Is this the end?

[Dutchie]

What happened this week made me very uncomfortable. Tesla had to pay back more than $900 million which coincided with the announcement of the standard Model 3. Tesla always maintained that they were production constrained. Demand remained high even when standard range M3 was not available yet. Why come now with standard M3 when they said it would be the middle of the year.

Now standard M3 is available and deliverable within weeks. How can that be? If you have still a high demand of higher priced M3's and you are production constrained, why come with a lower price M3 which will obviously have lower margins?

Than the price slash of Model S and X. How can this happen? How can they remain producing them with these prices and still remain profitable?

Slashed prices for current owners to upgrade EAP and FSD. Desperate for cash? Again coincides with huge payment of over $900 million

Than closing of stores.

All in all it looks like a closing sale to me. Everything must go. Take it while you can!

Any thoughts? Am I too negative?

 

[gilscales]

Maybe the Doors said it best

[Chorus]
This is the end
Beautiful friend
This is the end
My only friend
The end

[Verse 1]
Of our elaborate plans, the end
Of everything that stands, the end
No safety or surprise, the end
I'll never look into your eyes again

 

[Surfer]

Who wants to pay for showrooms?

Who wants to talk to car salesman?

I think this is fantastic! I just think the optics of it were poorly planned.

 

[Fellsteruk]

They have just over 3billion cash in the bank so paying back the bonds is no big issue.

Slashing the price of s x I don’t agree with especially the P but everything else they did makes perfect sense. I mean everyone is going nuts about online only.

I ordered my MX in April 18, I took deliver at an SC in September, I signed my finance on an iPad so in my mine it was already online.

Less stores don’t seem like an issue at all.

 

[Ostrichsak]

What happened this week made me very uncomfortable. Tesla had to pay back more than $900 million which coincided with the announcement of the standard Model 3. Tesla always maintained that they were production constrained. Demand remained high even when standard range M3 was not available yet. Why come now with standard M3 when they said it would be the middle of the year.

Now standard M3 is available and deliverable within weeks. How can that be? If you have still a high demand of higher priced M3's and you are production constrained, why come with a lower price M3 which will obviously have lower margins?

Than the price slash of Model S and X. How can this happen? How can they remain producing them with these prices and still remain profitable?

Slashed prices for current owners to upgrade EAP and FSD. Desperate for cash? Again coincides with huge payment of over $900 million

Than closing of stores.

All in all it looks like a closing sale to me. Everything must go. Take it while you can!

Any thoughts? Am I too negative?

Why come?

 

[GreenT]

The fact you used an iPad, not Android, is the biggest problem I see.

 

[Uncle Paul]

If I had a nickle for every times someone predicted the end of Tesla....

All have been proven wrong.. Even the Bankwupt ones.

 

[gilscales]

The fact you used an iPad, not Android, is the biggest problem I see.

I bought an iPhone in 2007, once thoroughly wrapped in the ecosystem of Apple I found it not worth the effort of extraction, haha

 

[Dutchie]

The fact you used an iPad, not Android, is the biggest problem I see.

Huh? How do you know?

 

[HabitualUser]

Am I too negative?

Yes, although the new is not all positive.

The price drops across the entire range seems to be an adjustment to demand, which could be the economy (auto sector is weaker) or within Tesla, neither which are good. Yet dropping the stores, many of which are in high-rent leases in nice malls, is a long-term positive. Once production gets humming, this could help further improve margins.

Like the Battle of the Coral Sea, it may be a tactical defeat, but a strategic victory.

 

[thx1139]

I have been purchasing cars online or over the phone since 1990. I never once cared for the whole sales process at dealerships. Never did a test drive sway me one way or another. Why? Well with a salesperson beside me and not wanting to 100% purchase the car I was careful as *sugar* and never really drove the car the way I would have if it had been my own.

Honestly until Tesla sales people hated us. We would call up get the price they would give us. Tell them we want to come in and sign everything very fast and get out. No up-selling to us. No fabric treatment, none of that profit padding *sugar* they wanted to give us. They would still try to sell it to us. The old well you need to talk to my manager just so were covered crap. We pressured them as well. We did our research lets us sign the paperwork then get out.

Basically we wanted the experience we get when we purchased our Teslas. We researched then we ordered online and went and quickly signed a couple pieces of paper and drove out. Maybe 10 minutes of going over how things worked in the car, inspecting it and driving away.

 

[Deeppurple]

I have been very much puzzled as well, but:
1. Closing of stores is a good move in the end, as long as they don't close all of them. Why fight with the number of states that prohibited the direct sales to consumers at the physical locations, when you can just sweep this entire issue under the rug while the traditional automakers can continue paying for the high cost of sales. In Tesla's case the product kind of sells by itself.
2. Tesla has sold over 150,000 M3's already at the $45K+ each and Elon has mentioned that most of those buyers (75%) were not on the reservation list anyways.Therefore, most reservation holders were in fact holding for the $35K M3 and now they can have it.
3. The S/X pride slash, even though it hurts me personally, could also be justified since they further simplified the options and needed to move some of the capacity to the M3 production line.

 

[BlufftonBob]

I never found Tesla store/gallery folks to be anything but helpful and never pushy. I too want some of the stores/galleries to survive even if they are combined with service/delivery centers. I think that there are lots of folks who need to sit in and drive a car before they purchase it. That said there certainly are some cities where multiple stores are located - and great expanses of the country where none exist.

I don't get why some folks are upset about the price reduction of the MS and MX? We have a 2015 MS 85 AP1 and a 2017 MS 75D AP2. The price reductions will hasten my decision to trade in the MS 85 and I'll probably upgrade the MS 75D to FSD now that it is only $3K to do so.

 

[Deeppurple]

I don't get why some folks are upset about the price reduction of the MS and MX? We have a 2015 MS 85 AP1 and a 2017 MS 75D AP2. The price reductions will hasten my decision to trade in the MS 85 and I'll probably upgrade the MS 75D to FSD now that it is only $3K to do so.

When you go to trade in your Teslas you will def see the difference now as both of your cars just depreciated substantially. On the other hand I can totally justify their MS price reduction - I it is a 7 year old body design for the most part, but I am not so sure why MX is heavily discounted as well. SUV's as as popular as ever and MX has no competition at this point, as I-Pace and e-tron are smaller.

 

[J1mbo]

Putting the price cuts into perspective: 5 years ago, a fully loaded MS P85+ cost about the same amount as a fully loaded P100DL today. 5 years of production improvements, cost savings, etc.

The real surprise for me was the cutting the selling price at the same time as closing the stores. Maybe a lighter price cut could have kept more stores open, or helped to pay for improvements to after-sales service.

 

[BlufftonBob]

@Deeppurple I expect the MS 85 to depreciate considerably but I am also thrilled to upgrade the MS 75D from EAP to FSD for a mere $2K or $3K.

 

[Deeppurple]

Assuming that Tesla will keep the stores next to the service centers open, closing the mall stores will probably be OK in the long run as mall traffic has been declining for years anyway. Also, with FSD being around the corner (probably a year), I guess they will be able to just dispatch a car from their service center to the potential customer for the test drive--cut the sales person BS.Tesla could perhaps come up with a demo mode that quickly explains everything about the car on the in-car touch screen, while the customer can ask additional questions by contacting the tech support while in the car.

 

[mikevbf]

It's just the old supply and demand equation. Tesla is an agile company. As their production goes up, supply goes up. Either demand meets the increasing supply or the price has to come down to boost that demand. I'm not worried about Tesla. They have some of the highest margins in the industry and so have the cushion to roll with these short term fluctuations unlike companies whos margins are as low as they can go.

 

[Singuy]

This is the beginning. What is Tesla's mission statement? What is their secret master plan?

Everything Elon did on Thursday was a fat "mission complete" for secret master plan part one.

You have to remember that Tesla wants EVERY CAR ON THE ROAD to be electric ASAP. Time is running out, and Elon started this company not to sit on a pile of cash but want to curb CO2 emissions. Their mission has always been to cut prices as fast as they can down to a level that is highly competitive to ICE counterparts REGARDLESS of demand.

The last two quarters have show us that they can generate an operational cash flow positive of over 1 billion/quarter(that's profit prior to capital expenditures). Elon have solved production bottle necks and have multiple new battery lines since Q4 to drive prices down. He has trimmed the fat wherever he can while maintaining the same production growth. The demand for the M3 high trim version was high enough to give Tesla the ability to drive down all Tesla prices and the plan is working BETTER than Elon has hoped.

This is no fire sale, this is the beginning. Tesla currently has the cheapest electric car with a positive margin. Legacy automakers as of last Thursday just went from 2-3 years behind to 5-6 years behind.

 

[S4WRXTTCS]

What I know - This is an uncomfortable change

What I don't know - What happens next