Why would people pay full sticker price - when they can get heavy discounting on higher-level trim? I suppose next move is to create 1500+ Model S 60 and 60D for inventory layout through Q4 in order to move metal for end of the year guidance. Or if not, some type of reason to take a breather at the factory and slow production for a bit and use that as a reason to lower annual guidance. Soon, they will start blaming customers for not ordering fast enough regarding "demand". (current calls being made to Model 3 reservation holders to "consider an MS60 now")
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Why would people pay full sticker price - when they can get heavy discounting on higher-level trim? I suppose next move is to create 1500+ Model S 60 and 60D for inventory layout through Q4 in order to move metal for end of the year guidance. Or if not, some type of reason to take a breather at the factory and slow production for a bit and use that as a reason to lower annual guidance. Soon, they will start blaming customers for not ordering fast enough regarding "demand". (current calls being made to Model 3 reservation holders to "consider an MS60 now")
"Heavy discount" is not the same as reduction in price on the demo car. This is not discount - it is depreciation due to use in demo fleet. Order of magnitude more people buy new rather than demo cars. I personally would never buy a demo car. They are always exposed to more wear, tear and abuse than a car in personal use.
I bought an inventory car with 15K miles on it. Good as new man. They get refurbed prior to being sold.
In 2005, I bought a demo car from a Mazda dealer. Sticker $27,000 - my price $20k. Well worth the discount there. Very pleasing car too - Mazda6. V6, manual transmission, sport wagon, good utility. Problem was its highway miles were only 27mpg at best. Got a good 135k miles out of it before being crashed out of usage (t-boned by lady in CUV at a quite slow speed leaving a parking lot and not looking).
I think a lot of people are buying demo cars due to discounting of the demo/loaner miles. The Model X Inventory has fallen by 40 since morning of 8/9. About 8 per day nationally. And that is cars "visible" from the web (ie. ev-cpo.com) and does not include unlisted sales. Many Model S are showing with $100 of price drop per day on the inventory. That is roughly $3000/month. It's interesting to see the price history on ev-cpo.com showing daily $100 drops and filling the history list of lots of various values.
Remember a classic-look shiny Red P90DL is just as fast as a new-look model but can be had up to $30,000 less.
Model S P90D 5YJSA1E40GF129357 | Tesla
From $142,700 down to 115,500 and slowly falling.
Who is buying such a car to be a 10-year buy/hold car? Many hold for 2-3 years and trade-in for something else.
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Guys, you are missing my point - it is not a discount, you are buying less for less money. Whether it is material to a particular person or not is beyond the point. I guess conditioning by the car dealers about "discount" over the years took it's toll...
The bottom line is that stores need demo cars to sell cars. Selling demo cars is good business because it allows refreshing the fleet. There is no discounting going on - these demo cars depreciated, and this depreciation is part of the SG&A. Selling demo car is as good for the business as selling the new one.
Regarding the price "drops" they are reflective of time in demo service and mileage. If somebody sells you 1 liter bottle of water with 0.5 liter left in it, you would not call it "discount", or say that the price dropped would you?
The bottom line is that stores need demo cars to sell cars. Selling demo cars is good business because it allows refreshing the fleet. There is no discounting going on - these demo cars depreciated, and this depreciation is part of the SG&A. Selling demo car is as good for the business as selling the new one.
Regarding the price "drops" they are reflective of time in demo service and mileage. If somebody sells you 1 liter bottle of water with 0.5 liter left in it, you would not call it "discount", or say that the price dropped would you?
Then the Classic fascia is being sold at $10,000 discount right off the sticker just because it doesn't look like the new front-end (or have a few of the new items on board). That is also reducing the owners' resale value by $10k on top of normal depreciation.
Here is one showing $10k discount and 50 miles.
Model S P90D 5YJSA1E46GF133641 | Tesla
Another $17,000 discount, 50 miles.
Model S P90D 5YJSA1E47GF128237 | Tesla
Here is one showing $10k discount and 50 miles.
Model S P90D 5YJSA1E46GF133641 | Tesla
Another $17,000 discount, 50 miles.
Model S P90D 5YJSA1E47GF128237 | Tesla
If they sold it to me for a quarter then, it's a discount. A 3 month old car with 3000 miles selling for $5k off, that's indeed not a discount. That same car with $30k off, that's a discount.
Well, you are glossing over the details, as refresh brought changes other than fascia, and price went up by about 3K if memory serves me well.
The improvements with the refresh (I probably missing some):
- Center Console
- Quick Connect Phone Dock
- Dynamic Full LED headlights
- HEPA filtration
Once again, you get less for less money. Calling it "discount" is accepting the brainwash from the years worth of visiting car dealerships...
Wow, you are a person from whom I expect response like this the least. Having a healthy dose of skepticism toward the information fed to us is a good thing, why drop your guard here, because we are getting "discount"?
Accelerated wear and tear is not necessarily outside capabilities of the car...
Here is the thread in question. 31k off price for 4200 miles on a car at most a few months old. Tesla's hold their value so much better than that in my opinion. For example this inventory car, also pre-facelift, has 3100 miles on it and when you price it out is on sale for a discount of 18k. 1000 miles are not worth the 13k difference, so how would you call this?
adiggs
Well-Known Member
Thank you for posting your definition of demand. I like this definition, but it's not the definition that I use. My immediate reaction is that this seems like a good definition for demand, when your fundamental outlook is more short term - as this is the form of demand that is a direct translation into cars for the factory to build, now.
One weakness of this definition is that the way I read it, the 400,000ish model 3 reservations reflect no demand (lack of a binding contract). Of course, Model 3 can't be built in any case today, so its potential demand.
When I'm thinking about demand, my context is a long term investment perspective. I don't care about deliveries in the current quarter - I care about production. A weakness of this view is that run amok, it's easy to imagine a world where the factory is building cars that nobody wants. The strength is that in a production constrained environment, a unit produced is either delivered this quarter or next - there is only a minor difference in timing of receipt of cash (with quarter boundaries imposing arbitrary divisions with greater and lesser effect when adding up the total numbers). This quarter's growing production, is next quarter's baseline to grow from.
My definition of demand for a particular model is the number of annual orders for a model, when their is adequate supply over the course of the year to satisfy everybody's interest in the car AND when the neighboring segments contain a meaningful competitor / substitute. This will wax and wane with the overall economy. It is clearly influenced by the price the car is sold at (but supply and demand always include price in their functions). We might also think of this as the run rate.
For Model S, an important confounding factor is that there are no meaningful competitors in neighboring segments, where those neighboring segments include similar price but different body styling (think luxury SUVs), or same body styling and lower price (think BMW 5-series sedans). This confounding factor for understanding demand (or maybe run rate) is important because we know that Model S is pulling people that wouldn't otherwise be buying in this segment, into the segment specifically for Model S.
The only model I see today as a significant substitute that is drawing buyers away from Model S, is the Model X. And as the cars are made by the same company, this is hardly a problem for us as investors.
When Model 3 launches, I do expect that we'll see the first significant competitor drawing sales away from Model S (to Model 3). I also expect we'll see Model 3 pulling buyers from other segments further down market, and up to a Model 3. I don't know where the balance will be, but I expect the overall trend we see in Model S' segment, of buyers moving away from gas engine cars to Tesla will show up in these other segments.
As additional evidence this dynamic generalizes from Model S, I'm looking to see what happens with luxury SUV's as Model X hits significant production, the backlog gets cleared, and people can just order and take delivery of X.
The unfortunate consequence of my definition of demand, is that it's less tangible and specific than yours @bonaire. And pretty literally means that in my view of things, I don't yet know what Model S demand is. Though the read from the more short term view of things is suggesting to me that we're pretty much there. That's a run rate of like 60 or 80k Model S per year? And I expect that will shrink when Model 3 launches.
What will the Model X run rate be once it's going?
For me, Model 3 does not define demand. It defines desire. No matter what you do, you cannot have it. Today or soon.
Demand is when you have a binding contract and are awaiting completion of the task/project.
We know that it was said 35,000 Model X reservations existed on Jan 1, 2016.
However, the "demand" is that confirmations and Vin # assignments have hit approximately 17000 for production models.
So, desire is one thing, perhaps something beyond that - and then demand comes in when reservations become a "demand for production" in the form of a contracted confirmation.
I know the future "excitement of desire" for the Model 3 exists. However, it is not a real product - yet. How can we judge demand for that beyond the 350,000 or so fully refundable reservations which may include investors who can easily afford to toss in a $1000 refundable deposit to help their position as a stockholder? I would have loved to see Tesla do something like Elio Motors - and take the reservations in two flavors. Fully Refundable - and Non-Refundable. If someone really wants one, they would definitely go with the binding non-refundable reservation. It also makes a better statement of faith on both sides. "we will be there for each other - one as a vendor and one as a customer - lock it in". Hardship refunds would be allowed with proof.
I demand 50% efficient Solar PV modules. I really demand it. Because if I had them, I could power my house with 1/3 the modules I have now. My demand doesn't matter. it is only when the product exists and I can "do something about it" is there real demand. I also demand lower tax rates, higher employment and ice cream for everyone before bedtime. Doesn't always mean any of those things will happen.
Demand is when you have a binding contract and are awaiting completion of the task/project.
We know that it was said 35,000 Model X reservations existed on Jan 1, 2016.
However, the "demand" is that confirmations and Vin # assignments have hit approximately 17000 for production models.
So, desire is one thing, perhaps something beyond that - and then demand comes in when reservations become a "demand for production" in the form of a contracted confirmation.
I know the future "excitement of desire" for the Model 3 exists. However, it is not a real product - yet. How can we judge demand for that beyond the 350,000 or so fully refundable reservations which may include investors who can easily afford to toss in a $1000 refundable deposit to help their position as a stockholder? I would have loved to see Tesla do something like Elio Motors - and take the reservations in two flavors. Fully Refundable - and Non-Refundable. If someone really wants one, they would definitely go with the binding non-refundable reservation. It also makes a better statement of faith on both sides. "we will be there for each other - one as a vendor and one as a customer - lock it in". Hardship refunds would be allowed with proof.
I demand 50% efficient Solar PV modules. I really demand it. Because if I had them, I could power my house with 1/3 the modules I have now. My demand doesn't matter. it is only when the product exists and I can "do something about it" is there real demand. I also demand lower tax rates, higher employment and ice cream for everyone before bedtime. Doesn't always mean any of those things will happen.
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Dont you find it amazing that people stand in line in rain/sunshine to put in deposits for the 'Desire' as you call it?
Krugerrand
Meow
Well, what I did was paid $1,000 to get in line for a car that WILL be made well within my definition of 'soon' - as far as 'desires' go. So really don't know what you're talking about.
Well, as I mentioned before, this is pre-refresh car, it's depreciation reflect mileage, age, price increase associated with the facelift, the fact that it does not have quite a few items that are included in the post-refresh cars and the fact that it's appearance is now one generation behind of what is currently being offered. The depreciation could also include things which we can't see from the listing:
- any wear/tear on the interior items
- damaged/scratched wheels
- swirled/pitted paint
- pitted windshield
- etc
What I really want to know is whether 70D the OP returned was inventory car as well and what was the reason Tesla took it back...
The comparable cars with 18k off are also pre-facelift, same mileage etc. For a 13k difference I think it is more likely a discount than the reasons you sum up like have damaged wheels or windscreen. All those can be replaced _new_ and still cost less than the price differential.
Also, according to your definition, every car sold through a referral program is sold with a discount because the buyer gives up nothing in value for getting the lower price. Technically right is the best right
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