Late delivery of base Model 3 (out of Market Action)

[Lessmog]

I think the SR is important, but just not yet. I agree they must get to a 35K base-as they said they would.

Someone on VA's twitter feed suggested producing 100% LR packs and SW throttling some to SR. That 1) simplifies and streamlines factory, 2) allows for future income from unlocking the hidden capacity (permanently or like a rental), and 3) optimizes battery performance in terms of both longevity and rapid charging. Maybe more benefits. Plus, the concept has been tested and proven.

Looks like a super-smart-suggestion! (3S, (TM) )

 

[MXWing]

Someone on VA's twitter feed suggested producing 100% LR packs and SW throttling some to SR. That 1) simplifies and streamlines factory, 2) allows for future income from unlocking the hidden capacity (permanently or like a rental), and 3) optimizes battery performance in terms of both longevity and rapid charging. Maybe more benefits. Plus, the concept has been tested and proven.

Looks like a super-smart-suggestion! (3S, (TM) )

I will disagree but provide more intelligence than a simple thumbs down.

It sorta worked for the 60D because the base car was still very high. At that high price point you have a chance of coaxing conversions once the price went down to 4500/2500 due to pricing percentage ratios with the high base of the original.

60D cars also had high uptake on EAP. I don’t expect many SR Model 3s to spend 8K on software.

Min-Maxers will have a field day on the value of the SR by just charging to 100 percent all the time while the LR+ folks are trying to preserve their batteries by going from 50-90.

Tesla can sell them as fully unlocked CPOs in the future but the vehicles would have aged and depreciated significantly by then.

Giving upfront margin on a battery that could have went into a P but sits idle on a 3 with no option uptake?

SR Model 3s and world peace are wonderful ideas conceptually.

 

[Drumheller]

Someone on VA's twitter feed suggested producing 100% LR packs and SW throttling some to SR. That 1) simplifies and streamlines factory, 2) allows for future income from unlocking the hidden capacity (permanently or like a rental), and 3) optimizes battery performance in terms of both longevity and rapid charging. Maybe more benefits. Plus, the concept has been tested and proven.

Looks like a super-smart-suggestion! (3S, (TM) )

That would lead to the SR being just as heavy as the LR, which would cut potential range for the SR.

 

[MXWing]

Bring on the disagrees, I have convictions on what I believe is best for Tesla and the shareholders. Though no one seems to have a problem when Elon Musk thinks the SR Model 3 would have killed Tesla.

As I said previously, the SR Model 3 is going to be no go for a very long time because

New battery line
New body
New interior
Worldwide demand for Premium Model 3
Low option uptake on SR Model 3s. $35,000 cars stay $35,000 cars. $80,000 Model 3's check all the boxes.

All the work of bringing the SR to market is like building a new vehicle. Tesla should consider an actual Model 3 lite that accounts for

Smaller battery pack
Reduced autonomy hardware that no one was going to pay for anyway.
Other optimizations to reduce cost

I see this as a better way to get a better car to the consumer that is optimized and designed around the $35K price point.

Controversial but would be an actual win win. I think Elon actually talked about competing in the Corolla class at some point, here you go.

 

[Esme Es Mejor]

Tesla has been promising a car for the masses and has many times stated the $35,000 base price. I believe they owe it to the like waiters to produce what they promised. While I am not happy with the delay I can understand it as they need to also be profitable. But I think it is just as important to follow through with promises.

I think making the SR is hugely important not just to line waiters, but to the reputation of the company. Tesla is a mission-driven company, and while the primary mission is sustainable transportation, the idea that Tesla cares about the common person is tied to that.

It isn’t economically rational, but neither are waiting lists. Both work for social reasons.

Financially, it makes sense to continue producing an average of about 60k LR/week, with any extra production going to SR. So, if Tesla is sustaining 7k+/ week at the end of 2018, they could batch out 20-30k SR for Q1. As total production increases, they have room to batch out more & more SR production without hurting profits.

 

[Krugerrand]

If they introduce the 'Y' before we ever see the SR '3'....we won't see a SR 3 until the China GF is fully operational. (3-4 years).

BTW: Found another avatar for you.

I’d give MY before SR3 less than zero chance UNLESS demand for it is equal to demand for S40.

Re avatar: bring it!

 

[Krugerrand]

I really do believe it to be the case.

Reputation is everything in business (there is a nice quote from WB on this) and I do hope Tesla/EM keep their promises to the masses. MY reservation holders will be taking queues from what Tesla did with M3 reservations to decide if they want to do reservations.

Also do note that once we reach 6-7K/week or 10K/week volume , the volume will make up for lower cost SR.

I’m mildly raising my eyebrows that you’d think they’d ‘break their promise’ of base SR3. IMO, it’ll be offered and demand will be less than people think. And when I say base, I mean base - 35k ZERO options - 18” aeros and car in black no PUP, no EAP, no FSD.

 

[Words of HABIT]

Why all the talk of whether or not SR M3 will be built. Elon committed to producing by end of this year during 2Q CC.

For Shanghai, is it possible that the G3 facility, infrastructure and supporting office buildings, housing et all has already been built by China government and just waiting to be fitted out and occupied? I'm not suggesting Tesla had this in the works, however looks like China has built a fair amount of projects just waiting for multi-national companies to occupy. shanghai ghost city

 

[Krugerrand]

As a hopeful future model Y buyer I couldn’t give a damn about when they release SR model 3. The biggest risk Tesla has to getting model Y revenue from me is how long it takes for the model Y to become available.

Same except that I’ll wait as long as I need to for it.

 

[Fact Checking]

I’m mildly raising my eyebrows that you’d think they’d ‘break their promise’ of base SR3. IMO, it’ll be offered and demand will be less than people think. And when I say base, I mean base - 35k ZERO options - 18” aeros and car on black no PUP, no EAP, no FSD.

While I think there's some level of genuine demand for the $35k version amongst urban consumers, I believe a good chunk of the "Tesla broke their promise to give us a $35k car!!" complaints are coming from shorts:

• It allows shorts to express deep concern and disappointment that "Tesla is breaking their promise",
• It generates fake grassroots pressure on Tesla to make lower margin cars, which is disadvantageous to Tesla's financials,
• When explained that Tesla cannot make the $35k version yet shorts can show even more concern that "Tesla would go bankwupt if they made the car they promised!" ,
• The $35k version would also make it easier for shorts and their allies in the media to deceptively compare the Model 3 to competitors unfavorably,
• Finally, complaining about the delay of the $35k version also allows shorts to make a false binary argument: "Tesla will not be able to serve the mass market until they make a $35k car!", ignoring five inconvenient facts:

1. that the $49k version with federal and state incentives already costs less than $39k in a number of big states,
2. that U.S. inflation of ~2% already turned an early 2016 price of $35,000 into $37,000+ by the end of 2018, with a matching rise in disposable income,
3. that even a $49k car addresses over 30% of the profits of the U.S. car market (high unit count cheap cars have much lower profit margins), which is the metric Tesla should focus on to increase free cash flow,
4. that Tesla can start tapping the European market once they have addressed U.S. demand.
5. that the inability of ICE carmakers to sell more $49k cars is primarily caused by the inadequacy of their cars: Tesla is seeing significant up-sales from owners of much less expensive cars: $20k+ Toyotas and Hondas. I.e. Tesla created new demand for $49k+ cars, which new consumers ICE carmakers have no access to with their high margin $49k+ products. This fast transformation of consumer demand and its negative impact on ICE profit margins should scare the *sugar* out of traditional OEMs.

Tesla introducing the Standard Range version makes sense under the following circumstances:

• if Tesla is still cell run-rate limited by the end of 2018, but they should initially target the highest trim versions with higher margins: PUP+AWD,
• or once v9 Autopilot generates measurably higher EAP+FSD take rates: in that case SR becomes a lower price base platform to sell two near-100% margin software options: EAP+FSD for ~$7k, which has a (much) higher margin than +25kWh of Long Range battery

Selling more EAP+FSD enabled units would also further cement in Tesla's semi-monopoly: it's the two features traditional OEMs will have the most difficulty to match.

 

[Reciprocity]

I will disagree but provide more intelligence than a simple thumbs down.

It sorta worked for the 60D because the base car was still very high. At that high price point you have a chance of coaxing conversions once the price went down to 4500/2500 due to pricing percentage ratios with the high base of the original.

60D cars also had high uptake on EAP. I don’t expect many SR Model 3s to spend 8K on software.

Min-Maxers will have a field day on the value of the SR by just charging to 100 percent all the time while the LR+ folks are trying to preserve their batteries by going from 50-90.

Tesla can sell them as fully unlocked CPOs in the future but the vehicles would have aged and depreciated significantly by then.

Giving upfront margin on a battery that could have went into a P but sits idle on a 3 with no option uptake?

SR Model 3s and world peace are wonderful ideas conceptually.

In terms of margin, a maxed out 3P will compensate for 3 base model cars, bringing the average to the 25% Target. Now that's not enough but many other configs are also over 30% so the blended rate is going to remain high and help Tesla hit that 25% Target. So few people will order a zero option car. Paint, wheels and EAP will have a high take rate. Anyone who commutes will be buying years of life expectancy from the stress reduction.

 

[shlokavica22]

I think making the SR is hugely important not just to line waiters, but to the reputation of the company. Tesla is a mission-driven company, and while the primary mission is sustainable transportation, the idea that Tesla cares about the common person is tied to that.

Absolutely.
It is important to stay solvent and make revenue top priority. Most people understand the reasoning.
However once the finances are in a healthy state (and the production numbers allow positive GM on the SR), it is important to honor the orders of the people who waited hours to order the car. Not switching 100% to SR, but at least starting producing, while keeping the balance sheet in order.

 

[Big Earl]

Bring on the disagrees, I have convictions on what I believe is best for Tesla and the shareholders. Though no one seems to have a problem when Elon Musk thinks the SR Model 3 would have killed Tesla.

As I said previously, the SR Model 3 is going to be no go for a very long time because

New battery line
New body
New interior
Worldwide demand for Premium Model 3
Low option uptake on SR Model 3s. $35,000 cars stay $35,000 cars. $80,000 Model 3's check all the boxes.

All the work of bringing the SR to market is like building a new vehicle. Tesla should consider an actual Model 3 lite that accounts for

Smaller battery pack
Reduced autonomy hardware that no one was going to pay for anyway.
Other optimizations to reduce cost

I see this as a better way to get a better car to the consumer that is optimized and designed around the $35K price point.

Controversial but would be an actual win win. I think Elon actually talked about competing in the Corolla class at some point, here you go.

Why does SR require a new body line? As far as I know, the only major difference is the number of cells in the pack. I see nothing that would require major modifications to install a different battery pack.

Why does SR require a new interior? Premium interior is available on SR and non-premium interior will be available on LR.

Tesla has already said that they will produce the standard range version in 2019. In my opinion, it would be a mistake and sacrifice good will for profits if they were to delay it further. After two profitable quarters, I believe it will be important for Tesla to start shipping SR vehicles to customers, especially those with early reservations who would like to benefit from some of the tax credit.

Delivering SR vehicles will also crush one of the more recent bear narratives.

 

[saniflash]

Re the SR discussion.

Elon is a master of virality (see PayPal). He also mentioned the viral aspect of the M3 on the CC.

Thus, I would assume that in his eyes, an M3 on the street (no matter whether LR or SR) is not only worth the absolute margin of this one specific vehicle to Tesla's bottom line. It triggers follow-up purchases by a certain percentage of people who see/experience it. Thus its bottom-line contribution for Tesla over its lifetime is

z * (absolute margin of that one M3 SR)
with z being a naive viral coefficient in >1

Not the only argument (I find the mission & reputation arguments have a lot more weight), just an additional one.

 

[elasalle]

Re the SR discussion.

Elon is a master of virality (see PayPal). He also mentioned the viral aspect of the M3 on the CC.

Thus, I would assume that in his eyes, an M3 on the street (no matter whether LR or SR) is not only worth the absolute margin of this one specific vehicle to Tesla's bottom line. It triggers follow-up purchases by a certain percentage of people who see/experience it. Thus its bottom-line contribution for Tesla over its lifetime is

z * (absolute margin of that one M3 SR)
with z in ]1; ∞[

Not the only argument (I find the mission & reputation arguments have a lot more weight), just an additional one.

True, (Twitter, FB) etc all measured on number of users. AMZN prime is there to add more users. NFLX bundled with Comcast for free once again to also bump up user base.

Ever SR customer is one more car on the street, one less car for the competition. Also ever SR is a customer for upgrades, Services, internet access, SCharger etc etc .. hell they might even be eating their burgers in the old themed tesla Burger joints .. like IKEA

 

[MP3Mike]

Why does SR require a new body line? As far as I know, the only major difference is the number of cells in the pack. I see nothing that would require major modifications to install a different battery pack.

Why does SR require a new interior? Premium interior is available on SR and non-premium interior will be available on LR.

Tesla has already said that they will produce the standard range version in 2019. In my opinion, it would be a mistake and sacrifice good will for profits if they were to delay it further. After two profitable quarters, I believe it will be important for Tesla to start shipping SR vehicles to customers, especially those with early reservations who would like to benefit from some of the tax credit.

Delivering SR vehicles will also crush one of the more recent bear narratives.

The base SR doesn't have the glass roof, premium sound, or premium interior. So would necessitate a lot of changes to the production lines, as well as changes to the seat manufacturing. (We don't really know exactly what it will have.)

The could make the SR with PUP available with the only difference being the battery, but that wouldn't fulfill the delivery of a $35k car, that would be a $40k car.

 

[Ugliest1]

Absolutely.
It is important to stay solvent and make revenue top priority. Most people understand the reasoning.
However once the finances are in a healthy state (and the production numbers allow positive GM on the SR), it is important to honor the orders of the people who waited hours to order the car. Not switching 100% to SR, but at least starting producing, while keeping the balance sheet in order.

Not picking on you @shlokavica22, well-written post but like others written with a tone of voice that implies Tesla WON’T do what you’re recommending. What makes you (and the several others) think that Tesla doesn’t already have the SR build timeline already mapped out?

I do know it’s frustrating for those who can’t afford anything but the SR and the wait is excruciating. But calling out Tesla for that now is like punishing your kid today for something they might or might not do next week.

 

[shlokavica22]

Not picking on you @shlokavica22, well-written post but like others written with a tone of voice that implies Tesla WON’T do what you’re recommending. What makes you (and the several others) think that Tesla doesn’t already have the SR build timeline already mapped out?

That was not the intention. Quite the opposite. I'm sure Tesla will get to the SR sooner than later.
My point was towards the argument (stated earlier by others) that Tesla should prioritize maximum profit (even after the finances are in tact) with no sentiment towards the long line of SR reservation holders.

 

[jhm]

SR is important for Model Y reservations. Don't keep the SR M3 promise and the number of people reserving the MY will be small.

I think the key here is to set clear expectation that not all versions of the MY will be available by the time orders for some versions are open to non-reservationholders. The value of the reservation is simply that one has a place in line for ordering the first versions as they become available.

 

[Ugliest1]

That was not the intention. Quite the opposite. I'm sure Tesla will get to the SR sooner than later.
My point was towards the argument (stated earlier by others) that Tesla should prioritize maximum profit (even after the finances are in tact) with no sentiment towards the long line of SR reservation holders.

Ok, my misinterpretation. Yes, I agree Tesla should (and in all likelihood WILL) release the SR as soon as they judge their financing can handle it.