Pricing of options, I hope the Model 3 is reasonable.

[MXWing]

I think it's likely margins will be thin at best on base models. However, that can be written into marketing expense in the same way Supercharging has been. If they make the base 3 attractive enough to bring in customers, but not attractive enough to keep them from upgrading, it's precisely that. This is a well known and used tactic - it's called a loss leader.

Loss leader and losing money on each sale is the same thing. One sounds nicer than the other.

We have a lot of geniuses here that think you can outprofit GM when

1.) Cost of inputs higher.
2.) Unit volume low.
3.) Niche market.

Tesla is trying to solve all 3 and I am sure GM made the Bolt as cheap as it possibly could. If the 3 matches the Bolt in price and no one buys 8-10k worth of options, does anyone seriously think Tesla made more money than GM? I'd put money on this wager.

We can approximate if my wager is correct if there are limited Model 3 design options and there are many software unlockables.

 

[ohmman]

Loss leader and losing money on each sale is the same thing. One sounds nicer than the other.

I'm not taking sides or arguing against you. I was just trying to point out that, while you seem to have a distaste for the possibility of Tesla losing money on base 3 sales, it can be a valid business strategy employed to the company's benefit.

 

[ccutrer]

Loss leader and losing money on each sale is the same thing. One sounds nicer than the other.

We have a lot of geniuses here that think you can outprofit GM when

1.) Cost of inputs higher.
2.) Unit volume low.
3.) Niche market.

Tesla is trying to solve all 3 and I am sure GM made the Bolt as cheap as it possibly could. If the 3 matches the Bolt in price and no one buys 8-10k worth of options, does anyone seriously think Tesla made more money than GM? I'd put money on this wager.

We can approximate if my wager is correct if there are limited Model 3 design options and there are many software unlockables.

Huh? Are we talking about the S/X, or the 3? I thought we were talking about the 3.

1.) Some inputs, yes. But the "biggie" (battery cells), Model 3 blows away the Bolt.
2.) GM is hoping for 30-40k Bolts per year. Tesla has 400k reservations, and wants to get to 500k/year (though that across S/X/3, but mostly 3, so not strictly analogous to just the Bolt)
3.) Agreed, even at 500k/year, it's still a niche market in the grand scheme of things.

Yes, GM I see making Bolt as cheap as they can. And in fact, losing money. Because by losing money, they lose less money -- than they would owe in ZEV mandate fines if they didn't sell it at all (or sold fewer, with a smaller loss per).

Although this is all moot. I don't see anyone saying Tesla is going to out-profit GM (as a whole). Or even that a base 3 will be particularly profitable. Simply that they will not be losing money hand over fist with it. That would be stupid of them. It may be barely profitable, or it may even have a small loss, which Tesla calculates they'll make up on in the future with battery and/or autopilot unlocks, or significant gains on resell by enabling said unlocks. But a very thin margin is alright, as long as it's there. Because that means they'll be making money hand over fist for the unlockable options, and the higher trims.

 

[MXWing]

I'm not taking sides or arguing against you. I was just trying to point out that, while you seem to have a distaste for the possibility of Tesla losing money on base 3 sales, it can be a valid business strategy employed to the company's benefit.

I don't have a distaste at all for Tesla losing money on base Model 3 sales. I actually believe this will be the case. It is others who are thinking Tesla is going to make 20% margin (cough, cough) on a Base Model 3. I think to break even or show revenue, Tesla would count on all buyers opting for EAP and FSDC.

Huh? Are we talking about the S/X, or the 3? I thought we were talking about the 3.

1.) Some inputs, yes. But the "biggie" (battery cells), Model 3 blows away the Bolt.
2.) GM is hoping for 30-40k Bolts per year. Tesla has 400k reservations, and wants to get to 500k/year (though that across S/X/3, but mostly 3, so not strictly analogous to just the Bolt)
3.) Agreed, even at 500k/year, it's still a niche market in the grand scheme of things.

Yes, GM I see making Bolt as cheap as they can. And in fact, losing money. Because by losing money, they lose less money -- than they would owe in ZEV mandate fines if they didn't sell it at all (or sold fewer, with a smaller loss per).

Although this is all moot. I don't see anyone saying Tesla is going to out-profit GM (as a whole). Or even that a base 3 will be particularly profitable. Simply that they will not be losing money hand over fist with it. That would be stupid of them. It may be barely profitable, or it may even have a small loss, which Tesla calculates they'll make up on in the future with battery and/or autopilot unlocks, or significant gains on resell by enabling said unlocks. But a very thin margin is alright, as long as it's there. Because that means they'll be making money hand over fist for the unlockable options, and the higher trims.

I think you are taking a very rational approach to the economics. Others think Tesla is still going to make 20% margin on a base model 3 with no options are on the highest potency crack possible.

I think they will sell a good amount of options and will turn out ok with the majority ending up at 42k which is my guess on what is needed to show a small profit. Where they will do well is when they hit the 50k plus. They can definitely sucker me in if they make a $5K PUP package that has a HUD for the Model 3.

I passed on self presenting doors and bio defense filtration...

 

[diamond.g]

I don't have a distaste at all for Tesla losing money on base Model 3 sales. I actually believe this will be the case. It is others who are thinking Tesla is going to make 20% margin (cough, cough) on a Base Model 3. I think to break even or show revenue, Tesla would count on all buyers opting for EAP and FSDC.



I think you are taking a very rational approach to the economics. Others think Tesla is still going to make 20% margin on a base model 3 with no options are on the highest potency crack possible.

I think they will sell a good amount of options and will turn out ok with the majority ending up at 42k which is my guess on what is needed to show a small profit. Where they will do well is when they hit the 50k plus. They can definitely sucker me in if they make a $5K PUP package that has a HUD for the Model 3.

I passed on self presenting doors and bio defense filtration...

I thought Elon said they were looking at 8-12% on the 3 which was admittedly lower than what they get on the S and X. Maybe I am misremembering things.

 

[dsvick]

I don't have a distaste at all for Tesla losing money on base Model 3 sales. I actually believe this will be the case. It is others who are thinking Tesla is going to make 20% margin (cough, cough) on a Base Model 3.
...
Others think Tesla is still going to make 20% margin on a base model 3 with no options are on the highest potency crack possible.

I don't recall anyone in this entire thread mentioning 20% until you just did. Most of us have simply taken exception to your saying that they're going to lose thousands on base Model 3 sales.

 

[Red Sage]

I know you're usually good with the analogous situations from other manufacturers (namely, BMW). Is there an example where the exact same hardware/service offering is priced differently across the vehicle lineup?

The only thing that seems to make sense to support a difference in pricing would be if the S/X had an updated suite or software set. But that goes against what I know about Tesla to date.

Meh. Idunno. It's hard to come up with stuff. I don't really like going to website for... 'competitors'. The configurator always ends with some sort of 'Contact a Dealer' link...

Here's something for Porsche, but they don't exactly have a typical product lineup.

Panamera -- $2,630 -- Porsche Rear Seat Entertainment (PRSE)
_____________ $420 -- Preparation for PRSE

_Cayenne -- $2,590 -- Porsche Rear Seat Entertainment
___________ $2,890 -- Porsche Rear Seat Entertainment Plus

___Macan -- $2,590 -- Porsche Rear Seat Entertainment
___________ $2,890 -- Porsche Rear Seat Entertainment Plus​

Main thing is that the pricing is the same between the SUVs. The Sedan is more expensive than either iteration of the rear seat entertainment system for an SUV. And this is really not much more than the HaterAid screens on the backs of front seats. The kind I think are a complete waste of Bank of Mom & Dad Cashflow. Nothing at all as advanced as Autopilot.

 

[Red Sage]

My belief is Tesla loses their shirt on every Model 3 they sell at 35k. Tesla -maybe- breaks even with Model 3 + EAP and FSDC.

When Elon thinks the typical Model 3 will come out at 42k, most of that increase is going to be from adding in the AP suite.

Tesla is going to do everything they to make you buy that car for 50k. I doubt brakes are going to be even included for 35k. Get used to 1 pedal driving...

Why exactly would you make that bet? Please, do explain why the typically rather smart people at Tesla Motors would purposely release a 'loss leader' configuration of the vehicle that is pivotal to the very survival of the enterprise as a whole. I'd love to hear your in-depth data to support such a supposition. Because I rather disagree, and think Tesla will aim very hard to have no less than a 12% minimum profit margin on every single Model ☰ that rolls out of Fremont from the very outset. That is the best way to silence the Naysayers who believe they lose money on every vehicle they sell -- by making more money per vehicle than any of them can imagine possible.

 

[ohmman]

Meh. Idunno. It's hard to come up with stuff. I don't really like going to website for... 'competitors'. The configurator always ends with some sort of 'Contact a Dealer' link...

Here's something for Porsche, but they don't exactly have a typical product lineup.

Panamera -- $2,630 -- Porsche Rear Seat Entertainment (PRSE)
_____________ $420 -- Preparation for PRSE

_Cayenne -- $2,590 -- Porsche Rear Seat Entertainment
___________ $2,890 -- Porsche Rear Seat Entertainment Plus

___Macan -- $2,590 -- Porsche Rear Seat Entertainment
___________ $2,890 -- Porsche Rear Seat Entertainment Plus​

Main thing is that the pricing is the same between the SUVs. The Sedan is more expensive than either iteration of the rear seat entertainment system for an SUV. And this is really not much more than the HaterAid screens on the backs of front seats. The kind I think are a complete waste of Bank of Mom & Dad Cashflow. Nothing at all as advanced as Autopilot.

So.. you agree?

 

[Red Sage]

My holdings in TSLA is more than what I have in my Model X. Newly invested money, not 2004 stock appreciation money.

So yes, one could say I have my money where my mouth is.

Wait... Why would you have any 'holdings' -- beyond borrowed shares for $#0r+ing -- if you expect, as you mouth has put it here, Tesla to lose their shirt on the base Model ☰...? What's the call date on your low margin? And by the way? The company didn't go public until 2010, so what 'stock appreciation money' are you talking about anyway? Further, if you had bought stock four years ago, around January 20, 2013 you probably could have picked it up for around $35 per share. As they closed at just shy of $245 per share today, that would be a 7:1 growth for you. So, why the complaints? You could have sold off 25% of your holdings and let the rest ride for the duration. You should reassess which horse knows where you mouth is headed.

 

[Red Sage]

So.. you agree?

Not really. But as someone was once misquoted to have said something to the general effect of, "The absence of evidence is not the evidence of absence." or something like that. I say again, I do not believe that Tesla Motors will charge its Customers for vehicular feature sets in the manner that Porsche does for its own, even while Tesla may charge rates similar rates for hats, t-shirts, mugs, and curios.

 

[Red Sage]

I hope you are right and I am wrong on Tesla not making money on a zero option Model 3.

Here are just three reasons why Tesla is in trouble if the bulk of M3 sales go optionless:

1 - Very high cost of operations. No employees at Tesla are paid cheaply. Tesla is in the heart of silicon valley. Practically all manufactured goods are overseas. These are basic economic concepts around comparative advantage production.

Ah. So how is slave labor working out for your business? It must be nice to have a workforce that literally 'will work for food'. Tell me, what's your EIN, again?

2 - Model 3's will come with software limited batteries, software limited autopilot hardware, software as much as everything. This is a gamble on Tesla's part.

And this is a guess on your part. One quite a few of us share, but still just a guess. In other news? Blackjack apparently gives The Player the greatest chance to NOT LOSE in Las Vegas.

They pay for all the high end hardware, hoping people will activate them. If they don't, they eat it. Two Titan X Gpus that sit in a car, inactivated and collecting dust really hurts Tesla. People need to pay 8000 for that. If they want to produce in volume and allow every car for the same "autonomy potential" they have to include the hardware and find a way to make you pay for it.

Yeah... And did you notice how many fewer of the Porsche Panamera and BMW 7-Series and Mercedes-Benz S-Class and AUDI A8 have been selling since the Model S appeared on the market? Oh, and how sales of AUDI A4, BMW 3-Series, Mercedes-Benz C-Class and a bunch of others' sales have plummeted since the Unveiling of Model ☰ at the end of March 2016? Oh, there will be plenty of people to buy all that hardware and spend money for extra goodies too. It isn't as if Tesla intends to sell a redux of the 1984 Chevrolet Chevette for $35,000. Oh, and not only is the hardware necessary to meet future needs for Autonomous driving, but it is also necessary to pass future regulations worldwide for crash avoidance as well. Thus, Tesla might as well put in every single car. That way lives can get saved and stuff.

3 - Some repeat of #1 and #2 but I believe $35,000 is a very subsidized price point.

Even my own MX60D is subsidized to some extent. If it wasn't, they would keep selling them. Margins simply weren't there so they cut it.

That's the beauty of it! The woeful sales of the BMW 7-Series are subsidized by the usually awesome sales of the BMW 3-Series. Of course, the 3-Series dropped by around 25% in 2016 compared to 2015... That was surely just a coinkadink though, and had nothing at all to do with the Model ☰ Unveil... Right? Tesla is built the other way around, so that the High End cars subsidize the Production and Release of their Low End vehicles. What a great idea! I expect it will make them a whole lot of money.

Again, I hope I am wrong but I'm trying to see things pragmatically. I'm betting a lot on TSLA's success.

Everyone that posts 'pragmatically', or 'realistically' never seems to want to admit they are actually posting pessimistically around here. I openly admit that I post optimistically. Thus, I just might be wrong. Same as you.

By the way, in case you haven't read it, have a look here -- it will soon be eleven years old -- but outlines... a plan:

The Secret Tesla Motors Master Plan (just between you and me)

 

[Red Sage]

Is it my fault if Tesla insists on putting extra batteries, GPUs, and other hardware into a 3 that I didn't ask for or order? That is a major waste of THEIR money. Putting all the autopilot sensors in the car when I know I will not order it? They should not be trying to guilt trip me into dumping another $8000 on my 3. $35,000 is going to be bad enough.

I told them not to give every 3 a 75 KW battery, take the extra cells out of cars ordered with the 60 KW pack. It is easy enough to swap in a 75 at a Tesla Service Center if the customer decides to upgrade later.

Wait... wait, wait... Yeah! There it is! [SARCASM] detected. Clear out! Nothing to see here, folks! Be on your ways...

EDIT: Oops! Apparently not! Oh, well. I would have made perfect sarcasm though... What a waste.

 

[ohmman]

Not really. But as someone was once misquoted to have said something to the general effect of, "The absence of evidence is not the evidence of absence." or something like that. I say again, I do not believe that Tesla Motors will charge its Customers for vehicular feature sets in the manner that Porsche does for its own, even while Tesla may charge rates similar rates for hats, t-shirts, mugs, and curios.

So... you agree. Great!

 

[Red Sage]

I don't have a distaste at all for Tesla losing money on base Model 3 sales. I actually believe this will be the case. It is others who are thinking Tesla is going to make 20% margin (cough, cough) on a Base Model 3. I think to break even or show revenue, Tesla would count on all buyers opting for EAP and FSDC.

Hmmm... That's interesting, because in my experience I am the most optimistic individual in these parts. I've consistently pointed out that companies that make less than a 5% margin (such as Suzuki) on their cars go out of business. I've also noted that the traditional automobile manufacturers as a whole admit to perhaps a 6% margin. Thus, on the very least, I expect the Tesla Model ☰ will have a 6% margin. That would mean a $35,000 car would cost them as much as $32,900 to build. I have reminded people that three years ago, early 2013, Elon Musk noted an expectation of between 10% and 15% margin on Tesla Generation III vehicles. And, that he modified that to perhaps be around 12%. In which case, Tesla could build the car for as little as $30,800 as a goal. It would be really cool to get a 20% margin at the outset, it would certainly ruin your $#0r+ position on the market, and I could chortle myself to sleep happily each night. But really, Lexus manages around a 14% margin and they have been in business over 25 years. I think Tesla will be just fine.

I think you are taking a very rational approach to the economics. Others think Tesla is still going to make 20% margin on a base model 3 with no options are on the highest potency crack possible.

That would probably require crack, and likely a chaser of LSD too! Did you like your hit?

I think they will sell a good amount of options and will turn out ok with the majority ending up at 42k which is my guess on what is needed to show a small profit.

And how, pray tell, do you define 'a small profit'...? Will you tell us when Tesla has exceeded your prognostication by many multiples, ruining your portfolio on Wall $treet?

Where they will do well is when they hit the 50k plus. They can definitely sucker me in if they make a $5K PUP package that has a HUD for the Model 3.

Wait... How are you a 'sucker' for getting exactly what you order?

I passed on self presenting doors and bio defense filtration...

And...?

 

[MXWing]

And how, pray tell, do you define 'a small profit'...? Will you tell us when Tesla has exceeded your prognostication by many multiples, ruining your portfolio on Wall $treet?

A TSLA bear wouldn't bother building and investing in a thematic portfolio that is designed to go long for both Tesla and the Gigafactory.
Tesla Motors and Gigafactory Holdings

Any more assumptions you want to make?

 

[Red Sage]

Any more assumptions you want to make?

As I said before, your 'pragmatism' smells an awful lot like pessimism from this side of my keyboard.

 

[Matt125]

Some people in this thread seem to forget that $35k is a heck of a lot of money and the base model of the BMW 3 series falls well under that. The cheapest Mercedes C-class on-the-road price is £29k, which is around $35k, and that is a Mercedes.

$35k is a lot of money for most people, you're already at a par or above other executive-level sedans.

 

[MXWing]

Some people in this thread seem to forget that $35k is a heck of a lot of money and the base model of the BMW 3 series falls well under that. The cheapest Mercedes C-class on-the-road price is £29k, which is around $35k, and that is a Mercedes.

$35k is a lot of money for most people, you're already at a par or above other executive-level sedans.

The most stripped down 3 series at 34,445 MSRP is useless. No parking sensors, no rear view sensors, no navigation, no LED lights.

I am thinking it will be difficult for the Model 3 to throw in $3,100 (Premium Package), $950 (Driver Assistance Package), $700 (Lightning Package), $995 (Power Front Seats), and $1,950 (Navigation System). Let's not forget automation systems, software battery, and other software features that may be or not be enabled

and come in at the same price at this 320i after the Federal Tax Credit.

No one actually has an idea of what comes standard with the Model 3 right?

 

[MXWing]

As I said before, your 'pragmatism' smells an awful lot like pessimism from this side of my keyboard.

I would be thrilled to be wrong.