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Best Way to Honor the Intent of the Tax Credit?

Discussion in 'Model 3' started by 22522, Jun 12, 2016.

  1. 22522

    22522 Member

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    Sometimes incentives are abused, or gamed, which does not seem right. Is manufacturing and delivering as many cars as possible inside the credit window abusive?

    The $7500 EV tax credit is there to create low cost production capacity of EVs, with the goal of competitive pricing after the incentive goes away. The behavior most consistent with that goal is to build a factory that can satisfy the entire demand inside the full rebate window. This maximizes production capability and efficiency, and is the best path to a "when we are all done" price that is as low as the credit incentivized price, say $26,000 dollars.

    The goal of the program is a Model 3 that is profitably sold for $26,000 without incentives. Tesla is not supposed to just close up shop when the incentives expire. Manufacturing efficiencies are supposed to have improved to where $26,000 is the market price - cars move at that price without government help.

    Tesla should be planning price reductions to match the incentive phase out schedule.

    With that in mind, it is in Tesla's and the public's best interest to deliver as many cars as possible in the 2 quarter window of the $35,000 price point. They make $9K more per car than they do after they honor the price reductions implicit in the bill.

    This says they produce 400,000 cars in 6 months. Then lower the price. It sounds like Henry Ford.

    Does this sound right to you?
     
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  2. Tiberius

    Tiberius Member

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    Keep dreaming.
     
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  3. Woosie

    Woosie Member

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    No, Tesla (I expect) to keep prices on the Model 3 to stay the same but add features as time goes on.

    Tesla would never disclose actual procurement, design, manufacturing and sustainment costs as these costs are variable and are necessarily less than purchase prices by consumers.
     
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  4. msnow

    msnow Active Member

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    Ain't gonna happen.
     
  5. kort677

    kort677 Active Member

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    no
     
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  6. FirstSea

    FirstSea Member

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    The S didn't drop in price, sure the batteries are getting cheaper and so is production, but that's that.

    The 3 won't drop in price, but battery upgrades will be cheaper.

    The 3 will fund a $25k Tesla just as the S and X funded the 3.
     
  7. 22522

    22522 Member

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    To make demand high, Henry Ford had a pattern that worked: Price the car at a point where people can afford to pay.
    The 3 with a tax credit is $26K.
    When the tax credit is gone the 3 should be $26K.
    A 3 at $26K will deliver the kind of demand that Tesla is looking for.
    This seems obvious to me. You have a good design. Make it.
    What am I missing?
     
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  8. msnow

    msnow Active Member

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    What you are missing is that at $35k the demand far exceeded expectations. That seems to be the right price point with or without the tax incentive.
     
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  9. Tiberius

    Tiberius Member

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    #9 Tiberius, Jun 12, 2016
    Last edited: Jun 12, 2016
    You're missing that it's pretty stupid to sell a car for $26k when people will gladly pay $35k+ for it. Tesla is a great company with honorable ambitions but at the end of the day, a company's job is to make money.

    When UNICEF starts making cars we'll let you know.
     
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  10. 22522

    22522 Member

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    Run a credit check on the 400,000.
    They can't pay without the $7,500 credit.
    They mean well, and they are rooting for Tesla.

    The observed demand is at $26,000 for a 3. [It is a "with the tax credit" demand]
    Don't kid yourselves. The price needs to be $26K to keep the factory running.
     
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  11. EinSV

    EinSV Member

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    #11 EinSV, Jun 12, 2016
    Last edited: Jun 12, 2016
    As @FirstSea said, Tesla will be introducing a less expensive car that some refer to as the Model 4. Elon Musk says Tesla’s next car will be even cheaper than the Model 3

    It has been Tesla's plan from the beginning to keep making less expensive cars as soon as economically feasible. The Secret Tesla Motors Master Plan (just between you and me)

    I believe the Model 4 will be introduced in 2020-2022. Given how aggressively Tesla has been moving and how much its battery costs are dropping it is very unlikely to be later than that in my opinion.

    There is no reason to reduce the price of the Model 3. It will be better than the competition at the same price point (my opinion, but I believe many, many car buyers share it, judging by the number of preorders).

    If you search around the forum you will find several threads on the Model 4 with different opinions on timing, pricing, etc.
     
  12. msnow

    msnow Active Member

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    Respectfully I disagree. The tax credit for Tesla was for 200,000 cars and they will likely reach that with the MS and MX close to the availability of the M3. Maybe the first cars will get it but certainly not all. Not even close.
     
  13. ZBB

    ZBB Emperor

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    How is $35k less a $7.5k tax credit $26k?

    Tesla has said the price will be $35k before incentives. Keep in mind that Tesla does not receive that incentive -- the buyer of the car does (or the lessor...). Tesla is aiming to make the model 3 profitable at $35k base -- but I suspect a base car will be minimally profitable, since tesla will make most of the profit on options (especially since some of the options are just enabling a software flag, those are nearly 100% margin.,,). So you are asking Tesla to give up nearly $7.5k in profit (or $9k at your math)? That won't help Tesla here.

    Additionally, the Model 3 target competition is cars like tha BMW 3 series, Audi A4 and Mercedes C class. A lot of people want it to compare to a Honda Accord or Toyota Camry -- but it's pretty clear it's intended to be one price level up and compare with those sports sedans...
     
  14. Tiberius

    Tiberius Member

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    Yeah ok, sure. You're assuming the tax credit is the deciding factor for everyone. Plenty of people would be buying model 3s even if there was no tax credit. Plus there will be enough demand for current and future models to keep prices as is.

    Why did you even ask if you're not going to listen to objective reasoning?

    EDIT: also, the Ford Model T came out over 100 years ago so your comparison (like your premise in general) carries almost no weight.
     
  15. deonb

    deonb Active Member

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    You DO realize that there are countries in the world other than the U.S. right? And that said countries don't have that $7500 tax credit.

    The longest lines before launch were actually outside the U.S.

    So even if they don't sell a single Model 3 in the U.S. they'll have more than enough demand to keep the factory running.
     
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  16. AZ Desert Driver

    AZ Desert Driver Genesis - The Beginning - MS60D in its nest

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    I'm one of those 400,000. My credit check would let me buy with or without the tax rebate. It is the perceived quality/value that has me in line. The tax credit is nice, and I want my piece of it, but this played only a minor part in me deciding on a Tesla. Further, once I started looking at a Tesla M3, and then started adding features from the MS, I'm now looking at the new M60. Perceived quality/value - not tax. A blanket statement that 400,000 people are bouncing along the bottom of the financial ladder is rather presumptive , don't you think?
     
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  17. Skotty

    Skotty 2014 Model S P85

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    For Tesla, the price reductions come from new models, not the same model. The 3 is the price reduction from the S. If Tesla had tried to sell the 3 several years ago, it would have been a lot more than $35K. Many of the technologies have already been refined through the S program.

    Also, Tesla is not going to base their prices on government incentives. They are not going to raise prices because the government offers an incentive, nor are they going to lower prices because an incentive goes away. The incentives have an effect, but there is no direct link between the two.
     
  18. 22522

    22522 Member

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    These are really good points. For 2015 in the US, BMW sold 95,000 3 series, Mercedes sold 86,000 C-Class, Audi sold 29,000 A4s.
    That is just 210,000 cars.The IS brings it to about 250,000.

    I do not know anything about the size of foreign markets, right now.

    What factory run rate do you consider is needed "to keep the factory running?"
     
  19. 182RG

    182RG Free The Service Manuals From Tyranny

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    You know this how? I'm betting there are a significant number of the "400,000" who don't care about, or need the tax credit. Frankly, $7,500 making or breaking your ability to purchase a new car, means you probably shouldn't be buying a new car. Seriously, no one should be living that close to the financial edge when there are plenty of other good choices available, including used.

    So, no, it doesn't sound right. Tesla is a public company. They have a duty to investors to maximize their profits, up to a point that the market will bear. "Public's best interest" and Capitalism are in direct conflict.

    This car needs to stand on its own, and it appears that it will do so.
     
  20. Chopr147

    Chopr147 Active Member

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    I didn't even know about the tax credit when I reserved! Now NY is also giving $2000. Hell, I pay enough in taxes, i'll take whatever I can get and it may even be an incentive to add options. :) I am on Long Island NY and there are so many BMW's, MB's, Audi's etc.....I am always amazed and how much people are willing to spend on a car. 35k is cheap for the M3. I priced a 535i and I was over 60k easy. IK it's comparable to the 3 series but I wanted bigger. I will sacrifice size for the M3. My point is the money is there and before delivery it's likely the reservations will be over 500,000. Hopefully I will at least get the half credit. $7500 will be long gone before most of the M3's are out.
     

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