Attempting to price out options for Model 3

[ChadFeldheimer]

The reason for the price to consumers at the moment is purely a cash generating thing to prep for the Model 3. It's far beyond normal margins.

To be fair, everything Tesla has done to date is a "cash generating thing to prep for Model 3". And I don't think Tesla's 50%+ margins on battery upgrades are out of line with margins on other options - Tesla's or otherwise.

It's certainly possible. However, Tesla has discussed the M3 as targeting vehicles classes like the 3-series, and it's a similar ratio:

BMW 320i: 33,450
BMW M3: 64,000

Difference: 1.9

If they are targeting the 3-series market, it would make sense to also target the ratio. Granted, this is a bit of a different argument.

See Also Mercedes:

C300: $38,950
AMG C63 S: $73,250

Difference: 1.88

Sure. But my point is that ratios are more or less arbitrary. One could arbitrarily de-feature the base model or shoot for the sky with the high end model (see: Porsche Cayenne). What matters much more is delivered value.

320i 0-60 is ~7 seconds. M3 0-60 is ~4.

With any luck, a ludicrous Model 3 will deliver a lot more performance over the base 3 than the M3 over the 320i! Also, the upgraded/performance 3 will deliver more range than the base 3 - which is the holy grail of value in an EV.

It'll be interesting to see how Tesla decides to price the 3.

 

[dsvick]

"At least for a whole category" means many but not all options, although once self driving, the ability pull regenerative braking off the front axle likely pays for itself in energy and safety over the life of the vehicle. Loss to society is likely less if they all came with four wheel drive.

Tesla should do the integral and offer products that have the lowest human and lowest environmental cost.

I think people who don't have money don't enjoy playing games with it as much as people who do have money (enjoy that activity). Elon could come down on the wrong side of this cultural subtlety and kill the company. I expect he is as blind to this as many here are.

If a lot of people (depositors) choose to do without a Model 3, because Elon mistakenly believes that everyone likes to play with money the way the BMW and existing Tesla customers do, sales fall off a cliff and the company does not sell enough product to pay for the capital investment. They used to call this the crossover point. If Tesla does not make crossover, current shareholders lose their money.

People who don't have money still like choices, they just don't want to be reminded how little money they have every time they try to make a choice. May be Tesla thinks their primary purpose is to use the Model 3 options list to paint demographic differences? BMW already does that. If that is what Tesla is here for, they don't really need to exist.

I'm really not sure what point your making, people without a lot of money don't like to spend it? Of course not, and despite the fact that this is Tesla's least expensive model, $35,000 is still a large chunk of money so, no, not everyone will want one, and those do may not all be able to afford one. That in no way means that they should reduce the price of the vehicle so more people can get one. Yes, they want to accelerate the adoption of sustainable transportation, but they need to be in business to do it.

Reservation holders are not going to cancel their reservations because options aren't given away for free, no one expected them to be, and if someone did then I'm not sure where they could have gotten that idea.

And I'm sure Tesla is not using the options to highlight demographic/economic differences in the purchasers. They offer options because not everyone wants every thing, some want all the bells and whistles some just want a bigger battery but not luxury items, some want all the luxury but not the extended range - we don't all have to get the same thing, that's why their options. Does you local ice cream intend to highlight the economic differences between those that can by two scoops as opposed to the people that can only by one?

 

[Neohippy]

It seems like a small percentage of reservation holders are expecting a 35k and the tax credit. Seems like 50% are hoping to spend 50-60k which should be more then enough to get a great optioned car. The rest which seems totally crazy are saying 100k M3. The M3 is not a 100k car and I would be amazed even fully optioned to see a 100K M3. Time will tell

 

[SageBrush]

Does you local ice cream intend to highlight the economic differences between those that can by two scoops as opposed to the people that can only by one?

Hard to say, but 22522 might be saying that only one scoop should be sold, but it should be twice as big as the old scoop and no more expensive.

Otherwise, those people who only have one small scoop will not enjoy it and refuse to eat any more.

Or something ;-)

 

[melindav]

It seems like a small percentage of reservation holders are expecting a 35k and the tax credit. Seems like 50% are hoping to spend 50-60k which should be more then enough to get a great optioned car. The rest which seems totally crazy are saying 100k M3. The M3 is not a 100k car and I would be amazed even fully optioned to see a 100K M3. Time will tell

I'd also think a lot of the current conversations could fall under the "talk is cheap" category and what actually gets configured/paid for may be different in the end.
I expect something like 25% to be $35-40k, 50% $40-55k and 25% +$55k - just a total guess

 

[Model 3]

The M3 is not a 100k car and I would be amazed even fully optioned to see a 100K M3. Time will tell

But on the other hand: At the moment, the only one that would have any reason to even think about that is those that absolutely have to have *every* single option checked. For the rest of us it is only that the base car is priced as promised and that those features we want in the car is included or reasonable priced. It will not bother me a bit if they release a $200k "Model 3 P***DL Rally GT SS Super Sport DeLux Cupè" that goes 0-60 in 1.5 seconds, as long a I get what I want for an reasonable price. And why should I care?

 

[22522]

I think 1/3 (1/2 us) won't buy without the tax incentive. The more one makes people count the cost, the more likely they are to walk away.

Maybe I am wrong. Tesla has trained itself on a part of the market where there is little price elasticity. All their instincts and muscle memory are set by that experience.

The 3 is acting on a demographic where there is price elasticity... Offen selling to people who cannot afford it. That happens a lot when one has a desirable product but no way to vet.

The contract lets them sort the list based on credit rating. People who can't pay full price get the tax incentive. People who can get pushed back a bit.

Since we all care about Tesla's economic well being, sorting to maximize closed deals for cars, without lowering the price seems like the best practice.

 

[22522]

Hard to say, but 22522 might be saying that only one scoop should be sold, but it should be twice as big as the old scoop and no more expensive.

Otherwise, those people who only have one small scoop will not enjoy it and refuse to eat any more.

Or something ;-)

Are you all suggesting that every flavor at baskins Robbins should have a different price?

 

[EXOTIC1]

A fully loaded every option M3 will come in under 90k and then you'll have tax credit
book it

 

[Canuck]

The M3 is not a 100k car and I would be amazed even fully optioned to see a 100K M3. Time will tell

If a fully optioned one is $75kUS, then in Canada, that will be $100kCAN, plus we have 15% tax (GST of 5% and our PST goes from 7 to 10% -- our "luxury" tax on vehicles) plus we get no rebate on EV's priced more than $77kCAN so, as I see it, I'm paying over $100k regardless. Unless, that is, all those who say a fully optioned one will be $50k. I just don't see it. It might not reach the 6 figures but I expect it will get close.

 

[SageBrush]

The contract lets them sort the list based on credit rating. People who can't pay full price get the tax incentive. People who can get pushed back a bit.

Not going to happen, for a whole host of reasons.

#1: No company prioritizes customers with a higher default risk.
#2: Tesla has already said outright that highly optioned cars will have (relative) delivery priority. They know which side the bread is buttered, and it is not the 'may be able to afford the least expensive car with help' crowd.

 

[Citizen]

I have not read every post in this thread but it seems like most are not even adding in sales tax. I know in the state of FL tax is 6% and the last I saw tesla had a $1,200 delivery fee and maybe a $50 doc fee. You add all that up on just the base model 3 zero upgrades and you are paying $38,350. Now that price just keeps going up with all the options that one selects.

 

[ccutrer]

I think 1/3 (1/2 us) won't buy without the tax incentive. The more one makes people count the cost, the more likely they are to walk away.

Maybe I am wrong. Tesla has trained itself on a part of the market where there is little price elasticity. All their instincts and muscle memory are set by that experience.

The 3 is acting on a demographic where there is price elasticity... Offen selling to people who cannot afford it. That happens a lot when one has a desirable product but no way to vet.

The contract lets them sort the list based on credit rating. People who can't pay full price get the tax incentive. People who can get pushed back a bit.

Since we all care about Tesla's economic well being, sorting to maximize closed deals for cars, without lowering the price seems like the best practice.

Tesla does not have my credit score, and they likely never will. Having someone's credit card number does not allow you to get their credit score. So unless you apply for Tesla financing, they won't get it. Even then Tesla financing is mostly a thin veil over a partner bank. It would definitely be an underhanded behavior to pass the credit score over from the finance department to production, and they would certainly get raked over the coals if such a thing were ever uncovered.

Of course, I can't tell if you're advocating such behavior or not. I think you are - on the basis of putting lower credit scores first, so that they can take advantage of the tax credit in order to actually be able to afford the car. That's... weird.

Your whole argument seems to be that Tesla should optimize for the benefit of society as a whole, at the cost of all other factors. Unfortunately, reality gets in the way. You can't just make the world a better place, for free. Luckily Tesla DOES care about making the world a better place, and they've got this ingenious plan where they make products that people actually want, and a pricing strategy that both allows them to provide a reasonable product within the reach of large quantities of people, while also having a compelling enough product with options that those with the money to finance the whole business are willing to do so. Most other car companies don't care about creating a better product for the world - they simply want to maximize profit.

 

[22522]

Not going to happen, for a whole host of reasons.

#1: No company prioritizes customers with a higher default risk.

If you have to close a deal with an entire set, it makes sense to behave in a way that minimizes number of defaults.

 

[diamond.g]

I find all of the nitpicking about option pricing amazing. Considering I am not seeing any of the same in regards to the Chevy Bolt on the GM forum.

I for one am glad they are going the BMW/Mercedes route with options. Allows you to buy exactly what you want (ignore the premium package, lol) instead if making you buy a higher trim before you can even get the option (looking at you Cadillac).

 

[mhan00]

I think 1/3 (1/2 us) won't buy without the tax incentive. The more one makes people count the cost, the more likely they are to walk away.

Maybe I am wrong. Tesla has trained itself on a part of the market where there is little price elasticity. All their instincts and muscle memory are set by that experience.

The 3 is acting on a demographic where there is price elasticity... Offen selling to people who cannot afford it. That happens a lot when one has a desirable product but no way to vet.

The contract lets them sort the list based on credit rating. People who can't pay full price get the tax incentive. People who can get pushed back a bit.

Since we all care about Tesla's economic well being, sorting to maximize closed deals for cars, without lowering the price seems like the best practice.

If you can't afford to pay full price of a 35k dollar car, then the tax credit will be of very limited use to you because you likely don't make enough money to have a tax obligation that large. Tesla will already be facing pretty thin margins on the base III. A great many people were shocked And still doubt Tesla can sell the car for that price and still make money on it. Expectations of even the most bullish Tesla pundits are that Tesla will be making most of their margin on the options for the III. The chances of Tesla throwing in a ton of options for free on the base model is pretty low.

The car is positioned as an entry level luxury vehicle, not an entry level vehicle period.

 

[mhan00]

I have not read every post in this thread but it seems like most are not even adding in sales tax. I know in the state of FL tax is 6% and the last I saw tesla had a $1,200 delivery fee and maybe a $50 doc fee. You add all that up on just the base model 3 zero upgrades and you are paying $38,350. Now that price just keeps going up with all the options that one selects.

Most don't add in sales tax or fees when talking about car prices for most makes and models, mainly because sales tax varies from state to state.

 

[22522]

I find all of the nitpicking about option pricing amazing. Considering I am not seeing any of the same in regards to the Chevy Bolt on the GM forum.

I for one am glad they are going the BMW/Mercedes route with options. Allows you to buy exactly what you want (ignore the premium package, lol) instead if making you buy a higher trim before you can even get the option (looking at you Cadillac).

Someone said that I think the options should be free. They were pretty close to right. Every flavor at baskin Robbins has a different cost. If you measure to the tenth of a penny.

 

[SageBrush]

If you can't afford to pay full price of a 35k dollar car, then the tax credit will be of very limited use to you because you likely don't make enough money to have a tax obligation that large.

A 7500 tax liability probably implies at least (1000/0.1 + 6500/0.2) = $42,500 taxable income and at least $52,500 adjusted gross income.

That level income is lower than I suspect the overwhelming majority of buyers of this car will have. The very motivated at that salary would likely not have $35,000 cash, but they can stretch and make a $500 monthly payment if the car is discounted $7,500 by a tax credit.

I think 22522 is saying that someone who has to stretch to make the payment does not want to feel like they bought sub-par goods. I understand that sentiment, but the reality is either buying used or Hyundai*. In any case, Musk has said that the $35k base level will be a very nice car. Each customer who is limited to $35k will decide for themselves if they agree.

*Hyundai is not derogative. That company *very* astutely cut corners on their cars in ways that their customers were willing to forgive, but left them (relatively) highly optioned. It was a tremendous marketing success.

 

[diamond.g]

Someone said that I think the options should be free. They were pretty close to right. Every flavor at baskin Robbins has a different cost. If you measure to the tenth of a penny.

Out of curiosity, why wouldn't you look at the bolt?