Pricing strategy for 2023?

[Mike7564]

(moderator note)

Please direct further pricing discussion to the stickied thread, which can be found here:

Discussion: Model 3 and Y price drop Jan 2023

Haha. Keep dreaming. Ha. Only if I can sleep tonight. Beyond annoyed. Early December 2022 buyer here..

teslamotorsclub.com

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Ouch. As expected given the aggressive end of q4 push, TSLA fell well short of delivery estimates for q4. Now looking at real headwinds in q1 with the looming IRS ruling on the refund qualification and macroeconomic headwinds.

Will be very very interesting to see if they totally rethink their pricing plan. Cut prices across the board and shrink profit margins now that supply chain shortages are improved? Introduce RWD MY? Shift more of the cost to after the purchase software updates (even basic autopilot?), bring a more feature rich/luxury version MY to customers who don’t qualify for the refund, etc.

Exciting next few months where finally the consumer has the upper hand.

 

[exxxviii]

TSLA fell well short of delivery estimates for q4...

Tesla only missed the Wall Street expectation by 3%. Everyone else got equally screwed by the IRS guidelines. Nobody else can manufacture anything close to Tesla’s scale. So, I don’t think Tesla has any real threat yet. Tesla predicted they will increase sales by 50% YoY in 2023, but Wall Street adjusted that to 35%. Everyone else’s combined total sales will probably not equal Tesla’s 2023 sales increase.

I don’t expect anything different in pricing strategy, because there is not enough volume available anywhere else to diminish Tesla sales. Don’t forget that Tesla sold the hell out of these things without the subsidy, so they probably know they can keep selling them like crazy.

This will probably be a serious conversation in 2024 or 2025 when some of the others can manufacture 1M cars/year.

 

[ucmndd]

Prices will absolutely need to come down to sustain this level of demand. Pretty much every Tesla model is dramatically overpriced for the market we’re likely to find ourselves in for 2023.

At minimum there will need to be various 3/Y configs that are both compelling enough and priced to qualify for any available tax incentives (let the government do the discounting first).

When the battery materials requirements kick in around March and reduce the credit to $3750 for essentially everyone, I expect Tesla will be forced into an across the board $3750 discount to make up for it.

 

[patmurphey]

From my other thread...

What is being ignored is the IRA battery/battery pack credits of $35 and $10 respectively per kwh of batteries and packs made in the US. That $45 per kwh amounts to approximately $3,500 credit to Tesla for every long range 3 or Y. (Tesla by a long-ago contract gets all of Giga Nevada's joint Tesla/Panasonic credits.) IF there is any weakness in demand with a recession, Tesla could offer a $5,000 discount on every long range 3 and Y with no loss in gross margin on the cars. The long range 3 would be back in line for a credit and the standard range Y could be tweaked a bit more to get a credit with minimal options. A $60,000ish long range Model Y would be more competitive in a potential recession, especially with the Mach E decent models having no credits. Other Manufacturers do not benefit the same way because I'm sure that their battery manufacturing partners are unlikely to have made the same mistake as Panasonic.

If the SUV definition is resolved in the Model Y's and Mach E's favor all the better for everyone.

All in all, Tesla could be off to a very competitive start in 2023 before even considering reducing gross margins. They will have plenty of financial flexibility to ride out even a deep recession. It's important to remember that consumer tax credits do not help the manufacturer in an era of already high demand. Credits to a manufacturer help both the manufacturer and consumers with potential discounts.

 

[tangible1]

From my other thread...

Tesla kicks off Q1-23 with 35,000 cars in transit, the SEMI ramping up production, the CT going into production in several months, and a M3 refresh coming.
Tesla continues to grow their resource limits, expanding battery production and seeing additional batteries coming from Panasonic new KS factory in late 2023.
Tesla remains solidly profitable, and surprisingly, their Carbon Offsets business will grow yet more with the new Infrastructure legislation mandates growing.
Tesla retains pricing power with products still in demand, and has demonstrated flexibility, with Model variants at different price points likely coming.
Tesla Power products will see more uptake by Electric Utilities around the world. Lead times are 2 years....there's real demand, and a new Lathrop CA factory.

All the naysayers and boo-hooing going on are nonsense.
Demand for EV's is not slacking, Tesla remains dominant in the market, and while their share might shrink as more competition comes, Tesla is the standard.
Tesla doesn't need and cannot yet profitably build a low-price, low-margin car for several years yet. Ignore the hype nonsense.
All Tesla has to do is execute with what they've got and keep profits going to scale their volume, as Elon has described for years.

 

[tangible1]

Ouch. As expected given the aggressive end of q4 push, TSLA fell well short of delivery estimates for q4. Now looking at real headwinds in q1 with the looming IRS ruling on the refund qualification and macroeconomic headwinds.

Will be very very interesting to see if they totally rethink their pricing plan. Cut prices across the board and shrink profit margins now that supply chain shortages are improved? Introduce RWD MY? Shift more of the cost to after the purchase software updates (even basic autopilot?), bring a more feature rich/luxury version MY to customers who don’t qualify for the refund, etc.

Exciting next few months where finally the consumer has the upper hand.

don't get those hopes up too high.
demand remains strong, and Tesla will likely offer Model variants to lower price points, with range and feature trade-offs.
They will not discount all that much.

the market as a whole remains resource limited (batteries). that won't get much relief this coming year.

 

[acpd]

Tesla couldn't sell enough cars when they had $3,750 + 10k miles discounts. so they were forced to offer $7,500 discounts.

That is all you need to know. Absolutely 100% prices will come down. No way they stay where they are at. Specifically in March, except heavy discounts. This is mostly due to current economic conditions.

 

[exxxviii]

I believe economists and analysts are forecasting an increase of consumer EV demand in 2023, despite an overall recession. This means that they will be buying fewer ICE and more BEV. Tesla increased sales from 340K in 3Q22 to 410K 4Q22, despite a U.S. government-caused blip that enticed buyers to abandon orders. Tesla is currently the only BEV manufacturer able to deliver at volume In 2023. There is literally no place else for anyone to buy the cars they want but from Tesla.

 

[tangible1]

Tesla couldn't sell enough cars when they had $3,750 + 10k miles discounts. so they were forced to offer $7,500 discounts.

That is all you need to know. Absolutely 100% prices will come down. No way they stay where they are at. Specifically in March, except heavy discounts. This is mostly due to current economic conditions.

Tesla wasn't forced to do anything.
Tesla learned from last year's EoY Government tax incentive- induced chaos and tried to offset it.
But many people are committed to their specific order configuration.
So despite getting CASH NOW rather than a tax CREDIT in 15 months (worth much less), they opted to push orders out to 2023.

For those that realized they could get $3750 - $7500 CASH UPFRONT, plus even a year's worth of free SuperCharger access, they made out like bandits.

Pricing on currently offered Model configurations aren't going to change much.
Tesla will just offer Model variants with less range and features to spur demand if needed.

And any low end Model is years off. Think of Elon time.

 

[ucmndd]

And any low end Model is years off. Think of Elon time.

Nobody here is talking about a “low end” model.

I’m talking about Tesla returning to prices close to what the 3/Y were priced at barely a year and a half ago.

Yes, demand for EVs is high and will remain so. But people aren’t going to buy millions of $60k+ cars at 6+% interest staring into the abyss of an imminent recession. Anyone thinking otherwise is deluded.

 

[exxxviii]

Yes, demand for EVs is high and will remain so. But people aren’t going to buy millions of $60k+ cars at 6+% interest staring into the abyss of an imminent recession. Anyone thinking otherwise is deluded.

This is literally what economists and analysts are predicting for EVs. They are predicting that BEV demand in 2023 will be higher than it was in 2022, despite the recession. Sales will be shifting over from ICE to increase BEV demand. And we are talking a couple million globally (only around a million-ish in the U.S.) a drop in the bucket of all new car sales.

 

[tangible1]

Nobody here is talking about a “low end” model.

I’m talking about Tesla returning to prices close to what the 3/Y were priced at barely a year and a half ago.

Yes, demand for EVs is high and will remain so. But people aren’t going to buy millions of $60k+ cars at 6+% interest staring into the abyss of an imminent recession. Anyone thinking otherwise is deluded.

Model variants with lower range or feature sets. Or, maybe better range etc at current price points. An updated Model 3.
That's what's coming.

 

[ucmndd]

This is literally what economists and analysts are predicting for EVs. They are predicting that BEV demand in 2023 will be higher than it was in 2022, despite the recession. Sales will be shifting over from ICE to increase BEV demand. And we are talking a couple million globally (only around a million-ish in the U.S.) a drop in the bucket of all new car sales.

Let’s go ahead and revisit this thread in Q4.

Tesla average transaction prices are coming down significantly this year to stimulate demand or I’ll eat my hat.

 

[Mike7564]

Surprised to see folks still argue the “demand is as strong as before” and they “can’t sell them fast enough” and “don’t need to subsidize”. For literally a third of q4, they dramatically cut prices on their 3/Y cars. Close to $9-10k off (7500+supercharging value, pretax). And they still missed targets. Missing by 3% is actually a pretty big deal (companies who miss by 10-20% would be in a more dire existential situation). Imagine if they hadn’t don’t that. Q1 will be even harder since any money off is now a tax refund. And q2 onward will be even worse.

Trust me. I wish TSLA still had the unlimited demand and pricing power than they once enjoyed. Certainly stand to profit far far more of they did. But the writing is on the wall and we will see their actions over the next few months.

 

[Mike7564]

Model variants with lower range or feature sets. Or, maybe better range etc at current price points. An updated Model 3.
That's what's coming.

Funny thing is that when you look at it objectively, a M3 or MY already has a pretty lowered feature set these days, esp if they remove supercharger network monopoly. Definitely not 60-70k luxury finishes. Missing USS. Legal issues with FSD claims. Etc.

Wish Elon would turn his attention back to his core companies.

 

[tangible1]

Nobody here is talking about a “low end” model.

I’m talking about Tesla returning to prices close to what the 3/Y were priced at barely a year and a half ago.

Yes, demand for EVs is high and will remain so. But people aren’t going to buy millions of $60k+ cars at 6+% interest staring into the abyss of an imminent recession. Anyone thinking otherwise is deluded.

prices from 18 months ago may be offered, but on reduced feature / range configurations.
Tesla is a business.

 

[ucmndd]

Tesla is a business.

Yup. And businesses respond to market inputs or they die.

I don’t blame Tesla for making hay for the past couple years while they could through endless price increases. They’re a business, after all, as you point out.

But they’re not immune to the fact that their products are becoming fantastically overpriced for the current market.

You and I might care about driving an EV and be willing to pay the premium, but the average American 100% is NOT, particularly when gas prices are more or less normal and they’re worried about their paycheck-to-paycheck existence in uncertain times. The bottom line is all that matters.

 

[tangible1]

Funny thing is that when you look at it objectively, a M3 or MY already has a pretty lowered feature set these days, esp if they remove supercharger network monopoly. Definitely not 60-70k luxury finishes. Missing USS. Legal issues with FSD claims. Etc.

Wish Elon would turn his attention back to his core companies.

But the SuperCharger network is being enhanced. And it's value is only really now being realized. The crap funded by IRA is making a mockery of it.
The feature sets, especially range, are much better than competitive offerings. Most others don't come close.
And Tesla can deliver, without Dealer markups.

We can argue about values, but go find something comparable for 55-65K. Tough get, even for ICE.
Things may loosen up on the ICE side as they sit on Dealer lots, but for the near term, EV means Tesla.

Not everyone needs or wants an EV. But for those that do, the pickings remain slim.

 

[exxxviii]

Let’s go ahead and revisit this thread in Q4.

Sounds good to me. We ought to have a pretty clear perspective after 2Q2023. And this is not my opinion; I am merely relaying what industry analysts like Morgan Stanley, Bloomberg, S&P Global Mobility, etc. are forecasting about consumer demand for BEV. At the macro level, industry experts are pretty consistent that BEV demand will be higher in 2023 than it was in 2022. Tesla is still singularly poised to capture those sales compared to all others.

Tesla sold 302K cars in the US in 2021. As of October, they sold 400K in the US. That is a massive jump. They will probably have sold north 500K in the US when we get the final Q4 numbers. They just came online in Germany and are ramping up heavily in Europe. US demand and growth looks pretty incredible from the Tesla PoV.

 

[tangible1]

Yup. And businesses respond to market inputs or they die.

I don’t blame Tesla for making hay for the past couple years while they could through endless price increases. They’re a business, after all, as you point out.

But they’re not immune from the fact that their products are becoming fantastically overpriced for the current market.

You and I might care about driving an EV and be willing to pay the premium, but the average America 100% is NOT, particularly when gas prices are more or less normal and they’re worried about their paycheck-to-paycheck existence in uncertain times.

We will find out over the coming months whether demand holds up or not.
Interest rates and peoples budgets are variable.
I believe Tesla has sufficient demand levers left to pull, so I'm thinking Tesla will be more than good.