Model 3 prices to be increased?

Model 3 prices to be increased?

Reddit posted a comparison against the Model S vs Model 3 and that makes total sense to me.

Basically the value offered by the base Model S is modest but almost double the price when compared to the Model 3.

Unless Tesla greatly improves the craftsmanship in the interior and offer additional features in the Model S, it seems sales will be cannibalized.

I imagine a quick fix for that would be to charge more for the Model 3. Let's say if it is $39,950 for the base Model, it could still sell strong. The operational costs could make it very competitive against the Benz C300 and BMW 330i.

KP in NPT | May 31, 2017

I think that would be a disastrous PR move for tesla - so they'd be unlikely to do it.

KP in NPT | May 31, 2017

I think that would be a disastrous PR move for tesla - so they'd be unlikely to do it.

Frank99 | June 1, 2017

I'd like to see the same analysis against a Honda Accord EX-L V6 and, say, a BMW 535i. A similar 2:1 price difference, similar sizes, similar performance. Where's the difference that justifies a $30,000 cost differential?

The 3 is significantly smaller than the S, with much less interior space. The 3 will not have the cachet of an S. From a practical point of view, the S is built in smaller quantities so will cost more to build. I don't see a pricing issue between the two, but I do see people making a choice between them - much like people make a choice between a 3, 5, and 7 series BMW when they're at the lot.

bb0tin | June 1, 2017

Tesla's mission is to advance the transition to sustainable transport. They can do this best by selling as many Model 3 as they can, even if the Model S sales are cannibalised. This means keeping the Model 3 price at a level that delivers the largest market for it. The only caveat is that they need the S to sell in the requisite numbers until Model 3 is at the production rate required to replace lost S sales. I expect that is why they have been lately focusing on keeping sales of the Model S continuing. In another year I believe they will not care so much.

Efontana | June 1, 2017

Automobile factories are capital intensive. There is crossover point in volume where the capital is paid for. Tesla needs volume.

The flying hippie | June 1, 2017

Maybe they will do away with the S75 and S90 when the 3 gets spooled up since its the lower end of the market that would presumably get somewhat cannibalized. Leaves 100D and P120D or whatever they can fit in a 2170 format for the high end market (I know he said they won't go bigger than 100).

JeffreyR | June 1, 2017

Raise M3 price? Not a chance. See my M3vsMS post for some interesting discussion on this topic.

The target price was set a long time ago. It's part of the reason there's only one display.

JAD | June 1, 2017

Very few people actually cross shop a BMW 3 series, 5 series and 7 series. You know about what size you want and how much money you have to spend. The 7 series competes with S-Class MB, Audi A8 etc, not its smaller siblings. Same will be true of Tesla for the most part. Model 3 competes with Bolt, new Leaf, BMW 3 series, Audi A4 etc, not the Model S or X.

Another example price is meaningless between markets would be Porsche. A Cayenne cost between $60k and $200k+, similar for most other Porsches as well, and logically justifying the 3.5x price increase would not work, but they have been successfully doing it for years. Some people just need the back of the car to say "Turbo S".

PhillyGal | June 1, 2017

Agreed with the above - no way (in my opinion) Tesla will increase the base Model 3 price, at least not until the backlog of reservations is long cleared.

They may:
Decrease the starting price of Model S
Do away with the smallest Model S battery
Increase all Model S batteries but keep prices the same
Add more bells and whistles to Model S but keep prices the same
Do nothing at all because they are two different cars and both will sell regardless

ReD eXiLe ms us | June 1, 2017

"Unless Tesla greatly improves the craftsmanship in the interior and offer additional features in the Model S, it seems sales will be cannibalized."

If this is the essence of the article, then I don't need to read it. I disagree. I've said so for about three years now. There's no need to repeat the full rant again. This is total, complete, absolute [BORSHT] that presumes yet again that Tesla's success thus far is a a flash-in-the-pan phenomena.

For four years Tesla has been adamant that their Generation III vehicles would dwarf the sales of Generation II cars. This is by intent, by design, and not by accident. More than eight years worth of the Model S were sold in only 4-1/2 years. Even if sales dropped to half their current rate, they would still be in second place in class, ahead of BMW, Porsche, AUDI, Lexus, Jaguar, and all the rest among flagship vehicles that don't have a Mercedes-Benz logo. [DURN]. It is sales of 5-Series, A6, and E-Class that are going to be 'cannibalized' by the Model ☰.

carlk | June 1, 2017

Model S is competing with $80K + ICE cars and is winning big. No idea what is all this fuss about. If Model 3 is to cannibalize the Model S it will cannibalize ALL BMW and Mercedes flagship models first. Tesla has nothing to worry about.

ReD eXiLe ms us | June 1, 2017

carlk: A very good point. Anyone who feels the Model ☰ is at any trim level a better deal than the Model S, will certainly think it is a better deal than the 7-Series, A8, S-Class, LS, and Panamera... FIRST.

U.S. Sales of Midsize 'Luxury' Cars
2013 _____ 2014 _____ 2015 _____ 2016 _____ VEHICLE
56,863 ___ 52,704 ___ 44,162 ___ 32,408 ___ 5-Series
22,428 ___ 23,941 ___ 22,850 ___ 18,686 ___ A6
69,803 ___ 66,400 ___ 49,736 ___ 50,896 ___ E-Class

Hmmm... The Tesla Model S has outsold the AUDI A6 two years in a row already. I expect the Model ☰ will continue that trend, only by a wider margin that encompasses its contemporaries from BMW and Mercedes-Benz.

ReD eXiLe ms us | June 1, 2017

I'll just put this right here for those who believe a 'luxury interior' leads to 'more sales'...

2016 U.S. Sales
18,686 ___ AUDI A6
_6,558 ___ AUDI A7
_4,149 ___ AUDI A8 L

29,393 TOTAL for AUDI over three vehicles. Meanwhile, this is what Tesla managed the same year...

29,156 ___ Model S

socaldave | June 1, 2017

Mercedes (I'll never believe Audi alone is an indicator of luxury sales as a whole, they're too niche)

US Sales E Class


I'd say Tesla has a bit more work to do to catch Mercedes, but it certainly looks (without any real in depth analysis) like they're catching up!

ReD eXiLe ms us | June 1, 2017

socaldave: The E-Class leads its Midsize segment among 'luxury' vehicles, but its numbers have been trending downward. The Model ☰ will lead the Compact and Midsize segments before the end of 2018. In fact, it may be possible to do a similar comparison in 2019, showing the Model ☰ has outsold S-Class, E-Class, and C-Class... COMBINED during 2018. Just as Model S almost managed to outsell three established 'luxury' AUDI vehicles COMBINED during 2016.

socaldave | June 1, 2017

@red "In fact, it may be possible to do a similar comparison in 2019, showing the Model ☰ has outsold S-Class, E-Class, and C-Class... COMBINED during 2018"

fingers crossed, mate - let's hope so!

ReD eXiLe ms us | June 1, 2017

Yeah. My main point was that if 'luxury' is so important, than cars that are 'more luxurious' than Model S and cost less than it should be able to outsell it. During 2016 he A6 was outsold by a wide margin by a much more expensive Model S. The 5-Series only outsold the Model S by 3,252 units despite costing several thousand less. The E-Class sold almost as many as the C-Class (and just shy of 3-Series), so that isn't so bad at all. Because it could be (when giving the benefit of the doubt) the 'exclusivity' of cars that are more expensive than Model S contributes to their having lower sales. Because the Model S is a bargain compared to 7-Series, A8, and S-Class, among others.

Randkthorn | June 1, 2017

I know all analogies limp but they can be useful sometimes. For example a good road bike might cost $1,000. Amazing, specialized road bikes might set you back $10,000. They are not 10x more anything. This doesn't necessarily mean either is mispriced. Marginal improvements can be costly.

MarlonBrown | June 1, 2017

Hey folks, you made some good points about "premium" vehicle advantages. This is what I think it could be different for Tesla:
1) I have been reading that many Model S base buyers have stretched their budgets in order to buy it. That is probably true given the relative low operational in the Model S costs when compared to BMW, Benz etc. Those folks would be in my opinion fully satisfied with the Model 3. Therefore that segment of buyers likely would jump ship.

2) One very important aspect that JAD and other folks are missing: many folks with money are willing to pay more for the 'luxury' large sedans like BMW 5 and Benz E for two distinct reasons: a) luxury interior and b) engine power. In the case of Tesla, I have been saying that since the beginning; please bring the craftsmanship interior in the Model S up to to the Benz standards. That doesn't seem hard to do. I can't understand why it is still behind. In the case of the Model 3, the acceleration experience at 5.6 sec compared to the Model S under 6 sec make the engine capability no longer a differential.

I agree it is going to be either eliminating the base Model S or increase the price of the Model 3 moving forward. I am not sure which would be more profitable.

Haggy | June 1, 2017

I could see Tesla raising the base price, but not until they release the first significant refresh. For now they haven't even released the car. Tesla could make up for it with options, but they have to be in line with the price of the car. Somebody who is expecting to get the car for $26,000 after tax incentives isn't going to say "what's another $5000 while I'm at it" the way somebody might with a Model S that's already in the six digits.

mntlvr23 | June 1, 2017

At some point they will certainly raise the base price (1 year, 5 years, who knows) - but the interesting thing is how they handle it. They have a 400,000 to 600,000 backlog right now - and then once the next reveal comes, and people start to see them on the streets - it would not be unreasonable to think that they could double that in short order - and maybe have a half million backlog indefinitely.

When they choose to raise the price, if they say "The $35K base price will remain in effect only until DATE "X"" when it will be raised to $38.5K - then they might get another half mil signing up to beat the price increase.

A good problem to have.

carlk | June 1, 2017

@socaldave Model S has ASP of between $90K and $100K. E Class is more like $60K~$70K. They don't belong to the same market segment. The way it looks it's may be higher margin E Class and 5 series, more than their lower models, that will be hurt by Model 3 when higher option models become available.

@MarlonBrown Take a look at the Lexus LS sales figure you'll know how much people value luxury interior in a quality but boring car which is not very much. People spending that kind of money are looking for some excitement more than anything else. Tesla is offering by far the most exiting car one could buy now. JAD and I were all long time Porsche owners and we could buy any of those Mercs or BMW we want but we choose to buy the Tesla. Just to give you some perspectives.

ReD eXiLe ms us | June 1, 2017

Haggy is correct.

MarlonBrown: Take a look at the feature set for a Genesis G80 or G90. For a lot of people those cars are extremely well decked out. The Genesis G80 starts at $41,400. The Genesis G90 starts at $68,100. And you know what? Almost no one buys them. Each is sorely outsold by the competition from AUDI, BMW, and Mercedes-Benz.

The G80 moved 6,166 units in the U.S. during 2016 and has thus far exceeded that total in 2017 with 6,390 buyers through April (9,754 for BMW 5-Series). Hmmm... Wouldn't it be embarrassing to the German marques if it were to outsell the AUDI A6 this year? Anyway, the Genesis G90 is a bit less expensive than the entry level Tesla Model S. They sold a whole 782 of them during 2016, though things are looking up somewhat, with 1,916 of them sold in the first four months of 2017 (3,097 for BMW 7-Series).

Each of those cars has what many would consider a 'nicer' interior than what Tesla offers in the Model S. I wouldn't doubt that plenty of people would claim to 'love it' if those interiors were dropped intact into a Model S from now on. But I caution those of you who want such an 'upgrade' -- be careful what you wish for... Because in most sales parameters, Acura was leading all comers among 'entry level luxury' cars, until they bowed to the notion they should change their cars to be 'more like' everyone else. Once they did, it was a disaster, because buyers saw they were no longer unique and bought other brands instead. I think that the cars from Genesis may suffer from a similar issue in that though they are appropriately 'nice' inside, consumers may see them as artificial, possibly [IMPOSTORS], or even as copy cats.

www.forbes DOT com/2003/04/01/cz_jf_0401flint.html

I agree with Tesla: People don't know what they don't know. And, people don't really know what they want until you tell them what it is.

[ YouTube -- jKhr-dQXtQs ]
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brando | June 2, 2017

Think if you replaced lead acid with Li Ion, what range? and how about this new class "commuter car"?


carlgo2 | June 2, 2017

Don't expect the base price to go up, but don't expect any bargains for the options. Probably desirable options requiring packages that cost too much. That is the way most manufacturers are operating today.