Air Suspension Price Increase

[Right_Said_Fred]

Must be the Dutch market premium on some of these items. The current German A6 allroad quattro brochure lists leather interior at EUR 2,255 (the expensive Valcona) or EUR 1,930 (the cheaper Milano), 18 inch wheels from EUR 900 to EUR 2,100 (depending on the design), entertainment systems from EUR 690 (the basic) to EUR 950 (the BOSE) or EUR 6,000 (the ultra high-end B&O). You are right about the xenon and the parking sensors (but only if you want a camera too, the basic parking assistant is EUR 780).
It's not that I want to dismiss the fact that German carmakers charge quite a bit for some options, but Tesla does the same. EUR 1,500 for heated windshield, rear seats and wiper fluid nozzles (which are mandatory here anyway), EUR 300 for a parcel shelf (which is standard on any other car), EUR 3,900 for a tech package with hardly any special tech in it.
Anyway, I didn't want to argue about the price of the options per se, just the immense and sudden price increase. Of course, if sales of these options don't drop because of the increases, good for TSLA, and I will applaud them for that. But sad for us potential future customers (I say future because the way this is developing, the Model S for me is slipping ever further out of reach. Still, can hope for Gen III - I do actually).

You're right about those premium Dutch prices: when I bought the A6 Allroad they included a 46% car tax (which has since then gradually been reduced).

I think the option prices for Tesla after the price increases are more in line with those at Audi/BMW/Mercedes. Unfortunately for that to happen they increased them a lot, and I'm afraid that might hurt Tesla. Some options that people chose have now become too expensive and are less likely to be chosen (like air suspension).

 

[Volker.Berlin]

Some options that people chose have now become too expensive and are less likely to be chosen (like air suspension).

Which makes a lot of sense from a business perspective, think market segmentation and price discrimination.

 

[Kaivball]

Which makes a lot of sense from a business perspective, think market segmentation and price discrimination.

The free market at work...

 

[AustinPowers]

Which makes a lot of sense from a business perspective, think market segmentation and price discrimination.

But increasing the price of already overpriced options like the 21 inch wheels even further doesn't seem like a wise decision - if you want to attract more buyers. Perhaps they don't want that. If so, ok, increase prices even more and you will end like Fisker. (Ok, that might be a little too harsh, but the direction is all wrong imho). Tesla wants to make EV's more common on the roads. The way they are going about at the moment rather suggests the opposite.

 

[Volker.Berlin]

But increasing the price of already overpriced options like the 21 inch wheels even further doesn't seem like a wise decision - if you want to attract more buyers. [...] Tesla wants to make EV's more common on the roads. The way they are going about at the moment rather suggests the opposite.

I disagree. I doubt that the majority of buyers will decide for or against Tesla based on the price of high-end options. If they want a Tesla they can have it, and can negotiate the options based on their budget. If they cannot afford fancy rims or air suspension, they will happily live without it (and still drive a Tesla). With cheaper options they might have bought more options, but the total of the purchase will be more or less the same. Notably, base prices were not increased (this time around).

On the other hand, Tesla gets to realize a wider margin from the less price sensitive people. These people buy the options they want regardless of price. Currently Tesla unnecessarily gives options away to these buyers.

To be clear: These are just the extreme cases. Most of us will find ourselves somewhere in the middle, i.e., willing and able to spend a little more for some option while considering another option "overpriced" (not within budget). The argument works for all types of buyers and budgets, as long as they consider and can afford a Tesla in the first place.

 

[almostFitToEat]

Please don't tell that to Thomas Keller...

Amen to that!

 

[AmpedRealtor]

Price is generally a function of supply and demand, so if I were to apply this principle to Tesla's behavior I would say that more people are buying the 21" wheels and air suspension than are not. As a result, Tesla has made a calculation that by raising prices on those most popular upgrades will still net them a higher margin overall even if a few people decide not to get those upgrades due to price. The vast majority, however, will still pay the higher prices. I guess we shall see if they were correct when they announce their quarterly results.

As far as the extended warranty is concerned, I wasn't going to get it at $2,500 but now that Tesla has raised the price, I don't mind spending $2,500 for something Tesla values at $4,000. I have until tomorrow to get the lower price on the ESA.

 

[brianman]

Price is generally a function of supply and demand, so if I were to apply this principle to Tesla's behavior I would say that more people are buying the 21" wheels and air suspension than are not.

I don't draw the same conclusion. Please show your work to educate me (and perhaps others).

 

[AmpedRealtor]

I don't draw the same conclusion. Please show your work to educate me (and perhaps others).

I don't understand your question. My post was hypothetical, but if Tesla's price increases were due to supply/demand law, it would indicate those upgrades are more popular. They wouldn't raise prices on unpopular options, as that would not stimulate the sale of those options. I don't believe I need to educate you or anyone else, this is a hypothetical argument. Relax!

By the way, what conclusion do you draw? Perhaps you can educate me.

 

[Laumb]

I welcome this. I have already finalized on lower prices though.
But, if this is what it takes to Keep Tesla alive and around, allright - lets go for it!

 

[AmpedRealtor]

I welcome this. I have already finalized on lower prices though.
But, if this is what it takes to Keep Tesla alive and around, allright - lets go for it!

I have also finalized prior to the price increases and will be buying the $2,500 extended warranty today (it goes up to $4,000 on Thursday 7/4). The cost of this car is going up, so locking in a price and buying it when the prices are lower protects your investment. The fact that the car price is creeping up also helps our resale values.

 

[brianman]

I don't understand your question. My post was hypothetical, but if Tesla's price increases were due to supply/demand law, it would indicate those upgrades are more popular. They wouldn't raise prices on unpopular options, as that would not stimulate the sale of those options. I don't believe I need to educate you or anyone else, this is a hypothetical argument. Relax!

By the way, what conclusion do you draw? Perhaps you can educate me.

I'm relaxed. Just wanted to learn.

It's difficult to draw a direct conclusion, IMO. For example, they may be raising the price of an item because of any of (a) it's hard to source (volume issue), (b) they're trying to test the market to see if it's an option they can just cancel/remove (simplicity/production-speed), and (c) supply cost increased. These are just a few examples that really say nothing about demand itself.

 

[AmpedRealtor]

I'm relaxed. Just wanted to learn.

It's difficult to draw a direct conclusion, IMO. For example, they may be raising the price of an item because of any of (a) it's hard to source (volume issue), (b) they're trying to test the market to see if it's an option they can just cancel/remove (simplicity/production-speed), and (c) supply cost increased. These are just a few examples that really say nothing about demand itself.

Yes, I agree that it's difficult to draw conclusions from a simple price increase. At least regarding the price increase to the ESA, Musk tweeted that it was due to low margins. Perhaps the same is happening here, but there's no way to know for sure.

 

[ModelS8794]

Just noticed that the air suspension price has gone up from $1500 to $2250.

So, this is the third item with a 2013Q3 increase: 21" wheels from $3500 to $4500, air suspension from $1500 to $2250 and extended service agreement/warranty from $2500 to $4000.

Wasn't the paint armor $900 before? Looks like it's at $950 now, another price increase.

 

[Volker.Berlin]

For example, they may be raising the price of an item because of any of (a) it's hard to source (volume issue), (b) they're trying to test the market to see if it's an option they can just cancel/remove (simplicity/production-speed), and (c) supply cost increased.

(d) They increase the margin because they can. (Nothing wrong with that.)

 

[HHHH]

I think Tesla is aware that their clientele is obviously more educated, more tech savvy, etc people who recognize that you get what you pay for, that's why they'll shell out $70-$120k for a car like this from a brand who is so unconventional. They know they can increase prices a bit, so they will. Kudos to them. I'm happy as a shareholder.

 

[DonPedro]

An alternative possibility is that they discovered that it has higher costs than calculated. E.g. it has longer assembly time. Not saying this is the case - just thinking this thread has jumped to conclusions.

 

[AustinPowers]

I think Tesla is aware that their clientele is obviously more educated, more tech savvy, etc people who recognize that you get what you pay for, that's why they'll shell out $70-$120k for a car like this from a brand who is so unconventional. They know they can increase prices a bit, so they will. Kudos to them. I'm happy as a shareholder.

Still, goes very much against their agenda to make EV's more common, to the point to even someday replace ICE's as the most popular form of personal transportation.

I'm amazed at how lightly you all take this. I mean these price increases are drastic! Take the service plan. Even 2,500 up front for a car that was supposed to need "almost no maintenance" was ridiculous and went completely against the argument of "extremely advantageous in comparison to an ICE". But now 4,000 up front - a 60% increase!? In what way is owning such an EV advantageous in comparison to an ICE any more? If the Model S needs service that costs 4,000 Dollars in the first few years then there is definitely something wrong with it. Because for that amount of money you can really do A LOT with any car. I just don't get it.

And think about how this is percieved here, where the car isn't even out yet. All we see is price increase after price increase, before the first buyers here even got their hands on the thing. Sure, everyone who has already ordered is safe from the price increases. But if you are a "normal" customer who wants to make an informed decision on such an expensive purchase like a luxury car (or "premium electric sedan", but it's slowly turning into a luxury), you are screwed.

Remember the Model S was originally said to be available for a starting price of under 50,000 Dollars. When I think that I took Tesla's word for this and calculated with around 60,000 Euros for a (quite basic) Model S (which shouldn't have been an unrealistic calculation), I will now be faced with spending between 75,000 and 100,000 Euros, depending on options.
Of course the way things seem to develop at the moment, this might turn into even more. I wonder what will happen to Gen III over time. Now it is said to supposedly cost about half in comparison to Model S, but by 2016 I guess Gen III will have arrived at a starting price of 50k at the least. We will see, but I am desperately hoping that I am wrong.

 

[jkirkebo]

I'm amazed at how lightly you all take this. I mean these price increases are drastic! Take the service plan. Even 2,500 up front for a car that was supposed to need "almost no maintenance" was ridiculous and went completely against the argument of "extremely advantageous in comparison to an ICE". But now 4,000 up front - a 60% increase!? In what way is owning such an EV advantageous in comparison to an ICE any more? If the Model S needs service that costs 4,000 Dollars in the first few years then there is definitely something wrong with it. Because for that amount of money you can really do A LOT with any car. I just don't get it.

It's the extended warranty that costs $4000. The pre-paid service-plan still costs $1900.

And we probably won't get the extended-warranty option in Europe at all. At least that is my guess, as such warranties are not very common here like they are in the US.

 

[jeffhre]

I don't believe that the idea was to "make EV's more common" with Models S versions that were optioned out at over $110,000. The base Model S is unique and terrific, and if raising the prices of options over time can increase margins and lead to lower priced mass produced future vehicles, that makes sense. I don't see how people getting a Model S at current prices, a vehicle unique in all of automotive history, absolutely MUST have to have the optional addition of 21" inch wheels to enjoy their car. And seriously, if it is all that important, then by all means add 1.8% to the purchase price and get them!

And I wouldn't be surprised to see Gen III at nearly $50,000 if the price calculated is after expected US government incentives.