Model 3 Supercharging Capable Discussion

[Ben W]

Well, though I will likely bow out soon...? I was really just reserving my right to say, "I told you so!" to all the folks that desperately believe Tesla Motors must become 'The NeXT EXXON!!!' to survive. I submit there is no need for the Supercharger network to be a profit center. They already generate profit, by getting more people to buy the cars.

Pay-per-use would not be a profit center. It would primarily be an incentive to use the system properly, which would result in cost savings for Tesla far outweighing the fees themselves.

Elon Musk already said that if other automobile companies want to participate in the Supercharger network, he has two conditions: 1) That the cars be able to accept the full power of a Supercharger without throttling down; and 2) That the owners of the cars not be billed or charged any fees beyond the initial cost of the car. From my point of view, if that is the case for third party vehicles, it isn't likely to be any different for Tesla Motors vehicles.

Where and when did he say this? Obviously other companies would have to follow the same rules that Tesla sets for themselves, but if Tesla were to change their own rules, I doubt they would insist that other companies still must follow the outdated ones.

 

[EcoHeliGuy]

Exactly!



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Why would Tesla charge current Model S 60kWh owners $2.5K and not charge Model 3 owners? Free is not going to happen.

Because there are legal ramifications to accounting practices. The Model S 60 didn't have the cost included. Every Tesla since has. And you can't compare apple to oranges. The Model S costs more to produce then the Model 3, it's simple math of price sold minus profit margin.

 

[FlatSix911]

Because there are legal ramifications to accounting practices. The Model S 60 didn't have the cost included. Every Tesla since has. And you can't compare apple to oranges. The Model S costs more to produce then the Model 3, it's simple math of price sold minus profit margin.

Your logic is flawed ... the higher priced models get Supercharging included, the lower priced models do not. Simple really.

 

[Red Sage]

Why would Tesla charge current Model S 60kWh owners $2.5K and not charge Model 3 owners? Free is not going to happen.

Well... I predicted way back in 2014 that the Model S 60 would go away ahead of the Model ☰ launch. I said that from that point forward all Tesla Motors vehicles would be eligible for Supercharger access from that point on. And so far, that is the case.

I also predicted that also, ahead of the Model ☰ release, Tesla Motors would perhaps unlock Supercharger access for all Model S 60 vehicles that didn't have it already, along with unlocking the full potential of Model S 40 vehicles to Model S 60 with Supercharging. That second part hasn't happened, and may not it seems. So, the 'why' may simply be that those cars remain tied to the deal they agreed to when those cars were purchased.

Of course, from my point of view, the very small number of Model S 40 owners who were never eligible for Supercharging, or Model S 60 owners that didn't get the Supercharger option at purchase or afterward is such a small percentage of the current fleet that Tesla Motors might as well go ahead and do this anyway, perhaps around Q2 2017 as a 'gift' to those who contributed toward the future of the company. It also removes the query as to why it is that 'everyone else' gets Supercharger access for free.

I believe that the difference for Model ☰ may be that Supercharger access will not be free... 'for LIFE' as was the case with Model S or Model X. I figure a time frame will be introduced, perhaps four years as was the case with internet access for Model S, as the period by which Supercharger access will be free on Generation III vehicles. And that Tesla Motors will let you know later if that will be extended, or if there is an additional fee. I believe that if they handle it this way most concerns are fully addressed. And if the company is as successful as I expect they will be through 2021, I believe their evaluation will be to make Supercharger access 'Free (of additional fees) for LIFE (the life of the car)' from that point forward. Another path might be Free -- to the original purchaser, as long as they own the car -- but a nominal fee, perhaps $500, to reactivate Supercharger access when the car is sold to someone else.

 

[EcoHeliGuy]

Where and when did he say this? Obviously other companies would have to follow the same rules that Tesla sets for themselves, but if Tesla were to change their own rules, I doubt they would insist that other companies still must follow the outdated ones.

"When asked by a UK journalist for Pocket-lint what kind of sharing arrangement he envisioned, Musk responded that he specifically wants to avoid the walled garden effect with Supercharger technology, and that the main barrier to universal adoption by other EVs is whether or not other vehicles can accept the power level that a Supercharger delivers. Musk also noted that other manufacturers that want to use the Supercharger network would have to adopt the same cost structure. Currently, Supercharger users don’t pay for a fill-up; Musk has stated that each adoptee would need to contribute capital costs “proportional to their fleet’s usage of the network.”

At the supercharger unveiling

 

[Red Sage]

"For every complex problem there is an answer that is clear, simple, and wrong." -H.L. Mencken

For every wrong answer, there is another that is just as completely and entirely incorrect. -- Red Sage

 

[nwdiver]

Pay-per-use would not be a profit center. It would primarily be an incentive to use the system properly, which would result in cost savings for Tesla far outweighing the fees themselves.

That's based on the premise that a small fee would decrease supercharger use time by 50%... which is supported by nothing. Even if there is no additional cost for fuel the driving still isn't free. There's time and tire wear. That's why gasoline consumption is one of the most notoriously stubborn commodities. Gas prices double but miles traveled barely budges. Even if the cost of gasoline went to zero you're not going to see a huge (>10%) spike in usage... there's only so much pleasure driving someone can do before it's no longer pleasure driving.

The only effect would be do diminish local 'abuse' which only effects urban locations and is no where near 50% of use. You're trying to solve a problem that doesn't really exist with a solution that wouldn't have the desired effect anyway... reducing the required number of SC bays.

 

[EcoHeliGuy]

Your logic is flawed ... the higher priced models get Supercharging included, the lower priced models do not. Simple really.

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Except it's the same reason why for awhile Apple charged a $1 couple of times to unluck unannounced features.

 

[Red Sage]

"For every complex problem there is an answer that is clear, simple, and wrong." -H.L. Mencken

I thought about this a bit, and I'd like to take it on a different way... The complex problem that the world faces is the need for transportation. People and goods need to be moved from one place to another in a timely, predictable, reliable fashion. For centuries that complex problem was solved by beasts of burden, from goats and oxen, to camels and horses. As technology developed, some of this was serviced by ships that sailed the seas and oceans. Later on, they were taken care of by steam engines powering trains as well as ships. For over 100 years though, a lot of the transportation needs of modern society have been handled by automobiles, even as airplanes have arrived and become perfected for cargo and passenger travel.

So, today... for millions upon millions of people... this complex problem is solved readily by a clear, and simple solution: BURNING PETROLEUM PRODUCTS to operate vehicles. Well, you know what? That is a solution that is easy... It is a solution that is 'cheap'... It is a solution that works... And nevertheless it is a solution that is WRONG.

The best way to reverse this error is to offer a better solution. One that is unfathomable to most. One that is incredibly complex in terms of the issues that must be overcome to make it work. One that those with vested interest in the status quo repeatedly say is absolutely WRONG... And that is to move the majority of personal transport to fully electric vehicles.

Tesla Motors has taken on this challenge. Along the way, they have come up with a solution to the stigma that faces all so-called 'alternative fuel vehicles'... They have created Superchargers to enable long distance travel between population centers. They have recognized the need to install Superchargers in highly populated areas where people do not have access to personal home charging. They have emphasized the need to expand the Supercharger network to cover both Distance and Density. They have also begun a program to install charging at Destination spots around the globe for those who venture off the beaten path, away from the Supercharger Highway. And all this is offered at no cost to their Customers beyond the initial purchase of a vehicle and Free of additional fees for the LIFE of the cars... so far.

Until such time as someone comes up with a reliable, inexpensive, ubiquitous means to instantly transport goods and passengers via teleportation... I'm perfectly happy to accept electric cars as the solution to my personal transportation needs. And, having access to a network of Superchargers without attached fees just makes that decision all the more compelling. I think that's the point.

 

[Ben W]

And, having access to a network of Superchargers without attached fees just makes that decision all the more compelling.

All users are paying for the costs of the supercharging network no matter what, whether it is "baked in" or a la carte. For Tesla and the Model 3, the question becomes how to offer the most bang for the buck, to a price-conscious marketplace. Their goal is ultimately to get as many people switching to electric as possible. To accomplish this, Tesla needs to remain profitable and grow as quickly as they can.

I believe that the most successful strategy would be to minimize the cost of entry, by switching the Model 3 SC pricing structure to pay-per-use: it would allow Tesla to profitably sell the most SC-enabled cars (a tremendous value) for the lowest possible upfront price. You believe (as I understand it) that the price should effectively be 100% upfront, creating a tangible barrier to entry, for the slight perceived value of avoiding per-use fees. Time will tell; hopefully we will know by the end of 2017! And then one or the other of us will be able to say, "I told you so", while driving off emissions-free into the sunset

 

[Red Sage]

I believe that the most successful strategy would be to minimize the cost of entry, by switching the Model 3 SC pricing structure to pay-per-use: it would allow Tesla to profitably sell the most SC-enabled cars (a tremendous value) for the lowest possible upfront price.

Oh? What is that 'price'...? And how does this 'minimize the cost of entry'...? The car will start at $35,000. That has been the case for three years now. How is 'pay-per-use' going to save ANYONE money? Because I do not believe it will benefit Tesla Motors or their Customers.

 

[HanSolo]

$2k may seem like rounding error in the luxury segment, but not in the midrange segment. 5% of the cost of the Model 3 may be close to 50% of the profit margin. No car company could afford that hit to profit without making it up somehow. If an upfront SC option were offered a la carte, some M3 buyers might stretch for the $2k option at the expense of other high-profit options, but others may decide it's over their budget and buy an ICE instead. (For long-range travel, the choices are either Tesla + SC or an ICE.) The early adopters (even 400k of them) are not necessarily representative of run-of-the-mill buyers after production ramps up. And of course, the conversion ratio of refundable-deposit-holders to actual purchases remains to be seen.

As I said (but you seem to have ignored), I don't expect the fee to affect "road trips" or total miles driven in the slightest. That is not the point at all. Rather, it's all about local charging and inefficient use; e.g., trickle-charging, or staying plugged in after charging. The same number of miles will be driven regardless, but many more of them will be charged at home or at off-peak times or in the bottom half of the pack if there is a pay-per-minute fee. This will substantially reduce the SC build-out required to accommodate the fleet, particularly in populated areas. Even in low-population but high-traffic corridors like I-5, if you incentivize drivers to charge up to 60-70% and then unplug and hop to the next charger, rather than having dinner while slowly trickle-charging to 100% and leaving the car plugged in afterward, Tesla will be able to accommodate a LOT more cars with the same number of chargers.

I think you are hitting the nail. Now that we are getting into a totally different price bracket, it is very possible that demand elasticity with regards to higher price is going to have a much larger impact on total sales than at the 6 figure level of the S and X. While we are speculating, we really don't know because we really don't have any data. People often forget that those of us who even consider cars like the Tesla or whatever car fits our interests are a minority in the market. We are what marketing people dub as the 2 percenters because we only make up about 2% of the market. We may think that we are the most important, but the reality is that 98% of the market is going to buy whatever vehicle fits their budget and their lifestyle needs and desires. There is a plethora of options out there. The Fusion Energi is a very reasonably priced plug in big enough for a family while having 20 miles of EV range. The Prius hybrid V gets excellent fuel economy in the mid 40's while also big enough for a family. In that price range, cheap gas means that a big SUV might be an appropriate option. At this price, the M3 is not in isolation to its competition which are also options.

 

[Red Sage]

People often forget that those of us who even consider cars like the Tesla or whatever car fits our interests are a minority in the market. We are what marketing people dub as the 2 percenters because we only make up about 2% of the market. We may think that we are the most important, but the reality is that 98% of the market is going to buy whatever vehicle fits their budget and their lifestyle needs and desires.

Meh. That's OK. 2% of a market that will likely sell through 17,000,000+ new cars per year in the US through the rest of the decade works out to 340,000 cars per year. I'm pretty sure that would be fine for Tesla Motors. If ~75,000 of those are a combination of Model S and Model X... With the other 265,000 being the Model ☰ -- thereby demolishing sales of not only the BMW 3-Series, but also Toyota Prius, Chevrolet Cruze and Malibu -- that would get Tesla Motors into the top ten passenger cars sold here per year.... And it would have been the #15 spot for all vehicles sold in the US last year. Heck, that amount would have outsold the entire Buick division during 2015 by nearly 42,000 units -- with just one car. The rest of the market can catch up with us later.

 

[HanSolo]

While I am pessimistic about Tesla's future, this is a company that you cannot help but root for. If they can pull this off and become financially viable, they pretty much would have caught everyone with their pants down. It is great that even today, we can still see this kind of innovation from an American company. At a time when everyone is outsourcing every tier of the manufacturing process, Tesla pops in.

 

[Ben W]

Oh? What is that 'price'...? And how does this 'minimize the cost of entry'...? The car will start at $35,000. That has been the case for three years now. How is 'pay-per-use' going to save ANYONE money? Because I do not believe it will benefit Tesla Motors or their Customers.

The chance that the $35k base car will include free unlimited supercharging for life is precisely jack squat. Without pay-per-use there would have to be a ~$2k a la carte option (as the S60 had) to enable the unlimited supercharging. Thus the minimum cost for a SC-enabled Model 3, under the unlimited model, would actually be $37,000.

On the other hand, under a pay-per-use structure, the entry price for a SC-enabled Tesla could actually be $35,000. (Or to put a too-fine point on it, $35,000.25.) Tesla will make up the difference through selling more profit-rich options instead of the $2k SC upfront fee, through the incremental pay-per-use revenue, and also through the cost savings of being able to build out a smaller, more efficient SC network. Particularly for buyers who require supercharging but intend to use it rarely, this is quite close to $2k real savings. Getting those buyers on board (vs. alienating them with a $2k fee and pushing them to an ICE) will benefit both Tesla and its customers.

 

[Ben W]

Meh. That's OK. 2% of a market that will likely sell through 17,000,000+ new cars per year in the US through the rest of the decade works out to 340,000 cars per year. I'm pretty sure that would be fine for Tesla Motors. If ~75,000 of those are a combination of Model S and Model X... With the other 265,000 being the Model ☰ -- thereby demolishing sales of not only the BMW 3-Series, but also Toyota Prius, Chevrolet Cruze and Malibu -- that would get Tesla Motors into the top ten passenger cars sold here per year.... And it would have been the #15 spot for all vehicles sold in the US last year. Heck, that amount would have outsold the entire Buick division during 2015 by nearly 42,000 units -- with just one car. The rest of the market can catch up with us later.

This math is not quite right. You're assuming that EVERY ONE of the 2%'ers in the car market will buy a Tesla, which is an impossible assumption. Also, Tesla aims to sell >500k cars per year within a few years. They will have to break well out of the 2% bracket to achieve this figure.

 

[nwdiver]

On the other hand, under a pay-per-use structure, the entry price for a SC-enabled Tesla could actually be $35,000. (Or to put a too-fine point on it, $35,000.25.) Tesla will make up the difference through selling more profit-rich options instead of the $2k SC upfront fee, through the incremental pay-per-use revenue,

Ok... pay per use... where does the money come from to build the supercharger so they can pay to use it? 300k Models 3s could be sold in 2020... that's ~$500M required for superchargers just for model 3s... just in 2020.

 

[Ben W]

Ok... pay per use... where does the money come from to build the supercharger so they can pay to use it? 300k Models 3s could be sold in 2020... that's ~$500M required for superchargers just for model 3s... just in 2020.

Some will come from high-profit options people would likely buy instead of having to pay for a $2k upfront SC fee. Some (perhaps $500 per car) will come directly out of the profit margin. Some will be subsidized by the higher profits from S/X sales and higher-end Model 3's. Some will come from per-minute revenue from already-built but currently underutilized superchargers. Combined with not having to build out the SC network quite so quickly, due to increased efficiencies incentivized by pay-per-use, I think Tesla could very well make this work.

 

[geoffreak]

The chance that the $35k base car will include free unlimited supercharging for life is precisely jack squat. Without pay-per-use there would have to be a ~$2k a la carte option (as the S60 had) to enable the unlimited supercharging. Thus the minimum cost for a SC-enabled Model 3, under the unlimited model, would actually be $37,000.

Why do you assume that the cost must be $2k? I think it's pretty well (unofficially) documented that Tesla is making a huge margin on this (around 75%) and can easily bring it down to align with the goals of the Model 3. This cost could come down to $500 without Tesla losing any money, which would be a good reason for Tesla just to bundle it in to the base cost.

You guys who are hell-bent on supercharging being pay-per-use need to chill. You're trying to solve a problem that barely exists with something that isn't going to solve it. Dealing with a variable cost every time you have to take a road trip also goes against Tesla's mission of converting people to EVs. It's infinitely easier to sell a car with free road trips than to say the cost hasn't changed much from your ICE and you have to take longer stops. It's also not what Tesla has made a name for itself doing and there isn't a shred of evidence this is going to change.

 

[Jersey Shore Tom]

Sure, pedantically I used the word "margin" wrong. The fundamental argument is still sound though: Tesla's profit per Model 3 is ~$8k (~20% of ~$40k), while their profit per Model S/X is ~$25k (~25% of ~$100k). So Tesla is currently diverting ~8% of their Model S/X profits toward the SC network, but they would have to divert a whopping 25% of their Model 3 profits towards the same. The former may be sustainable, while the latter is almost certainly not. So either they will have to make SC access a $2k a la carte option (which may drive a significant number of would-be buyers to ICE's, or at the very least cost them sales of other profit-heavy options), or else they will have to change their unlimited-access model. I know that if I were a price-conscious Model 3 buyer, I'd vastly prefer $0.25/minute supercharging over a $2k upfront fee.

I simply don't understand where the $2,000 figure is coming from. Right now Tesla sets aside $500 per car. If anyone has evidence they are off by a factor of four, they should be screaming to the SEC.

For the sake of argument though let's say it will double over the next few years to $1,000 per car. Right now, GM is spending about $1,000 per car on ads with an average selling price below $40K. That doesn't include whatever their independent dealers are spending on ads that also comes out of the selling price.

Tesla spends $0 per car, and is estimating an average price of $42K per Model 3. I may be off base, but I don't see Tesla having to spend any money on ads before 2019 or later to drive demand.

If GM (and Ford and FCA for that matter) can spend $1,000 per on ads, why can't Tesla spend $1,000 per car on Supercharging. Supercharging not only makes their cars much more useful, it generates tons of publicity. Heck I wouldn't be surprised to see nice big signs visible from the roadway that said "If you had a Tesla you could get free electricity for your next road trip here" pop up. Well maybe not quite that tacky, but you get the point.

Look none of us, has access to Tesla's books, but there is simply no evidence that Tesla can't afford to continue the current Supercharging program.

If it turns out I am wrong and Tesla can't afford it, then they would have to go to an upfront fee. Collecting $0.25 a minute for the 2 hours a year you will be Supercharging won't generate the upfront capital needed to expand the system. Either Tesla pays the upfront costs out of the sales price, or buyers pay it upfront when they buy the car.

If you are concerned with people who live near a Supercharger using it for daily charging, there have to better ways than setting a fee per charge system.

For example, we could continue to let Tesla deal with it; or, Tesla could insert software that would turn your car horn into a speaker that would broadcast "I am a moocher who uses a Supercharger for my daily driving" whenever someone Supercharges locally. Or insert your own non-sarcastic idea here that doesn't involve a fee per charge.

End of Rant.