I can read the headlines already...
"Tesla's promise of a $35k car jumps to $43k at launch"
Anyone else fear this?
No, because they will still have the 35K version and it is better for investors if they sell the 43K first.
I understand they will eventually have the $35k version but I think news headlines won't be very forgiving if they don't offer it off the bat.
You will be able to order the $35k version right off the bat. You will just get a slightly delayed delivery date.
Fear is the mind killer.
Imagine for a moment, that the $35,000 version of the Model ☰ was always meant to have a 75 kWh battery pack. With that in mind, if there is a 60 kWh version of the car, that might actually cost less than $35,000. All the better to tell Tesla Naysayers to [SIERRA TANGO FOXTROT UNIFORM].
How would that be managed...? Well, let's see... If the $35,000 price tag yields a 12% margin for Tesla, then that means it costs $30,800 to build. If 25% of that amount is their internal cost for a 75 kWh battery pack, that is $7,700. Meaning it takes $23,100 to build the rest of the car.
But that would put their internal cost for the battery pack at perhaps $103 per kWh. What if their internal cost were a bit lower than that, maybe $90 per kWh instead? So, the 75 kWh battery pack would cost them $6,750 to make... And a 60 kWh battery pack would cost them 80% of that amount, $5,400.
If that were the case, then a Model ☰ 60 would take $28,500 to build. And Tesla could clear a 6% margin on it at only $30,320... and a 12% margin at $32,390. Or, there isn't a 60 kWh battery pack after all, and the higher capacity battery pack will be 90 kWh and debut about a year from now.
@FLHX13 very good point. I just hope that the media understands that. Most headlines are meant to create a buzz and I just hope that they don't get some bad press for it.
"and it is better for investors if they sell the 43K first."
How so? No amount of early profit margin on the Model 3 is going to be pushed on to investors as a dividend. The only way investors make money is for the stock price to go up, which requires GENERAL good feelings toward Tesla. In other words not giving the shorts or hostile press the slightest excuse to complain.
Thank you kindly.
No, the first cars will have a starting price of $35K. Elon has already said that the only options initially are going to be wheels and color. So the price is not going to jump from 35K to 43K just for going from 18 inch wheels to 19 inch and metallic paint.
Tesla is keenly aware that they have to have the Model 3 being available for $35K because they have been beating that drum for years.
I believe that he was saying that the only configuration options will be on wheels and paint colour. That is different than saying that the car will only have base options The first cars produced will have the same batteries, the same interior, the same roof, etc. This does not necessarily mean that they will all have the lowest level of any of these. Aside from the AWD and performance, these could all be fully optioned cars.
Given that the immediate target audience of these cars will be model S owners, they know that the first buyers will be looking for higher optioned cars.
Actually the immediate target audience are Tesla/Space X employees.
I've never taken Elon's tweets about the initial configurations, or initial options available, as applying to Employee cars. I imagine there's a different set of rules for them, but I've got no special knowledge as to what those would be.
@Frank99 - "I've never taken Elon's tweets about the initial configurations, or initial options available, as applying to Employee cars"
I've thought that myself. If they let employees order just about any configuration they want to then they'll get at least a few of just about every configuration for real world testing and employee feedback. Then they can dial back the options for a month or so while the employee cars are driven and any issues are discovered.
Quote: "Given that the immediate target audience of these cars will be model S owners, they know that the first buyers will be looking for higher optioned cars."
Research is a cool thing. Doing it would have showed you that reality is the opposite of what you said.https://www.fool.com/investing/general/2016/05/04/93-of-tesla-model-3-re...
They had stats that back when the number of reservations was at about 370,000, 97% of those were new to Tesla.
Ah, I did forget that we're talking about the initial ramp-up, where owners get priority, but still, at 7%ish, that's not going to last long.
Reading blogs and watching videos on youtube, it seems likely that when the configurator goes live next month, the smaller battery (which will price the car at the base $35k) will not be available without a further delay. I just don't think that will sit well with the press.
Similar to me telling my coworker in the morning that they can have my lunch only to find out at noon that I didn't mean TODAY, I meant November. I'm still offering my lunch, it'll just come later than expected. That kind of happening doesn't go over well with people.
Tesla just has to deliver cars in July without any massive recall to satisfy investors. The purpose of only offering base models early on is to meet that expectation as well as the $35k price tag.
I just wish they would open up the Design Studio to everyone at the same time - that would allow them to strategically plan production and deliveries. Ideally, it would also provide accurate pricing so people can see if this car is truly "affordable" to them. I believe that showing the true price of the car based on everyone's must have options will do more to anti-sell the 3 than anything else.
Well it's a little different in that it was never promised that you will take delivery of a $35k model 3 at some specific date. If Tesla had alluded to taking delivery of a $35k Model 3 by end of 2017 if you reserved by 4/1/16, then you would have a valid point. The difference with your analogy is that my heart was set on and I made plans on getting your lunch today and you pulled the rug out from beneath me. Not cool. Anybody who made concrete plans to take delivery of a $35k model 3 by some wishful date have only themselves to blame.
Now what would be a major faux pas would be an announcement that Tesla will not be able to sell the model 3 at it's base level for $35k. That would certainly give the press plenty to write about.
I've been excited seeing that the larger battery might be first since that's the only option I really want. Hopefully I'll be able to configure early. What worries me is I've seen theories of them making the cars in batches. For example, batch one is all large battery no options which could be 3 months, batch 2 AWD only etc etc. So what if I'm not in batch one and then they switch to AWD only?
@dyefrog in the original unveil, Elon clearly noted that it will start at $35k and deliveries will begin at the end of 2017. I would say that most people assumed that meant a $35k Tesla could be theirs by the end of 2017.
Kinda like my analogy, the whole point I'm trying to make is even though they didn't specifically say it, the announcement sure made it feel that way.
EM said he expected the average selling price of the Model 3 to be $42k. Well - why not start out with the average offering -- then you can go up OR down from there!
polaris: The pricing for the 'D' changed within weeks of its being made initially available in 2014. If Tesla were to open the Design Studio 'to everyone at the same time' but without the ability to confirm an order, people would be [PEEVED] when pricing they saw was not available to them a month, or two, or three, or six, after they had first seen it on their own screen. Also, some items may not be allowed for configuration anymore once the time comes to be invited to Configure/Confirm. Tesla is a fast moving company and may decide that some features/options go away, or be replaced by others entirely in the course of three-to-six months while people are 'playing' with the Design Studio. Better not to 'tease' people with potential configurations that may not be there at all once they are invited to do a final, official Configuration/Confirmation. They should be content to live vicariously through the various screenshots that others will undoubtedly place online when they get access to the Design Studio themselves.
noleaf4me: For the same reason that has been noted multiple times already... The press would make the narrative that Tesla 'missed' their goal of releasing a $35,000 car 'on time'. Just as they to this day call the Model S a '$100,000 car' and the Model X a '$140,000 car' and ridicule Tesla's Master Plan saying that such expensive cars are not 'even more affordable'. Never mind that they leave out details, and don't note the actual starting prices for those vehicles. What matters to them is the price paid by the very first people outside of Tesla who get them. It is another thing entirely if people are invited to Configure, and the base car is listed at $35,000 then they themselves choose to add options to reach a $42,000 total; than instead opening the Design Studio and seeing a $42,000 car and being asked to choose color and wheels. That is 'why not'.
>>> I would say that most people assumed that meant a $35k Tesla could be theirs by the end of 2017.
Back on March 31, 2016 (was that only a year ago? Feels like a lifetime), the expectations were:
1. Elon had said that they expected deliveries to start in "late 2017". Tesla was infamous at that point for missing delivery dates, so only the most optimistic expected that a handful of cars would get delivered by Dec 31, 2017.
2. Tesla had discussed ramping up to being able to build 500,000 cars (S/X/3) by 2020 - any rational interpretation of that would suggest perhaps 100,000 S/X and 100,000 Model 3's in 2019.
3. In the Feb 10, 2016 quarterly conference call, Elon said that "highly optioned" Model 3's would be built and delivered first.
This is an interesting thread to read through for the expectations back then:https://teslamotorsclub com/tmc/threads/elon-says-model-3-will-release-first-as-highly-optioned.62432/
No one expected base Model 3's to get shipped any time in 2017, and many didn't expect to see them until 2019. Those are the expectations that were set for the vast majority of reservations that occurred between March 31 and April 6. Sure, your hopes may have been raised in the interim by rumors and speculation, but don't revise the history of what was expecting when you put your $1000 down.
I am holding off until they offer a bigger battery and a glass roof.
Frank99: Hi! Nice to meet you. My name is 'No One'. I have pointed out to reasonable, rational, realistic people for quite some time that the Model ☰ is going to be on time, on budget, and AWESOME. There is nothing at all wrong with being optimistic. ;-)
But you're not a normal person, ReD. You're a Friendly Neighborhood Over-the-Top Optimistic Tesla Certified Apologist Fanboy. That's completely different.
Perhaps they'll all have the 75kWh battery pack and it will be software limited to 60kWH on the base model. That would simplify production.
ReD eXiLe ms us...I really like your thinking in your first post in this thread. That would be great to get the 75kwh battery for $35k and just choose to add options or not from there. I'm in the camp of comments that believe to not offer the $35k base car a launch will be a publicity mistake. Either way, I will still be a Tesla supporter, stock holder, and hopefully someday a Model 3 owner.
I think changing the pricing of options would be a PR nightmare for Tesla. Imagine you go and configure your car for AWD and pax x amount and then a month later once someone else's design studio opens up and that option is cheaper? That would not sit well with a customer base that has put down $1,000 for what could be 2 years. The same could be said if they went the other way and increased the price of options. It would be patently unfair. Everyone who makes a reservation prior to official release and pricing should be in the same umbrella for pricing.
@dimitri.anast - "I would say that most people assumed that meant a $35k Tesla could be theirs by the end of 2017."
As was mentioned, I'd say that most people, a year ago assumed they might be able to get a base version sometime after March or April of 2018. With the current plans and information we have I'd expect that there will people taking delivery of base versions several months before that, in either very late 2017 or early 2018.
I don't think Tesla would start with the larger battery. The whole point of the 3 is to promote an affordable EV that starts at $35K. To advertise that the 3 will start at $35K but then sell the first ones at $45K instead would be horrible PR. So, I think it is a given that the first Model 3's off the production line will have the smaller battery so as to start at $35K.
The only way I could see the Model 3 starting with the larger battery is if all 3's have the larger battery but are software limited to the smaller size like Tesla used to do with the S60. That way, they could produce all the 3's with the larger battery but allow owners to upgrade to a larger battery size if they want.
There are apparently some leaks saying they are focusing on the larger pack first. Also, they started the model S production with the larger pack.
My guess is you can get lowest price 3 at the very beginning will be about $42k, $5k for the larger battery, $1k for the glass roof and $1k for any color other than black. This would be by also selecting the 18" wheels and standard rims. This still hits Elon's average price and under $35k factoring in the rebate which everyone will get at first.
If they get under $40k off the bat somehow it will actually be a huge win and surprise to me. No $35 version until 2018 imo.
Hi, when i placed my reservation i factored in upgrades so i know i am going to spend up to 50g, if car goes over that i won't buy it, i don't think people really care as long as the price fits their budget, just my humble opinion...:)
borne.by.wind: Those who feel it is 'all about the money' tend to reject that notion, due to their insistence that Tesla must be profitable in short order. That's why I propose the new solution, of simply passing on the savings to Customers that are gleaned from the Gigafactory providing battery packs...
Since 60 kWh is 80% of 75 kWh... If Tesla's internal cost were $90 per kWh, the 60 kWh battery pack would cost them $5,400 to fabricate. If the entire vehicle cost four times that amount to build, that would be $21,600. So they could get a 12% margin on it with a selling price at only $24,545 MSRP.
That would make the $35,000 car with a 75 kWh battery pack would have a very tidy 34.4% margin.
But honestly, it seems their internal cost for battery packs is probably closer to $124 per kWh. And the build cost for a Model ☰ 60 is likely closer to $29,640. $22,230 for all components except the battery pack, which would be $7,410. Thus, $31,493 in all to build a Model ☰ 75, and that is 89.98% of $35,000 for a 10.02% margin on the car.
I expect that profitability will come as a 'side effect' of building great cars. Not the goal. And those that state the principle that, "If you can't be profitable at 50,000 vehicles per year, it is impossible to be profitable at 500,000 per year," are wrong... Because they ignore the word 'if' due to not acknowledging Tesla is already profitable on their vehicles.
polaris: Yes. There will always be those who claim some action or another is 'patently unfair' no matter how much notice or warning is given ahead of time or length grace period is extended. Some believe that will be the case if Signature RED is not joined by a similar Signature GREEN and Signature BLUE at the time of order placement for ☰. There will be people who raise unholy [HECK] if Tesla makes certain features standard for employees that are instead optional for the public at large. There are people who still biZZAtch and complain about having to pay for a parcel shelf on Model S that was made standard on all cars eight months after they bought one. There are people who complained like mad that they bought a rear wheel drive car that they took delivery of a month or two before Autopilot arrived. Things WILL change because Tesla WILL NOT STOP innovating. The smoothest way to usher in that change is to NOT open the Design Studio to 'Everyone at Once'.
Elon Musk @elonmusk
Replying to @dtweiseth
"Tesla will never stop innovating. People are buying the wrong car if they expect this. There will be major revs every 12 to 18 months."www.twitter DOT com/elonmusk/status/822984601630953477?lang=en
stockbandit91: Elon Musk has said quite firmly and very clearly multiple times for over four years now, every time he was asked, that the $35,000 amount is without factoring in any incentives, rebates, or credits. It has been Naysayers, Pundits, $#0r+s, and Talking Heads that have continually rounded that upward (often to as much as $50,000) to say what they feel he 'really means' by counting them anyway. Elon has also been very specific that no one should expect the Federal EV Tax Credit or any incentives/benefits at all -- due to the political climate being one that could change at any moment to be dis-favorable to them. I have illustrated above and elsewhere that Tesla can come in at the $35,000 base price even with a 75 kWh battery pack if they don't mind getting a 10% margin instead of a 12% margin on a 60 kWh battery pack. Those who believe Tesla will be 'breaking even' at $35,000 are wrong, but even if they are correct, that means they will have spent around $27,600 to build every part of the car other than a 60 kWh battery pack. That is around $5,000 per vehicle more than BMW spends to build a 3-Series 'roller', sans drivetrain.
papomonche: Yes, people will buy their cars for themselves, not anyone else. But for the sake of Tesla, they must be able to offer a $35,000 car from the very outset that is as Elon Musk said, better than any other for the money. $40,000 is not $35,000 and neither is $42,000 or $45,000 or $50,000. Any of those higher amounts would become the default amount reported -- or higher -- by every major news organization on the planet and would solidify the 'history' of Tesla as being led by 'a bunch of liars' who 'don't know what they are doing' and have 'missed a target yet again' in the eyes of their detractors who will feel vindicated for their eternal skepticism. That cannot be allowed to happen.
ReD eXiLe ms us- You rule! Everything you said sounds right to me and I'm sure to the 400k plus other reservation holders too.
I would agree if it's innovation based but the plans and options for the Model 3 are in place. Changing the value of the AWD option randomly doesn't sound like innovation to me.
I don't think they will start with the larger battery.
It's either there's only one size of battery or the larger size will be a delay. But don't forget, there is NO WAY whatever is released the first week/month/year is the same as a year from then, 2, 3, etc.
The Model S has changed battery sizes/offerings many times.
polaris: When it happened with the Model S 85D it wasn't 'random' at all. Tesla just realized they made a mistake. They increased the cost of the option to $5,000 above the single motor Rear Wheel Drive car, instead of only $4,000. And there were other changes as well, because the Model S P85D originally was available with only a bare minimum of options: Autopilot, exterior color, and rear-facing seats. Otherwise, the cars were fully loaded. Customers protested, some wanting coils instead of smart air suspension, some wanting 19" wheels instead of 21", some wanting tan or gray interior seats instead of black... So changes were made to the Design Studio to reflect those options. Then people who had placed their orders immediately in October protested that they would have a change fee applied if they wanted to have the same options as those who ordered in November. Dude. It just never ends...