Anyone with a crystal ball...

[ishareit]

..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.

 

[caltechkid]

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.

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.

 

[ishareit]

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.

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.

 

[gg_got_a_tesla]

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

 

[Troy]

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

When they discontinue 75 RWD, will they start offering 75D at the same price as RWD?

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.

Are they going to stop making 75kwh batteries altogether and instead only have 85 (locked to 75kwh) and 100 options?

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.

Is there an interior refresh coming?

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.

Is there an exterior refresh coming?

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.

How are they going to make the Model 3 differentiation more significant?

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.

 

[ishareit]

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.

 

[Troy]

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.

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.

 

[gg_got_a_tesla]

@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?!

 

[idleuser]

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.

 

[Troy]

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.

"Not sure if it's an appropriate comparison but, ..."

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.

 

[ishareit]

@Troy - what's your prediction on if and when the S75D price will drop?

Tesla will discontinue cheapest Model S on Sunday

 

[eleison]

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..

Basically, Tesla is hoping that the more expensive Model S/X 100 will have the same demand as it has now even if Tesla has to reduce the price a little bit. I think that is the weak link in this logic. After all, the model S is long in the tooth. What happens if the demand falls for the Model S/X 100? I contend one of the big reasons Model S/X's is selling well is that it is the only good electric vehicle out in the marketplace as compared to it's competitors. Now we have the model 3.

Remember when the Prius was the only "clean vehicle" in the market place. You had actors, celebrities, etc. willing to buy it, even though they could have afford vastly more expensive cars. Heck, if Toyota created an higher end version of the Prius (the prius p100D , wealthy people would have bought that too. This is what is happening to the Model S/X. Wealthy people are buying the S/X model because they want to have some "green street creed".... and if there's a more expensive p100d model, why not??? As more people get into electric cars, these wealthy people will be less inclined to buy (that is just a speculation on my part). After all, if you took out the electric drive train, the Model S/X are NOT really that comparable to a Merc or BMW or other high end brands with respect to comfort and luxury. Luxury (including excellent customer service) is what the Europeans do well. Tesla... not so much.

If this is truly Tesla's master plan, they better up their game fast. No more waiting months for parts.. No more misaligned gaps in body panels, etc.. The s/X 100 has to be better than they are now or sales of the 100 model will crater if they are trying to target the luxury market. Right now, I think most buyers of Tesla make around 100K--300K; I feel these people are basically technologist; I don't think these people will want to buy vehicles with high margins that Tesla is looking for especially if there is a viable alternative. This market is not the same market that the Europeans dominate in. After all, once those celebrities stopped buying Priuses, a lot of them went back to European vehicles.

Bottom line. This strategy will fail. Tesla is not a luxury car manufacture. they are pushing away their customers from their high end models, to their lower end model 3 line. Tesla is going to be surprise how many of their customers will just buy the Model 3 model instead of their higher margin model S. Prediction: Tesla will need to discount their 100 models by at least 10k instead of 4-5k. Initially, they will try to compete based on features and amenities on their 100 models, but the europeans will win since they are masters of creating luxury cars based on years of experience.

 

[Troy]

Hi, @sumitkgarg. It has been a month since I answered your original questions. I had a closer look at some of the data and have reconsidered some of the details since then. They don't need to get rid of the 75 kWh. They just need to improve the gross margins slightly more. Therefore I will answer the same questions again. You seem to enjoy predictions, so I think you will like this.

When they discontinue 75 RWD, will they start offering 75D at the same price as RWD?

I don't think so. The Model S/X 75D have lower gross margins than the Model 3 average and Tesla is very focused on gross margins. I think there is 60% chance the Model S/X 75D prices will stay the same, 40% chance they will increase the battery capacity to 80 or 85 kWh and increase the price as well. However, they might reduce the Model S 100D price by $3,000. It seems overpriced compared to MX.

Are they going to stop making 75kwh batteries altogether and instead only have 85 (locked to 75kwh) and 100 options?

Tesla needs to increase the range of the Model S 75D because it doesn't look good compared to the Model 3 Long Range but a battery upgrade is not the only option.

1. They could switch the Model S/X to permanent magnet motors as well. This will result in 2% highway range increase, 6% city range increase and 4% EPA rated range increase. In other words, the advertised range would increase from 259 to 269 miles.

2. Another option would be to switch from 18650 to 2170 cells. Because the new cells have higher energy density, they are lighter and the weight reduction could increase range by another 10 miles.

3. Tesla could replace the 75 packs with 80 or 85 kWh. The Long Range Model 3 has an 80 kWh battery. Therefore Tesla is forced to play games with the Model 3 names to try to hide the battery capacities. Replacing the 75 with 80 or 85 would help a lot.

They could pick all 3 options. In fact, increasing the battery capacity and switching to 2170 cells at the same time would be a good idea. Because of some technicality with the EPA rules, Tesla is able to use the 310 miles EPA rated range for the Model 3 80/80D/P80D until mid-June 2018 but after that, they have to do a separate EPA range test for the Model S 80D. Therefore the pressure to add more range will increase.

Is there an interior refresh coming?

I think they will add the interior features one by one. In other words, yes but it won't be a big sudden change.

Is there an exterior refresh coming?

It's possible. The only exterior change I can think of is the Model 3 style nose.

How are they going to make the Model 3 differentiation more significant?

I don't think Tesla cares about this. The anti-selling is only temporary.

 

[Troy]

Luxury (including excellent customer service) is what the Europeans do well. Tesla... not so much.

It's a good thing Tesla has differentiating factors like the Supercharger Network and Autopilot. Tesla sales in Germany have been increasing. In 2015 and 2016, Germany was Tesla's 4th largest market in Europe. Right now, Germany is #1 in Europe in terms of Model S sales:

1. Germany, 1485 units
2. United Kingdom, 1456 units
3. Netherlands, 1025 units
4. Norway, 1017 units
Source: (Look at the blue table for Model S) Tesla Europe Registration Stats

 

[Ross9733]

Troy,

Members in europe reporting they have received 5k discount off their ordered 75 D. Does this change your predictions? If we are expecting delivery next week should we be trying to delay it?? I always thought they might make the premium package standard and keep the same price.

 

[Troy]

@Ross9733, I can't find any recent topic about 5K discounts in Europe for the S75D. I've found one here from July but apparently, that's related to 0-60 improvements in S75D cars. Let me describe my thought process and then you can decide what's more likely:

Tesla wants 100K MS/MX sales this year. They finished the first 2 quarters at 47,077 units. We will find out the third quarter numbers in 10 days. If Tesla was too worried about sales targets, they would have kept the S75 around until the end of the year. This tells me that they are not going to talk about MS/MX sales numbers but they will change the conversation to total Teslas delivered in 2017 including the Model 3. That number is going to be over 100K units, most likely somewhere around 130,000 units. With that kind of impressive achievement, it's not so important whether they delivered 90K or 100K MS/MX.

The Model S/X 75D gross margins are not as bad as I thought. That means there is no reason to discontinue the Model S/X 75Ds because of gross margins. However, 259 miles range is not that impressive compared to the 310 miles Model 3 80 range especially considering the price difference between these cars. Therefore the most likely thing would be a range improvement. If they increased the Model S 75D range to 270 miles while keeping the price the same, that would look much better. They could do that by switching to permanent magnet motors.

It's also likely that the MS/MX will switch to 2170 cells. If they could do that and increase the battery sizes from 75/100 kWh to 80/105, that would be great. Right now is kind of a bad time to buy a Model S 75/75D. The Model 3 has the better motor technology and battery technology and some interior features the Model S doesn't have. Tesla is busy with the Model 3. My suggestion would be to wait and see.

 

[calisnow]

Basically, Tesla is hoping that the more expensive Model S/X 100 will have the same demand as it has now even if Tesla has to reduce the price a little bit. I think that is the weak link in this logic. After all, the model S is long in the tooth. What happens if the demand falls for the Model S/X 100? I contend one of the big reasons Model S/X's is selling well is that it is the only good electric vehicle out in the marketplace as compared to it's competitors. Now we have the model 3.

Remember when the Prius was the only "clean vehicle" in the market place. You had actors, celebrities, etc. willing to buy it, even though they could have afford vastly more expensive cars. Heck, if Toyota created an higher end version of the Prius (the prius p100D , wealthy people would have bought that too. This is what is happening to the Model S/X. Wealthy people are buying the S/X model because they want to have some "green street creed".... and if there's a more expensive p100d model, why not??? As more people get into electric cars, these wealthy people will be less inclined to buy (that is just a speculation on my part). After all, if you took out the electric drive train, the Model S/X are NOT really that comparable to a Merc or BMW or other high end brands with respect to comfort and luxury. Luxury (including excellent customer service) is what the Europeans do well. Tesla... not so much.

If this is truly Tesla's master plan, they better up their game fast. No more waiting months for parts.. No more misaligned gaps in body panels, etc.. The s/X 100 has to be better than they are now or sales of the 100 model will crater if they are trying to target the luxury market. Right now, I think most buyers of Tesla make around 100K--300K; I feel these people are basically technologist; I don't think these people will want to buy vehicles with high margins that Tesla is looking for especially if there is a viable alternative. This market is not the same market that the Europeans dominate in. After all, once those celebrities stopped buying Priuses, a lot of them went back to European vehicles.

Bottom line. This strategy will fail. Tesla is not a luxury car manufacture. they are pushing away their customers from their high end models, to their lower end model 3 line. Tesla is going to be surprise how many of their customers will just buy the Model 3 model instead of their higher margin model S. Prediction: Tesla will need to discount their 100 models by at least 10k instead of 4-5k. Initially, they will try to compete based on features and amenities on their 100 models, but the europeans will win since they are masters of creating luxury cars based on years of experience.

Gotta be honest with you - you got the rich wrong. You're doing a lot of imagining of what it is like to be wealthy - what we perceive luxury to be. this here wealthy forumite drives an S because it is more luxurious than anything else available. I don't drive it for green cred. Never had a Prius - never will. Came straight out of an E55 AMG and my weekend cars have prancing horses and bulls on the hood. Tesla has changed the game. The S is more pleasant to drive than any BMW Merc or Bentley I've had. I am willing to pay the premium for the S simply because it is larger, it looks much better and the ride will be smoother because of the mass. Would I turn down a new better interior, more sound insulation and more range? Of course not. But my loaded 2017 S with air suspension is really damn luxurious to the person who understands what luxury really is.

 

[vigge50]

@Troy I can’t find a thread here but on the Swedish forum there is people who have get a reduction on price for nearly the hole price difference between 75 and 75D on there Model S without any explanation , to me it seams like they will lower the price of 75D. This would help them to increase orders on Model S so that they easier can reash the 100k for this year.

 

[ericonline]

I think there is 60% chance the Model S/X 75D prices will stay the same, 40% chance they will increase the battery capacity to 80 or 85 kWh and increase the price as well

Agreed. This is contrary to what many believe (or are at least hoping for) - that on October 1 Tesla will lower the 75D to 70k or maybe raise the battery to 80/85 without raising the prices. It seems MS/MX sales have been fine since the release of the M3. Everyone needs to keep in mind the expiring tax credit will help S/X sales too - especially with regard to the lower end MS/MX. Tesla really shouldn't lower prices on the lower end versions until July 1, 2018. It's easy to forget in this community but 99.9% people do not have a M3 reservation - so if they are interested in Tesla they can buy a MS/MX and get the full credit or reserve a M3, wait a year or more, and get partial or no tax credit.

Right now is kind of a bad time to buy a Model S 75/75D

I have to disagree here - at least with regard to a S75 RWD. Well if you want the RWD you don't really have much choice but to order now. I guess you could try to time it perfectly and custom order on Sunday in hopes that by the time they produce it you get something better than what you order. Getting a base MS with all the recent option additions (most notably the Drive Unit upgrade, 0-60 in 4.3) for $69,500 - $1,000 referral - $7,500 tax credit = $61,000 is pretty darn attractive. Especially considering the entry price could go up $5,000 with the deletion of RWD, and the effective price of a MS should start rising in 9 months as the tax credit expires.

I have a 75 RWD due for delivery next week. Yes I'll be a little disappointed if on Oct 1 the base battery becomes 80/85, or some other expected changes occur. But I didn't want to risk losing the lower entry point as Tesla's product offerings evolve. Replacing a flooded S70 RWD. We loved that car.

 

[eleison]

Gotta be honest with you - you got the rich wrong. You're doing a lot of imagining of what it is like to be wealthy - what we perceive luxury to be. this here wealthy forumite drives an S because it is more luxurious than anything else available. I don't drive it for green cred. Never had a Prius - never will. Came straight out of an E55 AMG and my weekend cars have prancing horses and bulls on the hood. Tesla has changed the game. The S is more pleasant to drive than any BMW Merc or Bentley I've had. I am willing to pay the premium for the S simply because it is larger, it looks much better and the ride will be smoother because of the mass. Would I turn down a new better interior, more sound insulation and more range? Of course not. But my loaded 2017 S with air suspension is really damn luxurious to the person who understands what luxury really is.

If you took out the electric power train of your S and replace it with the merc hood emblem, would you still be driving it considering the level of service you recieved from tesla? Not to mention the interior where a lot of people think is not up to par considering tesla's msrp? Not to mention if you get into an accident, there's a good chance you will be waiting months for parts?

Without the electric power train, i think a lot of people will not be buying a tesla. The power train is what is creating a halo on high end tesla cars causing many people to forgive the company for its many faults. Take that away by creating cheaper cars (model 3) than tesla's flagship car doesn't have a raison d'etre.