want them to be able to trip out over all that you get for $35k.

I don’t want to have to say “Well, a Model 3 starts at $35K, but, uh, to get a white one, with a full glass roof that doesn’t open, and cruise control, you have to pay $11K more. No. I want as many other people as possible to “fall in love” too. So I’d rather say “The base price is 35K with vanilla cruise control and I paid a grand extra (or whatever) for the optional premium sound system".

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And yet that point of view is mitigated considering all of what has happened over the weekend, the minimalist reveal show, the pricing options, the limited configurations early on… it’s all 100% explainable by the phrase that keeps getting repeated in relation to the Model 3; ANTI-SELL.

Gosh, they really mean it! Like really really. Elon says it. Bundling policy says that. Initial configuration packages say that. The stream of suggestions pointed at M3 reservists to drive and configure a Model S says that. A bunch of stuff says that.

Hey, if it looks like an anti-sell, if it walks like an anti-sell, if it talks like an anti-sell ... then ... .

And where does the anti-sell come from? Well sure, Model S sales are threatened, but the overriding reason for anti-sell may be; PRESSURE. When you look at Elon’s demeanor at the reveal show, his body language, his words… he is really really feeling the pressure to get this car out in huge quantity. And this is a man who’s been feeling pressure since the Roadster was being developed. I would not want to be him.

And the employees likely feel the pressure themselves. So along with Elon’s rather unwavering vision of the future, the pressure to keep employee morale high, the self-inflicted pressure….he and Tesla are doing everything they can to relieve the pressure… and still get the car out.

And don’t think for one minute that one of the biggest sources of pressure isn’t the looming phase out of the tax credit. I suspect is it a massive factor, and they are likely gearing the ramp up around IT, because Elon really wants to make his customers happy. There is true empathy coming from the man when he speaks about such things (although he wisely avoids speaking directly of the tax credit at this point). I suspect that in a year or so there may be an entirely different mindset with regards to the Model 3. Oh well, that’s the life of a pioneer.

/cc

PS – that fizzle near the end of the reveal show with the event of employees taking delivery of their cars being so downplayed … I’ll bet you a dollar to a hole in a donut that came from the employees feeling pressure about being identified and waking up Sunday morning to the Tesla Paparazzi camping out on their front lawn.

bj | July 31, 2017

@PhillyGal - especially when the buyer is in Australia and will be invited to configure in early 2019. The menu of options will look entirlely different then. We dont have to agonize over whether to wait or not... Tesla has made that decision for us.