Lets hope Tesla doesn't go bankrupt with 35K model 3

[argon2018]

Not sure why Tesla needed to do this with possibly negative margins. They have to close all the stores... because of this car and it doesn't make sense to me why it was so necessary to announce a 35K model 3. They didn't have to do this. People need to test-drive a car before buying it.

Let's hope it works out and Tesla survives.

 

[Maximilien]

Agreed. Too much, too soon once again.

 

[argon2018]

Agreed. Too much, too soon once again.

Way too many changes, closing most of the store to offset the cost of a negative margin 35K model 3... I don't know if that's a great idea. They need to keep galleries for sure so people can see these cars. They should announce model Y ASAP and at least get some cash in with reservations

 

[SJC3]

They aren’t closing all stores. Clearly it didn’t make business sense to keep all of them open. I am a tiny bit concerned about their survivial over the next year though.

 

[argon2018]

They aren’t closing all stores. Clearly it didn’t make business sense to keep all of them open. I am a tiny bit concerned about their survivial over the next year though.

Agree, stores that weren't getting a lot of traffic needed to go. Most of the time, you could see sales staff doing absolutely nothing while the service center was getting slammed. So it really didn't make sense to have that many sales staff just hanging out doing nothing. Divert them to service centers...

 

[Big Dog]

They didn't have to do this.

If they didn't have to do this, they would not have. If the $35k model is available for delivery in 2-4 weeks, that likely means the backlog of LR & MR cars has been eliminated.

Personally, I have never test-driven a car that I bought, but I am a little different. So yeah, closing galleries/stores is gonna hurt at least on the margin.

 

[OCR1]

Elon's vision has always been to bring EV technology to the masses. Charging a premium price to have a bunch of sales galleries around does nothing to bring his vision closer to reality. Lowering overhead so that he can bring out the long promised $35K clearly does.

The new $35K starting point is going to have a major effect on the competition. Other companies are still trying to figure out how to make money on non-premium EVs, and the new lower price points of a Tesla have got to be creating some headaches for the other car manufacturers that were getting ready to launch their own EVs in the next 12-18 months.

If I were running Chevrolet right now, I'd seriously be thinking about killing the Bolt. Who is going to want one after March 31 when the tax credit is cut in half, and it will now cost as much or more than buying a Tesla.

 

[Thomas Edison]

Not sure why Tesla needed to do this with possibly negative margins. They have to close all the stores... because of this car and it doesn't make sense to me why it was so necessary to announce a 35K model 3. They didn't have to do this. People need to test-drive a car before buying it.

Let's hope it works out and Tesla survives.

I’m thinking of it like this: Tesla knows their sales figures and closing the stores will keep overhead down enough to make the 35k not a negatives margin, but a positive margin car. It was necesssey to bring the 35k car to market at this point because demand was far lower than production capacity for current models (not accounting for international sales). I think they are going to sell 35k-40k cars like hotcakes. Their margins before the SR introduction were already in the top 3 of the auto industry. If they suffer from the SR being the bulk of their production because of the demand then so be it. They will just be down a few spots on the list of gross margin. It’s the price they will have to pay for the time being to get the car and EV adoption to the masses while still be able to make cars at their full run rate. Once the production costs go down (as they are constantly working on) they will start going up the list again on the margin leaderboard.

There are a lot of people much smarter than me who think about this stuff way deeper from the business side. I’m just a jack of all trades who’s into Tesla and that’s what I see.

Ps: sandy monroe (spelling?) said that Tesla is the only car company that can sell an electric car at a profit.

 

[Gargantuar]

I do not expect Tesla to prioritize the production of 35k & 37k Model 3.
Now with orders coming from more parts of the world, new lower prices all around, Tesla will probably manufacture and sell the bigger margin cars first. If production capability remains available weekly, they will make some standard configurations.

 

[ChrisH]

I do not expect Tesla to prioritize the production of 35k & 37k Model 3.
Now with orders coming from more parts of the world, new lower prices all around, Tesla will probably manufacture and sell the bigger margin cars first. If production capability remains available weekly, they will make some standard configurations.

The cheapest models say delivery in 2-4 weeks. That shows the more expensive demand has mostly been fulfilled. We have to hope the lower configurations have massive demand.

I think it’s fine they released the $35k versions but I do not like or understand the drastic price drops on the other models. Either they are REALLY hurting for sales or they are doing just fine to be able to do that.

 

[Jaguar]

Elon's vision has always been to bring EV technology to the masses. Charging a premium price to have a bunch of sales galleries around does nothing to bring his vision closer to reality. Lowering overhead so that he can bring out the long promised $35K clearly does.

The new $35K starting point is going to have a major effect on the competition. Other companies are still trying to figure out how to make money on non-premium EVs, and the new lower price points of a Tesla have got to be creating some headaches for the other car manufacturers that were getting ready to launch their own EVs in the next 12-18 months.

If I were running Chevrolet right now, I'd seriously be thinking about killing the Bolt. Who is going to want one after March 31 when the tax credit is cut in half, and it will now cost as much or more than buying a Tesla.

Agreed, especially when GM is still losing money on each Bolt sold.

 

[Brisket5652]

I always wondered why $35k was so special. Before Elon targeted this as a goal, I never thought of this price as important. A true low cost, mass vehicle is probably about $20k-$25k, but I don't personally think Tesla should go there. Actually I think the target could have been moved since he stated it years ago, to $40k.

 

[BobAbooey]

They aren’t closing all stores. Clearly it didn’t make business sense to keep all of them open. I am a tiny bit concerned about their survivial over the next year though.

I wonder what percent of sales came from the stores? Had to be pretty low I would imagine

 

[Big Dog]

Agreed, especially when GM is still losing money on each Bolt sold.

The regulators don't care about stinkin' profits.

 

[Austindude]

I always wondered why $35k was so special. Before Elon targeted this as a goal, I never thought of this price as important. A true low cost, mass vehicle is probably about $20k-$25k, but I don't personally think Tesla should go there. Actually I think the target could have been moved since he stated it years ago, to $40k.

There is a reason why the $35K price point is important, the average cost of a new vehicle in 2017 was nearly $36K with the average truck cost $50K. Even people that should probably not be spending as much as that on a new car are doing so because of car loans. With the new Tesla price point that means at least some of those people might consider the base Model 3.

 

[davedavedave]

Not sure why Tesla needed to do this with possibly negative margins. They have to close all the stores... because of this car and it doesn't make sense to me why it was so necessary to announce a 35K model 3. They didn't have to do this. People need to test-drive a car before buying it.

Let's hope it works out and Tesla survives.

With respect to margins, shutting down facilities and layoffs always amount to one-time write-downs that will hurt profitability short term. I'm betting (i.e., go TSLA!) that the following quarter will show huge upticks without all the overhead of the stores and an optimized sales and delivery process.

FWIW, I'm one of the 400,000 folks who bought without a test-drive. Heck, I put down a deposit before anyone had even *seen* the car!

Yep - let's hope!

 

[focher]

That's a pretty made up claim that the $35k is a negative margin car. As no one can cite a single authority to support that notion, it's a lot more rational to conclude that Tesla feels it can make a perfectly good margin on that configuration.

I also think the "demand" topic is almost always talked about incorrectly. Demand for a particular configuration wasn't a one time thing. Every month, there are new potential buyers who are considering the Model 3 and they come with very different desires. Just because someone wasn't in the market last quarter or month doesn't mean they aren't now. Perhaps their lease on their current car is ending. Perhaps they were waiting to get a new job. Perhaps their kids finally moved out. This is proven out with Q4, where Tesla said most of the Model 3 buyers were NOT reservation holders but actually net new customers.

 

[OCR1]

I would say the lead time of 2 weeks to get a car suggests they don't have a huge backlog. I was wondering if the lead times would increase over the weekend, like iPhone sales used to on the first day they became available. But it appears that even at the $35K starting point Tesla is confident they can deliver the car in a very short time frame.

Also, Elon has stated publicly numerous times that he can't build an M3 for $35K. The exact cost has never been disclosed but it's been clear that it is something above $35K.

 

[SJC3]

I wonder what percent of sales came from the stores? Had to be pretty low I would imagine

i recall Elon stating that 78% of 3 sales came online and 82% didn’t take test drives. Strong data IMO

 

[focher]

IAlso, Elon has stated publicly numerous times that he can't build an M3 for $35K. The exact cost has never been disclosed but it's been clear that it is something above $35K.

So your interpretation of his statement at the time was that it would be forever true? He has stated that their intention was to sell a $35k version when their costs made that possible. The assertion that they're selling a negative margin vehicle is patently ludicrous. GM does things like that because they're just using it to get ZEV credits, and they cover the loss with huge margins on Escalades. Tesla doing that? Not likely.