Latest Price Drop Discussion

[MXWing]

I am still trying to wrap my head around the economics of this as well. If Tesla is selling these Model 3s as fast as they can make them then why are they reducing prices?

Purely speculative as I’m not in the board meetings but my bet would be something like this:

Tesla sells all the KW capacity they make as part of the SR/SR+ package. The first 50 KW capacity is the most expensive COG in the entire car.

SR is guaranteed lowest uptake on FSD as well. They had to force AP to even capture that 2K or so marginal revenue.

It only takes Tesla an additional water melon sized motor and 25KW more battery to make 16K more in revenue.

I’ll throw out a guess that it’s 500% marginal revenue for that 3000 in COGs.

So yes, Tesla sells every car it makes but it needs to make less SRs and more P’s.

 

[EinSV]

Yep, if the MSRP doesn't go down then the price hasn't really dropped.

As many have pointed out in this thread, dealers changes prices all the time, even when the MSRP stays the same. It seems it is only when Tesla changes their price that (a few) people seem to get upset.

Chevy offers a great solution for those people -- GM hasn't changed their sticker price, so they have no reason get upset. They won't even know they just missed out on a better deal that someone down the street just got.

Ignorance is bliss!

 

[Daniel in SD]

As many have pointed out in this thread, dealers changes prices all the time, even when the MSRP stays the same. It seems it is only when Tesla changes their price that (a few) people seem to get upset.

Chevy offers a great solution for those people -- GM hasn't changed their sticker price, so they have no reason get upset. They won't even know they just missed out on a better deal that someone down the street just got.

Ignorance is bliss!

It's not just the evil dealers lowering prices. The manufacturers are constantly changing the incentives (kickbacks) to the dealers which is what allows them to sell so far below MSRP.

 

[raptor5244]

As many have pointed out in this thread, dealers changes prices all the time, even when the MSRP stays the same. It seems it is only when Tesla changes their price that (a few) people seem to get upset.

Chevy offers a great solution for those people -- GM hasn't changed their sticker price, so they have no reason get upset. They won't even know they just missed out on a better deal that someone down the street just got.

Ignorance is bliss!

It will take some time for the market to get used to this. With other manufacturers buyers tend to know the timing of one model year to the next so you can anticipate discounts and incentives. You know when the 2019s are ending their run and the 2020s are about to hit the lots, etc. With Tesla it tends to be more shocking. For example, the recent $5k price cut on the M3P. Rather than reducing pricing in stages over say 4-6 months they just wack it $5k. They could have tried out a $2500 reduction first to see how that impacted sales and then worked their way down further if needed.

 

[AlanSubie4Life]

I am still trying to wrap my head around the economics of this as well. If Tesla is selling these Model 3s as fast as they can make them then why are they reducing prices?

They weren't selling them as fast as they could make them at the old price.

Probably that is true about the small price adjustments. They needed to lower the price to keep the demand more or less the same with the reduced tax credit.

But that doesn’t explain the large price reduction on the Performance. I think as others have mentioned, they have decided they need to try to improve their margin mix, and this should do it, I think. So overall they’ll be selling the cars as fast as they can make them, but maybe at a higher profit per unit. Why they did not do this before, I am not sure. Maybe they figured the SR buyers were more price sensitive and should get the larger tax credits or something, and now that the credit is getting smaller they can focus on the high end again. I have no idea. It’s also possible that the battery production constraints are a little more relaxed now.

 

[EinSV]

It's not just the evil dealers lowering prices. The manufacturers are constantly changing the incentives (kickbacks) to the dealers which is what allows them to sell so far below MSRP.

Absolutely. It's just evil Tesla that's upfront and transparent about the price changes. I mean .... they put it right there on their website for everyone to see!!!

It would be so much less upsetting if they could just hide things a little better, or pretend it's a Fourth of July sale or something.

It's downright Un-American to reduce prices and not even try to hide it.

 

[MXWing]

It's not just the evil dealers lowering prices. The manufacturers are constantly changing the incentives (kickbacks) to the dealers which is what allows them to sell so far below MSRP.

On top of the above, there are entire entities like GM Financial that loan you money below the prime lending rate and subsidizing leases to blow cars off the lot despite high advertised MSRPs.

And then go bankrupt destroying all shareholders and forcing tax payers to pay their reorganization bill.

 

[Glamisduner]

As many have pointed out in this thread, dealers changes prices all the time, even when the MSRP stays the same. It seems it is only when Tesla changes their price that (a few) people seem to get upset.

Chevy offers a great solution for those people -- GM hasn't changed their sticker price, so they have no reason get upset. They won't even know they just missed out on a better deal that someone down the street just got.

Ignorance is bliss!

We are taking about over 20k in price drops though... Not sure I have seen a gm drop 20k in less than a year.

I certainly haven't paid 20k of my loan yet...

Not sure why anyone would consider anything but a Tesla with the current pricing as long as they can charge at home, or need a truck or something.

 

[Knightshade]

On top of the above, there are entire entities like GM Financial that loan you money below the prime lending rate and subsidizing leases to blow cars off the lot despite high advertised MSRPs.

And then go bankrupt destroying all shareholders and forcing tax payers to pay their reorganization bill.

That's... not really what happened though...


The current GM Financial is a company that GM bought in 2010 and renamed. AFAIK they never went bankrupt and never took any bailout money.

You're thinking of GMs old finance company GMAC.

But even then your story isn't what happened-

By the time the government bailed out GMAC in 2008 they were no longer majority owned by GM at all... GM having sold majority control to a private equity firm in 2006 to raise cash.

Further, the government ended up selling their shares of GMAC (renamed to Ally) post-bailout for 14.7 billion, and got another 4.9 billion in dividends and other income during their ownership...meaning the government got back 19.6 billion after only having bailed them out for 17.2 billion total.

 

[cablue]

We've had Teslas since 2013. We also bought a P3+ at the higher price. Just went on the Tesla site to look at getting another, we love it so much. Was very surprised at the price reduction - kept looking back in the build to see if I was missing something. This discovery did not make me mad at having bought it at a higher price - it did not make me want to leave Tesla and buy something else. I'm just thrilled we can get another P3+ for a reduction in price. It's a bargain in my book! Yes, Tesla has some issues as a company, but their cars are amazing - nothing else I'd rather have.

 

[acarney]

Purely speculative as I’m not in the board meetings but my bet would be something like this:

Tesla sells all the KW capacity they make as part of the SR/SR+ package. The first 50 KW capacity is the most expensive COG in the entire car.

SR is guaranteed lowest uptake on FSD as well. They had to force AP to even capture that 2K or so marginal revenue.

It only takes Tesla an additional water melon sized motor and 25KW more battery to make 16K more in revenue.

I’ll throw out a guess that it’s 500% marginal revenue for that 3000 in COGs.

So yes, Tesla sells every car it makes but it needs to make less SRs and more P’s.

I somewhat agree. Tesla may try to be capturing as many SR/SR+ sales as they can earlier in the quarter so there isn’t a bottle neck on delivery at the end. However, I do think they’re playing with demand levers for different trims. I know I’ve seen a bunch of people here that were in one trim either with an order placed or about to order that now we’re talking about moving up to the next trim because it was affordable now or a good deal. Partly because of the price drop and also partly being able to step down from a color option and settle with the pearl white. That fees up like $2500 which makes SR+ to LR a rather “small” jump now for what you get. Same with LR going to performance, especially if people don’t plan to track it but want the smile/laugh inducing rocket like acceleration for themselves and a fun trick for friends. Unbundling the full performance package and allowing the rocket like acceleration is only a $2k difference now with ZERO hardware change, just a “validated” motor.

If Tesla is able to capture the people that can JUST get into the LR, and the people that think $2k is a steal for almost supercar acceleration, then their price drop actually is a increase in sales of $2k to $4k per vehicle.

I had talked myself into going from SR to SR+ because it seem like a good deal and reachable in my budget. Now I’m trying to figure out if there is anyway to move up to the LR because of the price drop, even though I had zero intentions to do that before! The thing holding me back now is I have a state level sales tax credit that only applies to vehicles $45k and under, and I believe that is including the $1200 destination fee. So moving to LR means I lose $2500, which puts it back into the hurting territory.

If anyone knows of a sales advisor/owner advisor that can remove AP from a LR model and discount it enough to get out the door at like $44,990 connect me with them and I’ll jump on it! (And then I’ll just add standard AP back on after delivery ) I’m fine with basic pearl white/black interior and inventory vehicles as long as they still look pretty good! [Washington state, but might travel and drive it home if they can make it happen!]

 

[jebinc]

I somewhat agree. Tesla may try to be capturing as many SR/SR+ sales as they can earlier in the quarter so there isn’t a bottle neck on delivery at the end. However, I do think they’re playing with demand levers for different trims. I know I’ve seen a bunch of people here that were in one trim either with an order placed or about to order that now we’re talking about moving up to the next trim because it was affordable now or a good deal. Partly because of the price drop and also partly being able to step down from a color option and settle with the pearl white. That fees up like $2500 which makes SR+ to LR a rather “small” jump now for what you get. Same with LR going to performance, especially if people don’t plan to track it but want the smile/laugh inducing rocket like acceleration for themselves and a fun trick for friends. Unbundling the full performance package and allowing the rocket like acceleration is only a $2k difference now with ZERO hardware change, just a “validated” motor.

If Tesla is able to capture the people that can JUST get into the LR, and the people that think $2k is a steal for almost supercar acceleration, then their price drop actually is a increase in sales of $2k to $4k per vehicle.

I had talked myself into going from SR to SR+ because it seem like a good deal and reachable in my budget. Now I’m trying to figure out if there is anyway to move up to the LR because of the price drop, even though I had zero intentions to do that before! The thing holding me back now is I have a state level sales tax credit that only applies to vehicles $45k and under, and I believe that is including the $1200 destination fee. So moving to LR means I lose $2500, which puts it back into the hurting territory.

If anyone knows of a sales advisor/owner advisor that can remove AP from a LR model and discount it enough to get out the door at like $44,990 connect me with them and I’ll jump on it! (And then I’ll just add standard AP back on after delivery ) I’m fine with basic pearl white/black interior and inventory vehicles as long as they still look pretty good! [Washington state, but might travel and drive it home if they can make it happen!]

Food luck and keep us posted. We’ll get you into a LR one way or another!

 

[Pegann]

The cars are great and I love the performance model 3, BUT

I bought my M3P+ in January for $73 000 (+taxes, delivery, etc) with FSD, white interior and white multicoat paint.

Today that car costs $62 000

Factor in my additional $1875 rebate and I've lost $9125 in 6 months, plus normal depreciation. Now tell me again about how my car is actually an appreciating asset

I like a lot of things about Tesla, but Musk's slimy sales tactics and compulsive lying are major issues with the company. I bought a Tesla believing in the vision and now I feel like a sucker who bought into a scam. I will definitely try hard to avoid buying a Tesla next time around. It's sad, but the brand has about the same prestige as VW to me at this point.

Yes it sucks that it costs less now, I paid more for mine too. I wondered if you think you should pay for all the software updates that improve the car in some way. How many electric car companies have this practice? Are there many? This is a honest question, I'm not sure.
Popularizing EVs comes with a risk. There's going to be price fluctuations, especially products that are considered innovative. Price changes happens on many products. I admit that I've lost track of the pricing for this same reason, but not surprised. But that can come with being an early adopter. EVs are still a tiny subset of the automotive industry. For Evs to stand a chance, we must move the barriers. That means making them cheaper. Isn't that the vision of Tesla? To create a renewal future with affordable electric cars? You mentioned the vision, what does that mean to you?

 

[raptor5244]

For Evs to stand a chance, we must move the barriers. That means making them cheaper. Isn't that the vision of Tesla? To create a renewal future with affordable electric cars? You mentioned the vision, what does that mean to you?

As a new Tesla owner I think I realized this when I handed them the check at delivery and instead of congratulations they said “it is going to a good cause.” Like instead of buying a car I just made a donation to saving the earth.

 

[PNWLeccy]

I somewhat agree. Tesla may try to be capturing as many SR/SR+ sales as they can earlier in the quarter so there isn’t a bottle neck on delivery at the end. However, I do think they’re playing with demand levers for different trims. I know I’ve seen a bunch of people here that were in one trim either with an order placed or about to order that now we’re talking about moving up to the next trim because it was affordable now or a good deal. Partly because of the price drop and also partly being able to step down from a color option and settle with the pearl white. That fees up like $2500 which makes SR+ to LR a rather “small” jump now for what you get. Same with LR going to performance, especially if people don’t plan to track it but want the smile/laugh inducing rocket like acceleration for themselves and a fun trick for friends. Unbundling the full performance package and allowing the rocket like acceleration is only a $2k difference now with ZERO hardware change, just a “validated” motor.

If Tesla is able to capture the people that can JUST get into the LR, and the people that think $2k is a steal for almost supercar acceleration, then their price drop actually is a increase in sales of $2k to $4k per vehicle.

I had talked myself into going from SR to SR+ because it seem like a good deal and reachable in my budget. Now I’m trying to figure out if there is anyway to move up to the LR because of the price drop, even though I had zero intentions to do that before! The thing holding me back now is I have a state level sales tax credit that only applies to vehicles $45k and under, and I believe that is including the $1200 destination fee. So moving to LR means I lose $2500, which puts it back into the hurting territory.

If anyone knows of a sales advisor/owner advisor that can remove AP from a LR model and discount it enough to get out the door at like $44,990 connect me with them and I’ll jump on it! (And then I’ll just add standard AP back on after delivery ) I’m fine with basic pearl white/black interior and inventory vehicles as long as they still look pretty good! [Washington state, but might travel and drive it home if they can make it happen!]

We are travelling on a similar path, as I fully intended to get SR initially, talked myself into SR+, thought a used LR RWD would be a good option but waffled too long and am now trying to see what I can do about getting a LR AWD under $45k (same WA credit as @acarney).

The sticking point is seeing if the doc+dest. fee count towards the total price for tax credit purposes for me, but all of these adjustments have definitely persuaded me to pursue a higher trim because I just love a good deal. Goddamn price anchoring is so effective on me...

 

[Thomas Edison]

And yet you replied and bumped it - Interesting!!

Nice try, that’s not going to work on me pal

 

[Pegann]

As a new Tesla owner I think I realized this when I handed them the check at delivery and instead of congratulations they said “it is going to a good cause.” Like instead of buying a car I just made a donation to saving the earth.

You did both

 

[acarney]

We are travelling on a similar path, as I fully intended to get SR initially, talked myself into SR+, thought a used LR RWD would be a good option but waffled too long and am now trying to see what I can do about getting a LR AWD under $45k (same WA credit as @acarney).

The sticking point is seeing if the doc+dest. fee count towards the total price for tax credit purposes for me, but all of these adjustments have definitely persuaded me to pursue a higher trim because I just love a good deal. Goddamn price anchoring is so effective on me...

Please let me know if you find out anything! Last I heard the doc/destination fee does count, but I only asked once and that was before the price drop. It’s so dang close otherwise. If they could just unbundle AP & the doc/destination fee they could get it to the price that would slide under the WA credit. I called the Bellevue store tonight and they checked for inventory cars, said the best one they had in WA state had like an $80 discount (seriously why even discount that?!). Then they said they didn’t think it was possible to remove AP for a savings... he mentioned a bunch of Tesla reps were trying to figure it out for themselves too right now, lol.

 

[cbkyro]

The cars are great and I love the performance model 3, BUT

I bought my M3P+ in January for $73 000 (+taxes, delivery, etc) with FSD, white interior and white multicoat paint.

Today that car costs $62 000

Factor in my additional $1875 rebate and I've lost $9125 in 6 months, plus normal depreciation. Now tell me again about how my car is actually an appreciating asset

I like a lot of things about Tesla, but Musk's slimy sales tactics and compulsive lying are major issues with the company. I bought a Tesla believing in the vision and now I feel like a sucker who bought into a scam. I will definitely try hard to avoid buying a Tesla next time around. It's sad, but the brand has about the same prestige as VW to me at this point.

I actually think a number of people are missing Sutton's point. The first issue is deceiving claims and pressure to buy before tax incentives are gone. Each time the Federal credit has been reduced, it's covered by Tesla with a price drop. The earlier buyers are fronting the cost for them to be able to do this, not process improvements.
This is also supported by my second point, that now the software upgrades are included. AP and Performance upgrades. If the company wants to include them now then great. But don't require earlier customers to still pay significantly more to upgrade now.

Doing a comparison of when we purchased in December 2018 against the same config now, we're spending $10,010 more just to get FSD. They took away the trial discounts as well in addition to ending the trails early. Tesla has an easy incentive opportunity for longer standing customers. Offer AP+FSD for the same price as new customers. Mind blowing, right?

 

[Leafdriver333]

Moderators, may I suggest thinking twice before merging completely disjointed threads together. There’s nothing wrong with parallel discussions, especially when the topics of conversation within diverge wildly. This thread is essentially useless now.

I think having one thread to express all our dissatisfaction is a good idea.

Btw. My auto wipers don't work.