It creates gross margins that keep Tesla highly profitable so the company can thrive until 2016/2017 when the Gen III line is introduced. This car will be priced so that it's interesting for the general public.
That is if Tesla can generate enough sales of Model S / Model X to actually ever be able to make a Gen III.
I think these price increases, which are quite drastic in some cases, leave a very bad aftertaste, as they show that Tesla is becoming like every other luxury carmaker when it comes to nickel and dimeing their customers on options. Only difference being that the Model S comes out at the losing end in many ways when you honestly start to compare it to cars like 5-series, Audi A6/A7, Porsche Panamera, Merc E-Class (even the current S-Class is much cheaper in many configurations!) on standard equipment, build-quality/refinement, amenities etc. And as someone else said, for that price difference of said M5 vs. MS you get a lot of fuel/maintenance (not that maintenance would be cheap for Model S to begin with - in contrast to what Tesla blabbered about "extremely advantageous compared to an ICE on maintenance and TCO". Bull**** I say.)
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Stretching to buy the car is one thing, but the price of the Model S didn't go up by much. The price of the top of the line performance edition with all the bells and whistles went up up by quite a bit, but strangely I don't have as much sympathy for somebody stretching their budget to get the fanciest edition of a car.
But when many of the bells and whistles on the Model S are standard on many of the competition then it becomes annoying.
If it takes KKK Dollars to bring Model S up to specs with the competition then there is something very wrong with Tesla's reasoning.
Coming from the German market, I can now see even less Model S's sold over here. Remember, no EV incentives here, so just being a 100K Euro novelty item will not sell the thing (or any future Tesla under the same marketing philosophy) here.
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Hold up. The Model S was always intended as a LUXURY sedan.
PREMIUM was the wording. No one said anything about luxury. On the contrary, pricing was always one of the main selling points before the car came out. Remember how they advertized it on their website as an EV for under 50K Dollars (if you factor in the tax incentive). So luxury I think was not what they had in mind back then.
I think they are seeing now how well the Model S (at current prices / options) is selling and think "hey, let's use this momentum to up the prices to get to that 25% profit margin asap".
What they don't think about is how this will alienate many potentiel buyers who would have been happy with a MS 40 or 60 for 75K Dollars (quite a few options included) who would now have to spend quite a hefty bit more (as the prices have gone up so steeply and the 40 isn't even available any more), going so far as to take the car out of the reach of the lower end of the former potential customer base alltogether.
Bad move, especially as this is basically a big middle digit at those who would really have loved to drive this car (and thus advertise for Tesla) but for whom it would have been quite a stretch to do so.
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The primary difference is that hardly no one pays MSRP for a BMW or Mercedes. Options in particular are more heavily discounted than the car as a whole, as they can push MSRPs beyond what most are willing to pay. When we were buying our E-Class, dealers weren't too keen on discounting a bog standard model, yet they were quite receptive to slashing thousands off one with an overpriced B&O stereo, active cruise control, and panoramic sunroof.
Hadn't though about that before, but true, that's an even worse point against Tesla.
Espcially when comparing that M5 from the example a couple of pages back. The 135K CAD for the Model S stand firm as a rock, while the 120K for the M5 are going to be subject to a substantial discount for sure.
I can see the execs in Stuttgart, Ingolstadt and Munich really rubbing their hands and grinning about that move by Tesla, thinking "right Tesla, go on and show the world that EV's are only for a select minority - like we said all along..."
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I thinks this sadly pushed me over to a fully loaded Audi S6. Too much for too little. Really does seem like nickel and diming. For $90k you get 0-60 in 3.7s, HUD, adaptive cruise control, 360 deg view camera, night vision, Google GPS, cup holders, folding mirrors, and much much more.
That's the kind of potential customer I am talking about.
Actually, come to think of it, I can't think of a lot of good arguments any more that I could tell people why they should buy a Model S in comparison to the competition. And don't tell me "but the competition doesn't sell an EV", because that is the least important part that people care about in that equation.