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Anyone with a crystal ball...

Discussion in 'Model S' started by sumitkgarg, Aug 25, 2017.

  1. sumitkgarg

    sumitkgarg Member

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    #1 sumitkgarg, Aug 25, 2017
    Last edited: Aug 25, 2017
    ..who can tell what Tesla is up to with Model S?

    When they discontinue 75 RWD, will they start offering 75D at the same price as RWD?
    Are they going to stop making 75kwh batteries altogether and instead only have 85 (locked to 75kwh) and 100 options?
    Is there an interior refresh coming?
    Is there an exterior refresh coming?
    How are they going to make the Model 3 differentiation more significant?
    Or maybe they are too busy with Model 3 to do anything to do with Model S for the time being?

    After an order screwup by Tesla, they are going to place another order for my MS and I’m just a little concerned about the timing now. Btw - this reorder resulted in me getting APH3 instead of APH2.

    PS: before you guys start bashing me for this silly post, the intention is just to share my frustration with not knowing exactly what’s coming but at the same time feeling like it is something important.
     
  2. caltechkid

    caltechkid Member

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    Isn't it being referred to as AP 2.1 or 2.5 and not 3? Who knows about the interior refreshes but it wouldn't surprise me. I don't see a sudden price drop on the 75D equating to the 75 for no real reason.
     
  3. sumitkgarg

    sumitkgarg Member

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    In the options code, it is mentioned as "APH3" as opposed to "APH2" for cars from last month, but I agree that the changes don't seem significant from what I have been reading.

    I agree that they shouldn't immediately drop the prices, but that might give people a reason to go for Model S rather than a Model 3 by offering more value at the same price.
     
  4. gg_got_a_tesla

    gg_got_a_tesla Model S: VIN P65513, Model 3 Res Holder

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    Buying a Tesla is like a box of chocolates... you never know what you're going to get.
     
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  5. Troy

    Troy Active Member

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    #5 Troy, Aug 26, 2017
    Last edited: Aug 26, 2017
    Hi, @sumitkgarg. Before I answer the questions I want to give a little context. There are two things Tesla wants to achieve:
    • Delivery targets
    • 30% gross margin
    The 30% gross margin is one of the 10 milestones Elon wants to achieve. The following list was published in a SEC document on page 30 here. There is a news article about it here.
    1. Successful completion of the Model X Alpha Prototype (Completed)
    2. Successful completion of the Model X Beta Prototype (Completed)
    3. Completion of the first Model X Production Vehicle (Completed)
    4. Successful completion of the Model 3 Alpha Prototype (Completed)
    5. Successful completion of the Model 3 Beta Prototype (Completed)
    6. Completion of the first Model 3 Production Vehicle (Completed)
    7. Gross margin of 30% or more for four consecutive quarters
    8. Aggregate vehicle production of 100,000 vehicles (Completed)
    9. Aggregate vehicle production of 200,000 vehicles
    10. Aggregate vehicle production of 300,000 vehicles
    These are Tesla's automotive gross margin numbers published in shareholder letters:
    24.5% in 2015
    25.2% in 2016
    27.9% in H1 2017

    These are estimated Model S gross margins in H1 2017 based on my calculation here:
    10.8% Model S 75
    12.5% Model S 75D
    34.3% Model S 100D
    38.0% Model S P100D

    These are estimated Model 3 gross margins by the end of Q2 2018 based on my calculation here:
    12.2% Model 3 55
    14.9% Model 3 55D
    27.9% Model 3 80
    28.9% Model 3 80D
    35.8% Model 3 P80D

    No, because the Model S 75D has only 12.5% gross margin. It doesn't make any sense at all to lower it any further because this would hurt the 30% goal. However, it makes sense to discontinue the Model S 75D and Model X 75D by the end of Q2 2018.

    There won't be any 75 or 85 Model S or X versions by the end of Q2 2018 because the 75 and 85 kWh Model S and X versions have low gross margins that are even less than the Model 3 80/80D. Right now, Tesla wants people to switch from Model 3 80 to Model S 75. In a few months from now, they will discontinue all 75 kWh Model S and X versions so people don't switch from Model 3 80/80D to a 75 kWh Model S or X because this would have a negative effect on the 30% gross margin goal.

    I don't think they will bundle all changes together. Coat hooks might happen at some time then they might add the new center console with two smartphone docks. I don't think they will do the collapsible rear arm rest with cup holders (present in the Model 3) in the Model S or X. Door pockets in the S are possible but it would require more work. Therefore I wouldn't expect this anytime soon.

    No, not anytime soon. Tesla will do a big Model S engineering redesign to make it easier to manufacture, to increase automation and reduce weight. However, this won't happen within the next 2 years. It might happen in 3 to 4 years. Until then, the Model S won't have 75 or 85 kWh versions.

    They won't. This is not needed. Tesla has two targets to hit: units and gross margin. For units, they have the Model 3. For gross margin, they need to get rid of the 75/85 Model S/X. The 100 keeps selling anyway. No changes needed. However, I do expect that the 100 kWh S/X price will be reduced by $4,000-$5,000 when they get rid of 75/85 kWh versions.

    By the way, looking at the Model 3 gross margin numbers, I can see that they will replace the Model 3 55/55D with Model 3 60/60D at the first opportunity. They can't do this right now because they promised $35K base price. They need to deliver those cars, clear out the reservation list and then upgrade the base Model 3 battery and increase the price and gross margins.
     
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  6. sumitkgarg

    sumitkgarg Member

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    Interesting.. thanks @Troy for your post and your views. You're essentially saying that because Model 3 will have more gross margins over non-100kwh Model S versions, it makes more sense for Tesla to move non-100khr buyers to Model 3.

    Btw - I too somewhat feel that they have other more important things, like Model 3 production, to do than making any "significant" interior/exterior refreshes on the Model S in near term.
     
  7. Troy

    Troy Active Member

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    #7 Troy, Aug 26, 2017
    Last edited: Aug 26, 2017
    Yes. They won't need low margin Model S/X versions anymore. They needed those to achieve delivery targets but they will have the Model 3 for that. The Model S/X's role will be to help increase the overall automotive gross margin beyond Model 3's 25% average. That means, there can't be any S/X below 25% gross margin. Therefore all 75 kWh S and X cars must be discontinued because those have 14-16% gross margins. However, first, the Model 3 needs to reach 25% gross margin which will happen most likely in Q2 2018. That means after Q2 2018, there won't be any 75 or 85 kWh Model S or X. It will be only 100 kWh.

    Update: I found an error in my calculations. The new versions are here
    http://i.imgur.com/2eHBO8C.gif
    http://i.imgur.com/hGts7lm.gif

    18.2% Model 3 55
    20.3% Model 3 55D
    24.4% Model 3 80
    25.7% Model 3 80D
    33.7% Model 3 P80D

    14.0% Model S 75
    15.5% Model S 75D
    32.8% Model S 100D
    36.9% Model S P100D

    This doesn't change anything I said above.
     
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  8. gg_got_a_tesla

    gg_got_a_tesla Model S: VIN P65513, Model 3 Res Holder

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    @Troy, your reasoning seems sound but, will the units sold for 100Ds and P100Ds be sustainable at the current rates at those price levels? I still think a sub-$90k config would be needed to keep the MS line sustainable and appealing to a larger pool of buyers who may be interested in a larger (and arguably more "prestigious") sedan than the Model 3. Not sure if it's an appropriate comparison but, can BMW sustain the 5-series with just the M550i xDrive alone?!
     
  9. idleuser

    idleuser Member

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    When they discontinue 75 RWD, will they start offering 75D at the same price as RWD? Yes, looking at the value proposition of the Model X 75D vs the 75rwd makes it likely that this will happen. Why? Compare the 69500 base S vs 79500 base X and you'll see that the Model X is a better value for 5,000 more. More cargo space, FWD, auto closing doors, better resale

    Are they going to stop making 75kwh batteries altogether and instead only have 85 (locked to 75kwh) and 100 options? Highly probable, the 3LR is going to make the more expensive base Model S range look pathetic in comparison. So the range has to either go up or Tesla needs to add more performance. If they ship the 85kwh battery in a 75kwh configuration, that means there might be room for an "insane mode" saving "ludicrous" mode for high end model for differentiation.

    Is there an interior refresh coming? Probably not, whatever changes that are being made must be interchangeable with the model X. So I believe a MCU upgrade will be coming along and maybe pocket doors but that's about it.

    Is there an exterior refresh coming? Absolutely not, it would cost Tesla too much time and resource. Especially since they're working on ramping up the Model 3 with Model Y, and the Semi.
     
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  10. Troy

    Troy Active Member

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    Hi, @gg_got_a_tesla.

    Right now, most Model S and X versions sold are the larger battery versions. Some countries in Europe release sales numbers by trim level. My best guess is 60-65% of S/X sales are 100 kWh versions. Therefore discontinuing the 75 kWh versions should drop S/X sales by 30-35%. However, they could compensate for some of that loss by dropping the prices a little but not too much to affect the gross margins badly.

    I do expect a modest price drop in all 100 kWh S/X versions. My best guess is $4,000 to $5,000 drop around the end of Q2 2018. This was one of the predictions I posted here. By the way, if people want to see whether my predictions in the past have been accurate, they should check that thread.

    This year, Tesla might deliver 100,000 S and X. It would be perfectly fine if they deliver 75,000 units next year. That's not a problem. That's a good thing. They can spin this as "differentiating between models." The real reason is, the large battery version of the Model 3 has much better margins than the small battery version of the Model S.

    BMW doesn't have the same problem Tesla has with the Model S/X. The reason that the Model S 75D/ Model X 75D is more expensive than the Model 3 80D is that the Model S/X production lines are not automated enough and require too much manual labor. Therefore production costs are high and prices are high too. According to this article, the S/X production is 7 times less efficient than it was when the Nummi factory (Tesla's Fremont factory) was operated by Toyota and GM. Elon confirmed that the Model 3 production line is a lot more automated than S/X. Listen here.

    Tesla needs a new Model S and X production line to return to normal. Without a new S/X production line that is as automated as the Model 3 production line, it makes no sense to continue with low margin S/X versions which were needed for delivery targets.
     
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