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Official: Upcoming Model S Price Increase & Timeline

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P. S. Let's take a sec and praise Tesla on their transparency with this one. We asked for communication whether it's good news or bad, and that's what we got.

It does have some humor to it.

Now that the production is approaching target rates, the 'critics' increasingly focused their doubts (aka FUD) on the question of "continued demand" and the market size at certain price levels.

Tesla's answer: we'll raise prices.
 
Am I the only one that thinks that this price increase (I aliken to a model year bump) is going to come with the Tech package, X years of 3G, and service wrapped up into the car, standard supercharging on 60kWh.

I think they will add some options to the 'base' car and increase the price with it. I don't think this is just a simple cash grab. I think they want to avoid backlash, like say from $600 annual service visits. Decrease their supply chain complexity, standard tech package. And force some profitable options, standard tech package. I expect a ~$7000k increase in price (maybe $5k on the 85kWh). Add 3G to the base price of the car so they don't have to worry about monthly billing, and credit checks. Same thing for service, you get your money up front, and you get all the data you need by having everybody bring in their cars.

I do think that Tesla might up the price of the performance package. And that could be just a pure cash grab. It seems to be a really popular option, and if you price it too high, people will still get the regular 85kWh (you might loose a small number to M or AMG) so you don't really lose that many customers.
 
They certainly have gotten a lot of feedback about pricing and options over the last year so think this is a good thing. Raise the price, include things that people expect (service, connectivity..etc) and make those charges 'disappear' into the cost of the car.
 
And make those options when possible available to current owners (for a price that includes a nice margin for Tesla) too..

Indeed, I hope that v1.0 S owners will be able to add things like parking sensors if/when they become available, barring major technical issues.

ACC / pre-collision systems / powered folding mirrors (this list could go on) would potentially be worth $$$ for a substantial number of people, IMHO.
 
I'm not sure this is a fair comment 49er...

The Model S, like the Roadster before it, are necessary planks in the TM business model to get the GenIII to market...right now, any speculation that the GenIII pricing will change is just speculation...


Agreed.

What happened to the mission of making EVs mainstream? Raising prices hurts that mission. The car is already 2-3x the cost of the average car sold in the U.S.

If it's not a profit-optimization issue but rather a cost issue, then that's no consolation. I'm increasingly confident that GenIII will come in at $40k after tax credit, and the attractive configurations (i.e. range of 250+ miles) will be $50k+.
 
Just what I was thinking. Just like GeorgeB said... People say they want the news, good or bad... until they get the news, and it's bad.
While GeorgeB's quote sometimes applies, I don't think it does here.

From what I've seen, nobody is upset that Tesla is communicating this "bad news". In fact, it seems consistent that people are glad Tesla is being open and firm about this.

What (some) people are upset about is that there is a price increase period, not the communication about it. In other words, the concern is about the content about the message not the format of the message or the messenger.
 
We are talking a timeframe of ~2 years from the time the original pricing was announced to when this policy is likely to take effect. General inflation is an issue, but so is commodity price inflation. And Tesla DOES know more about their real cost structure now, and Tesla DOES need to hit their gross margins, and it's clear that demand is likely higher than their capacity to produce cars. And it's well known at this point that the market is skewing heavily towards the higher end, and Tesla needs to cater to the needs of their actual customers as opposed to the theoretical ones they planned around in 2010.

+1. Additionally, Tesla may -- and should -- be adapting to the differences between real-world demand and whatever they projected. They need to charge what the market will reasonably bear in order to maximize profit and growth opportunities from the Model S. If they have a 20,000-unit backlog in sales, then a 5% increase in price is a great idea. That 5% goes straight to the bottom line, and a startup like Tesla can use all the oomph it can get!

Finally, let's not forget that the Model S was never meant to "mainstream the electric car". Tesla does intend to do that! But Rome was not built in a day, nor can you develop new technologies in weeks. The Model S is a huge step in the right direction: no EV before it provided anywhere near its capabilities, period. Regardless of cost, by the way. Now, with technology improving and Tesla making money from the S and X, their next car is planned to have a base price in the thirties after the tax credit: that's a 30% lower starting price than Model S, and will make the Gen-3 car affordable to a much larger market segment. But even that may not be totally "mainstream" yet... as technology improves and costs come down, it may be the Gen-4 car that starts at $20K.

We are not there yet, sure. But it's absurd to think that one car model and one development generation was going to be enough to reach that objective. Great results are achieved by the combination of both pressure, and time.
 
I hate this announcement. There are no "good" reasons for this IMO.

I don't know how you can make statements like this without facts.

Agreed.

What happened to the mission of making EVs mainstream? Raising prices hurts that mission. The car is already 2-3x the cost of the average car sold in the U.S.

If it's not a profit-optimization issue but rather a cost issue, then that's no consolation. I'm increasingly confident that GenIII will come in at $40k after tax credit, and the attractive configurations (i.e. range of 250+ miles) will be $50k+.

You know what won't make EVs mainstream? Tesla selling a few cars and making no profit.
What will make them mainstream is other manufacturers making compelling EVs. They will do that if Tesla sells cars AND makes a profit.
Tesla making a profit - and in fact more profit than the old car manufacturers - is good for EVs, not bad.
 
I also wouldn't doubt that based on comments from the last earnings call where they were surprised by the high demand for the Performance model, that we see an increase in the "Perf upgrade" gap...perhaps sweetened by additional performance options.
 
In so far as this is driven mainly by supply/demand (and less by necessity, for example due to suppliers raising Alu prices), I hope the price increase doesn't exclude (but rather support) adding production facilities to increase volume beyond the current maximum production rate of the line. Although perhaps such investments would delay those necessary for Gen III.
 
I also wouldn't doubt that based on comments from the last earnings call where they were surprised by the high demand for the Performance model, that we see an increase in the "Perf upgrade" gap...perhaps sweetened by additional performance options.
I agree that we'll see the biggest price increase on the Performance model. On a head-to-head price/performance comparison, the MSP is cheap compared to the Panamera Turbo, M5, etc. Also, the MSP requires a lot of hand-built attention to the electronics, and we've gathered that the CF has been a real headache.

I disagree with JakeP and others that we'll see any new options. The bulletin board post didn't talk about new options, only different groupings of existing options. I could see, e.g., the Tech Package getting broken out into a couple of smaller of packages.

I strongly agree with comments supporting the bundling of service into the base car.
 
All the whys and how much, etc is purely speculation at this point. Realistically though - if anyone of us were producing a complex product which involved as many sub-systems as a vehicle does, how many of us could truthfully say that we could guarantee a price 2 - 3 years from now based on what our costs are now?

If I understand correctly, Tesla has said that they will be honoring those who have reserved a car at the price quoted.

Try walking into a Chevy store and saying that you wanted to order a 2015 Corvette at a guaranteed price of what their MSRP is today.......just imagine what would be said.