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

[jhm]

Will Tesla start exporting M3P to Europe and Asia before delivering M3SR to North America?

 

[N5329K]

No matter when they actually begin SR production, they have pissed off a sizable number (you fill in your preferred percentage) of able, willing and enthusiastic EV customers. That said, it's going to be a bit harder to generate those predawn lines to "reserve" a Model Y.
Robin

 

[AlMc]

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

Re avatar: bring it!

 

[MXWing]

No matter when they actually begin SR production, they have pissed off a sizable number (you fill in your preferred percentage) of able, willing and enthusiastic EV customers. That said, it's going to be a bit harder to generate those predawn lines to "reserve" a Model Y.
Robin

No need to "reserve".

Tesla says Model Y is out Jan 1st 2020. 5000 per week.

Done.

 

[MXWing]

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.

Yeah, I'm going to quit arguing with people who have no idea what they are talking and just let you take it from here.

One of the options I suggested was Tesla come clean and just go $40-42K for SR Model 3. EAP/FSD is bundled in. Everybody wins.

Another option is to index 35K Model 3 to 1972 money. Add in inflation..

 

[JRP3]

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

New battery line

Nope

New body

Nope

New interior

Nope

All the work of bringing the SR to market is like building a new vehicle.

And nope.

 

[AlMc]

Will Tesla start exporting M3P to Europe and Asia before delivering M3SR to North America?

My bet: They do them at the same time but build 80% 3PDs for Europe and 20% 3SL for NA

 

[ktrivedi70]

There has been plenty of whining on TMC about Tesla delaying M3 SR and I've had no sympathy for it because getting profitable with higher ASP versions was truly critical for the company and it's mission.

However that is not a reason or excuse to not do what they promised early in 2019, with two profitable quarters behind them and production closing on 10K per week.
Reneging on the promise unnecessarily, screws over more than 100K Tesla supporters who showed their confidence and support for the company by reserving with deposits. In addition, the production rate of SRs can be set as some percentage of the mix, to maintain revenue and profits. As production rate continues to ramp, SR buyer backlog will be reduced more quickly. Showing a great EV can be had for 35K would be another Tesla tour de force. Proving to the wider car buying public that while seemingly impossible goals may take longer than Tesla thought, an amazing result delayed is still an amazing result. Plenty of value in showing when Tesla says they can do something hard it will come to pass.

I bet that a good percentage of the folks who get the short range version now will become folks who buy higher margin Teslas in the future. I understand that there are short term goals that take priority now, but I think this is an important long term consideration.

 

[MXWing]

Nope

Nope

Nope

And nope.

How many PUP options exist for Model 3?

How many battery pack options exist for Model 3?

How many roof options exist for Model 3?

Am I missing something??

When you are building a big lead and it’s the 3rd quarter, you don’t abandon your game plan on the 4th quarter.

 

[N5329K]

Tesla says Model Y is out Jan 1st 2020. 5000 per week

Don't believe I'd plan a family vacation around that. Like as not Tesla says won't count for much unless it's preceded by "Simon says..."
Robin

 

[JRP3]

How many PUP options exist for Model 3?

How many battery pack options exist for Model 3?

How many roof options exist for Model 3?

Am I missing something??

Yes, the fact that all Tesla need do to build a SR Model 3 is install fewer cells in some of the modules. SR can still have the PUP and the glass roof. I think you may be assuming that the SR3 will only come in a $35K version but I don't expect that to be the case. The roof panel change from a glass panel to a metal panel should be quite straightforward in any case.

 

[MXWing]

Don't believe I'd plan a family vacation around that. Like as not Tesla says won't count for much unless it's preceded by "Simon says..."
Robin

It’s reasonable to believe they can ramp the Y faster than the 3.

It will be fascinating if it has FWD or not. I’ll revise my statement according depending on that.

 

[N5329K]

...or they might be better off digesting what they've already swallowed.
Robin

 

[Fact Checking]

Will Tesla start exporting M3P to Europe and Asia before delivering M3SR to North America?

I believe China is a tough nut for Tesla in terms of managing their pent-up demand, due to the fact that import tariffs increased to 40%:

• Model S/X is supply limited and addresses a luxury market where tariffs are pass-through to a significant degree.
  
• For the Model 3 (even the Performance version) tariffs are probably much less of a pass-through: 40% tariffs could easily mean that Chinese customers willing to spend $80.5k on a fully configured M3P with their favorite color and interior and EAP+FSD will instead buy a $64k minimal performance version with black interior and exterior, which is $89k after tariffs. I.e. by offering the Model 3 on the Chinese market Tesla risks transforming possible sales of their highest margin trims/options into Chinese tariffs.
• While China is a huge market, per capita GDP is much lower than the U.S. or even Europe, so the size of $50k+ or even $80k+ cars is proportionately smaller. So while not offering the M3P could for some customers mean it's a lost sale (they'll buy some luxury ICE instead), but making an inefficient, low margin sale is lost gross margin and lost cash flow for Tesla.
• Finally, Tesla also has to be worried about not depleting their pool of customers for the Shanghai Gigafactory, and to a certain degree they might also not want to put U.S.-made and China-made cars on the roads: for example if the cell chemistry is different then it would mean service complications.
• Also, the tariffs might go away. The Chinese counter-tariffs are hurting Republican donors and eventually that message will get through to Trump. Whatever happens he'll be able to claim a huuuge victory, so agreement is not off the table.
• On the other hand by delaying the introduction of the Model 3 in the Chinese market they also risk losing sales altogether, because right now the lowest Model S/X prices in China are in excess of $100k.

So China looks like a very tough balancing act - and I'd be surprised if they started Model 3 sales in China this year (unless the tariffs go away, of course).

Europe is a no-brainer in comparison:

• It's almost as large as the U.S. market,
• Europeans prefer smaller cars, and the S/X is a bit too large - the Model 3 might be ideal, with no interior volume compromises.
• 10% import tariffs are much less of a hindrance, plus maybe Tesla is going to expand their final assembly factory in the Netherlands, to turn the Model 3 into a 'European made' car with no tariffs?

So I believe European sales of the Model 3 are going to be just as red-hot as U.S. sales.

So I think in the end China introduction of the Model 3 will depend on how badly Tesla needs those sales, and I don't think they'll have demand problems for at least a year, with just the U.S. and the European markets.

 

[ggies07]

I logged in a saw this:

Standard Battery available in 5-8 months

It was 6-9 months.....yay!

Edit: Unless they just updated it to fit the timeline as the months go by....hahaha.....so maybe nothing new....

 

[ggies07]

Official site updated again:

Standard Battery available in 4-7 months

Hopefully this means 4 months including September since it was updated at the beginning of this month, which means they are still on track to produce some in December.

 

[JRP3]

It would be nice if they could at least squeeze out some in December but I won't hold my breath.

 

[ggies07]

It would be nice if they could at least squeeze out some in December but I won't hold my breath.

Yes it would. Do I think it will be mine? No, probably not, but it will be a nice sign that things are getting real and are on track.