Analysis

Sandy Munro Says Tesla Shouldn’t Build A $25,000 Electric Car

He also mentioned the company is 10 years ahead of the competition in manufacturing.

There are private events that are so relevant they should have been public. This is the case of a recent Bernstein Research webinar that had Sandy Munro for a chat. Apart from saying Tesla is ten years ahead of the competition in manufacturing, the engineer also said Tesla should never do a $25,000 EV. Such a vehicle would pose more risks than benefits to Elon Musk’s automaker.

According to The Korea Times – which obtained a “fully edited transcript” of the webinar – Munro believes the affordable EV would make Tesla shareholders regret the decision both in market positioning and profits.

Will The First Chinese-Styled Tesla Be a Hatchback?

The engineer said most Tesla buyers want “all of the bells and whistles” the company has to offer. So much so that Tesla did not sell that many Model 3 Standard Range units and canceled the Model Y in that trim level.

Munro did not mention that in this webinar, but there is a similar case related to Porsche. Although the Cayenne saved the company, it brought to its dealerships a totally different sort of customer. While most 911 owners would give their cars the best money could buy, Cayenne owners often complained that the SUV ate tires for breakfast and asked for lower prices for replacements.

Tesla Service Center

Tesla itself saw the level of service at Service Centers drop with the introduction of the Model 3. Owners of the Model S and Model X frequently say they miss the Tesla they knew before that. People with less money to spend will also be more sensitive to suspension flaws and quality issues, such as the ones Tesla currently presents. In other words, Munro has a strong point of saying that.

The engineer said shareholders would see no sense in struggling to produce a cheaper vehicle with tighter profit margins while Tesla could be making more expensive cars that are sold out without effort. Remember, Tesla does not invest in advertising.

Tesla managed to reduce battery pack prices from the $156 revealed by the Model 3 teardown to $108 on the Model Y’s. Even so, Munro doubts Tesla could sell a cheaper vehicle for less than $32,000 for a profit despite its advancements in manufacturing.

Speaking of which, Munro said Tesla is at least ten years ahead of the competition for its method of applying improvements on the fly to production cars. According to the engineer, Tesla cranks out “a product that’s probably 90 percent, 95 percent there” and follows the strategy of “then basically waiting until customers complained and then changing things rapidly.”

Although that may make Tesla more agile than other companies, it comes at the expense of having its fans say the company sells prototype vehicles, not series-production automobiles.

Munro would follow exactly the same strategy, but he wouldn’t make a $25,000 EV. Is he right about the former and wrong about the latter? Totally right? Totally wrong? Feel free to comment that below.

Source: The Korea Times via TorqueNews, and Business Insider

This article originally appeared on Inside EVs.

Tiger

Active Member
Oct 31, 2016
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Tesla should make a $25k car with HIGHER profit margin, because a smaller profit margin and the cushion is too small for errors. Tesla just needs to innovate to make it happen. They need to fix the quality control and service, though - people who shop for the bottom $25 dollar are not risk takers on their car purchases.
 
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Saturday

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Jul 3, 2020
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I'm thinking Tesla should eliminate the m3sr+ and make a 30-35k hot hatchback that has 300mi+ range, awd.
We don't need to scrape the bottom here at 25k. If people reallyyy want an electric smart car type vehicle, another company can produce it.
I think that anyone who can't afford a 30k car in the far future will be more served by dependable and affordable tesla automated ridehailing rather than bare bonesing the car itself.
 

whitex

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Sep 30, 2015
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The engineer said most Tesla buyers want “all of the bells and whistles” the company has to offer. So much so that Tesla did not sell that many Model 3 Standard Range units
Hmm.... Let's see:
  1. Tesla delayed the Standard Range model, then called customers who ordered it to tell them they'll have to wait a long time unless they spend few thousand more and get their Standard Range Plus quick
  2. Tesla hid the Standard Range off menu where even the people at Tesla stores couldn't order them, customers had to jump through hoops putting an order for the more expensive model and deal with customer service via email to get it bumped down to Standard Range, all the while worrying that technically they put a non-redundable deposit down on a more expensive car
  3. Tesla removed the Standard Range completely
I'm sure all of the above had nothing to do with the fact that they didn't sell that many of them, no sir, no way. :rolleyes:

It's interesting to see the point of view of an industry expert, but one who's not familiar with Tesla detailed history of offerings (which I know is hard to keep up with, with changes rarely clearly communicated and happening almost every other week).
 
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whitex

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People with less money to spend will also be more sensitive to suspension flaws and quality issues, such as the ones Tesla currently presents.
So only people with less money mind if their 2 hour old new car loses a roof on a highway, or a bumper in the rain? Shocking! I guess that is more sensitive than a guy who would just leave the car on the side of the road, call for his helicopter to pick him up, then hop into one of his other 50 cars in his local collection after ordering a new Tesla on his phone during the helicopter ride.
 
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Brando

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$25,000 Tesla = used Tesla
new $25,000 Tesla + AutoPilot $8,000 = $33,000 Or more as AutoPilot increases in price.

Tesla will easily last => 20,000 miles/year for 20 to 25 years and 1/4 to 1/2 may easily last 50 years. [replaced suspension & brakes perhaps battery] So plenty of used Teslas around in the future.

With fewer accidents, most Tesla vehicles could last 50 years especially with replaced seats.
If people can learn to take care of their older sh*t.

Some countries need smaller cars - not US nor much of EU.
 
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Envchem

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Nov 13, 2019
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His approach is wrong on many levels.
First of all he thinks only of the American market. I believe this car will be mainly produced in China and Germany factories for the benefit of the Asian/European markets. A small, relatively cheap electric hatch will sell like hotcakes. Roads are far narrower over here. Model S, Model X (never mind Cybertrack) are not really suitable outside US.
Secondly being a Model 3 owner myself that part where apparently people who can afford only cheap cars are less tolerant to quality issues is insulting at least. I bought a relatively expensive car; yes. This does't mean that I am happy to throw money down the sink if it breaks all the time. So far I was lucky but Tesla need to pull their act together on quality.
To close this a 25k Tesla may be the only way for this company to go mainstream outside of the US. So they need to build it, it needs to be a decent quality wise car and it needs to be directed to the right market for it.
 

zecar

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Tesla will easily last => 20,000 miles/year for 20 to 25 years and 1/4 to 1/2 may easily last 50 years. [replaced suspension & brakes perhaps battery] So plenty of used Teslas around in the future.

Yet Fred Lambert just got a new battery and rear motor on his 2012 due to water infiltration. It's unlikely that EVs built today will last longer than ICE. With more experience and better chemistry EV will likely be built to last a long time, assuming that buyers of new cars want to pay extra for that feature.

I'm sure that when Ford released the Model A some people were sure it was all the car anyone would ever need.

Tesla likely has to build a car starting at $25K to do the volume they want to sell. The ASP will likely be $30K. Still not a cheap car.
 
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ItsNotAboutTheMoney

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$25,000 Tesla = used Tesla
new $25,000 Tesla + AutoPilot $8,000 = $33,000 Or more as AutoPilot increases in price.

Tesla will easily last => 20,000 miles/year for 20 to 25 years and 1/4 to 1/2 may easily last 50 years. [replaced suspension & brakes perhaps battery] So plenty of used Teslas around in the future.

With fewer accidents, most Tesla vehicles could last 50 years especially with replaced seats.
If people can learn to take care of their older sh*t.

Some countries need smaller cars - not US nor much of EU.

The average age of registered vehicles is gradually increasing and it's already over 11 years.

https://www.bts.gov/sites/bts.dot.gov/files/table_01_26_111919.xlsx

It's just a question of cost. EV advocates need to stop the durability myth.
 
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imola.zhp

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Jul 13, 2020
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Interesting how he comes up with this statement after two startups reach out to him for help to get their EV's to market.

I love his content, but lets don't discount the fact that he might have his own agenda. He doesn't want Tesla's $25k car to compete with the two manufacturers he is working with as it would steal market share from those two manufacturers.

$25,000 Tesla = used Tesla
new $25,000 Tesla + AutoPilot $8,000 = $33,000 Or more as AutoPilot increases in price.

Please let me know where I can find a $25k used Tesla that has a clean title.
 

Uncle Paul

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Nov 1, 2013
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You need to realize where Sandy Monro is coming from. He is currently consulting/parterning with at least 3 small 3 wheeled vehicle companies, wanting to come to the inexpensive EV marketplace. The Nobu, and a couple delivery/sporty narrow body vehicles.
Believe he wants to advice them to purchase their EV components from Tesla due to their superior technology and quality.
This will allow Tesla to profit from the little car market, while concentrating on the more profitable larger conventional vehicles.

Believe his idea is a good one. Will enable newer startups to enter the marketplace with fresh ideas while not spreading Tesla out too thin trying to do everything. Tesla can maintain a premium image and go where the most profits can be made.

(imola beat me to the topic by 1 minute)
 

Redbrick

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Jun 27, 2020
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He should stick to engineering....cars at that price have such a broad market share... look at the mobile phone market....cheap doesn't have to be bad.....most of my cheap products outlasted the more expensive variants....by a lot!!!!
 

Brando

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Sep 27, 2016
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Used Tesla Under $25,000: 7 Cars from $20,000 - iSeeCars.com

google search will find many more:
used tesla vehicle for sale < $25,000

note: 3 wheeled cars have fewer parts - less cost - tire replacement 25% cheaper

heads up - no car is cheapest of all - IF you can manage it - many don't think they can.

Sandy never said bad
...Munro believes the affordable EV would make Tesla shareholders regret the decision both in market positioning and profits.
less profitable

- he just thinks a distraction and Tesla has more important products/goals/margins to pursue.
Tesla may surprise - perhaps they can build all the worlds vehicles, right? or all the vehicle sizes anyway.
 
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AdamMacDon

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May 8, 2019
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Sandy is right, Tesla already can't handle the customers they have now. Service quality is pretty much zero and I can rarely even schedule a service appointment, nevermind get the actual issues fixed. With a startup, scaling fast is very important, but Tesla found PMF years ago now, and needs to start transitioning to actually retaining their current customers and a more healthy growth rate. If you get a customer in the door with a $25k offering but then lose them for life because their car constantly needs service that you can't get, it's very unlikely that customer wants to come back and buy another Tesla, even though the tech in the cars is light years ahead. We can try to deny it all day long, but customer service is clearly important. How do you think Amazon got into the position it is today? Not by shafting their customers, that's for sure.
 

Electric700

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May 21, 2013
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Yes, Tesla should make a $25,000 EV with AWD and basic Autopilot features including adaptive cruise control as standard. I think a lot of people would be willing to go with a 150 or 200 mile range Tesla if that's what it takes to get to $25,000 before tax credits are applied. May be they can accomplish this by introducing entry level Model 3 and Model Y versions. This way, it would make service visits easier because they wouldn't have to support a new Tesla model. Plus, the Model 3, Y, S and X now all support 250 kW Superchargers. This will really cut down the time to charge.

I think Tesla is expanding service center locations, which will really help. By streamlining processes and using a smart diagnosis / fix / reporting system (for future improvements and issue prevention), service visits can be done even more quickly and correctly. Also, a standard Tesla loaner will help lower Tesla's costs since they won't have to pay other car rental companies or Uber / Lyft. Tesla could charge $25 a day + Supercharge fees as applicable for a Tesla loaner or rental, which definitely would be another interesting business for them to get into.
 
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EVDRVN

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Tesla should make a $25k car with HIGHER profit margin, because a smaller profit margin and the cushion is too small for errors. Tesla just needs to innovate to make it happen. They need to fix the quality control and service, though - people who shop for the bottom $25 dollar are not risk takers on their car purchases.

Can you imagine the panel gaps on that car?