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Cost Impact of New Battery Plant

Cost Impact of New Battery Plant

If the new battery plant is supposed to reduce battery costs by ~30% I wonder what will happen to the cost of the vehicles once the new plant is online and shipping product? Will the Model S and Model X prices be reduced???

jjs | 15 april 2015

No.

vandacca | 15 april 2015

I agree with you @jjs.

I don't want to hi-jack this thread (after 1 reply) however, I've been doing some estimates of what my Model-X is going to cost, based on a 85D Model-S with most of the options (minus executive seats & jumper seats) and the cost has gone down by over $1000 after the 70D was announced.

The base prices may go down over time for various reasons (as costs in general go down, not just the cost of batteries), but I'm sure Tesla will always offset those reduced costs by offering new and desirable options.

georgehawley.fl.us | 15 april 2015

Tesla needs gobs of money to continuing growing at an incredible rate.
This suggests using lowered battery costs to increase gross margins.
However, once Tesla builds and sells the first 20,000 or so Model X vehicles, they may have to adjust prices to help stimulate continued demand. They will be aiming to build up to 100,000 S and X cars next year. They may find production capacity catching up with demand at last. We may even see some advertising next yesr!

Svenssons | 15 april 2015

Do not think they will lower prices or pay for advertising. With 25k Model X reserved and maybe 5k of those delivered this year Tesla will have 20k for 2016. Most people does not want to reserve a car but order one and maybe just as many will order a Model X during 2015 and 2016 after it is presented and available to order. Tesla Motors have just started to sell cars in markets like China and Australia plus have not opened Service Centers in countries like Spain and many other European countries but will open during 2015/2016.

Tesla Motors will be able to sell 100k Model S/X 2016 without advertising thanks to the growth in all existing markets. This growth is possible because of lower production costs and higher profit.

Growth will also continue thanks to new models, Model 3 is coming soon after Model X. It will open the market for those who want a car for less than $60k.

jjs | 15 april 2015

OK. Now with a little more substance. No.

Supply and demand. As long as demand stays high Tesla will not reduce prices. As george says they will increase margins and mulch the green back into growth.

They are driven by mission. That mission requires lots of cash. They will take all they can get.

Finally their recharge tech/superchargers will allow Tesla to demand a premium for their cars even when the big boys get serious about competing. Those that are not serious now, will get so in a hurry when the model 3 starts to sell in large quantities.

However Tesla has two huge advantages. A) Supercharger network and B)They will control the majority of batteries needed for EVs, by long term supply agreements with Panasonic and by their own battery Gigafactory.

(Please for give the following, sad, but appropriate pun.) Tesla is in the drivers seat. The commanding position indicates to me that prices will not come down anytime soon.

Brian H | 17 april 2015

No other company is using the small-cell assembly battery plan, but are sticking with larger plates, etc. The GF will have no direct influence on them -- except by applying severe price pressure per kWh capacity.

jjs | 18 april 2015

Brian, understood and agree that is the current state. However, when they come to play for real, they will realize the tremendous advantage a many small cells vs fewer large ones and will, as all engineers do, gravitate toward the superior design. Thus, I stand by my comments.

georgehawley.fl.us | 19 april 2015

The 18650 Lithium ion cells aka "small batteries" have the advantage that they can also be used in flashlights and similar small appliances if the the home energy storage product doesn't do well. :-))

jjs | 19 april 2015

@george - You're really not helping me! :)

georgehawley.fl.us | 20 april 2015

Also golf carts and battery powered vacuum cleaners.
And handheld GPS devices. But I hope the car business continues to grow apace.

ir | 29 april 2015

Although, when Tesla builds the 200,000th vehicle, they will probably have to compensate for the $7,500 price hike.

I'd hate to be the buyer of #200,001 since I wouldn't know until tax season next year.

georgehawley.fl.us | 29 april 2015

@ir: while it is possible for the $7500 tax credit to be eliminated for #200,001, it is not likely. I believe the operative words are "phase out".

Red Sage ca us | 29 april 2015

The IRS website has specifics on the phaseout parameters. Keep in mind, it is not literally the 200,000th electric vehicle that Tesdla Motors builds... It is the 200,000th eligible vehicle offered for sale in the United States of America.

I expect that 70%-to-80% of Model X sales will be in the US. Dependent upon how popular it is, that 200,000 barrier may be broken in late 2016, or by mid-2017.