Realistic Timeline for 35k base Model 3

[sooner]

Looking to start a conversation on whether the current production models, being the Model 3 with larger battery and upgraded trim, the Performance version, and the AWD drive of the larger battery/trim variant, are receiving enough demand to push back the introduction of the base 35k model.

I am unsure there is enough demand to hold off the 35k model in the domestic market, assuming Tesla does not start shipping the more expensive versions internationally.

I am unsure if at current production levels if the 35k version will be profitable, I suspect it would be, but not at the margin the more expensive other ones enjoy.

In my opinion, the Model 3 will be the iPhone of cars, but only at the 35k level (with or without tax break). I do not believe the 49k base version carries that designation. At least in my experience, my colleagues are all interested, but in the 35k version. None of them want the 49k version.

If the 49k version demand stalls out, will the 35k version begin production faster?

 

[eSpiritIV]

35K version nobody will buy. They will buy paint $1000, autopilot or Preminum interior for $5000ea. $40-42k will be the average price im sure so there is extra profit margin there. The recent German teardown showed 20-25% margins. 30% on the fully loaded ones.

They until they are capable of 10k vehicles per week, we wont see $35k model. That is the sweet spot in which they can make whatever they want at a profit, regardless if its the base model or premium.

Iphone if you remember was overpriced for the same or slightly better in some cases than a comparible android phone. People waited in line for it. Typically because they were the first with new features and style.

 

[ℬête Noire]

I wouldn't count on any metal top (non-PUP) cars getting shipped before the end of the year, so that puts $35K right out of the question (I'm assuming you mean metal top, SR battery, and are handwaving away that the actual sale price most will pay will one or more options like include paint, 19" wheels, and EAP, etc.)

That aside; It's been long estimated that they had maybe a market of 80,000 LR + PUP (collectively in RWD, D, and P) in the US & Canada among the roughly 450K worldwide reservations. At their current production clip of 3K/week, and having built maybe 40K units so far, that's (80K-40K)/3K/week = 13 weeks. That'd be roughly mid-October. This squares with the delivery estimate windows they've been providing so far, which is production into November.

A large variable here though is what new walk-up orders for some configuration of LR+PUP will be like in the next couple months. If they see something approaching 20K of those, then they have effectively pushed LR+PUP production into December leaving little room for any SR shipping this year.

EDIT: A wildcard is if they start shipping international beyond Canada, they'll have several 10's of thousands more demand for LR+PUP waiting overseas. I'd count that as a long shot. It doesn't make a lot of sense though financially as the logistics of doing that usually delays getting the cash and the sale on the books by several weeks (IIRC in the range of 9 weeks). This is why over seas shipments normally go out early in the Q, so revenue gets booked in the same Q as the money spent to build the vehicle.

 

[N5329K]

With money tight, expansion plans huge, with the market putting company financials under a microscope and strong demand for the loaded versions, Tesla has little incentive to build base models. They may feel obligated to (or not), but serious production of the base model (that I reserved) is not in the company's best interests. They will lose reservations as a result (they lost mine), but will post stronger numbers on their quarterly reports.
IOW, don't hold your breath.
Robin

 

[CtznSnips]

It seems to me that the most realistic timeline is the one established by Tesla. On their website it says standard version in 6-9 months, so I would expect it early 2019 (first deliveries in Jan-Feb)

 

[ℬête Noire]

One more thing. Musk has repeatedly, since last year IIRC, set a goal for production capacity of 8K Model 3/week (plus 2K Model S/X, for a total of 10K vehicles/week) for the end of 2018. Anything that might get in the way of those upgrades to the production line required for that are unlikely to win out in priority.

 

[Motor Mouth]

All of which makes for a highly interesting wagering opportunity. 12/31/17 - will any SR base models ship before that date? I think it's an intriguing question. I tend to believe the answer lies in how many orders they're receiving right now (now that the site is accepting and anti-selling has ceased) for P / AWD / LR models. While I certainly recognize the "good faith" aspect of filling first day orders for SR prior to the year end (and termination of the full tax credit) as a shareholder I should be rooting for sufficient orders of higher margin vehicles to push first delivery of base models into 2019. A middle-ground (which I would favor if I was in charge) would be to fill all or a substantial portion of remaining line waiter SR orders for delivery by YE. Wonder how it will play out.

 

[sooner]

I am not sold on the strong demand part for the fully loaded versions. I worry that may be the Achilles heel of Tesla presently.

I am not looking for a base model myself. I already have my 3, paid for by VW. But just pondering away at the companies future because I am now deeply vested in it.

 

[Motor Mouth]

I am not sold on the strong demand part for the fully loaded versions. I worry that may be the Achilles heel of Tesla presently.

I am not looking for a base model myself. I already have my 3, paid for by VW. But just pondering away at the companies future because I am now deeply vested in it.

If I were a betting man, I'd take that bet. I think "new" (meaning since the site started accepting orders) AWD and P orders will be over the 20K threshold by the end of Q3.

 

[chronopc]

If I were a betting man, I'd take that bet. I think "new" (meaning since the site started accepting orders) AWD and P orders will be over the 20K threshold by the end of Q3.

The AWD orders will be strong. I also think people waiting for a SR battery will consider the LR since the tax credit is phasing out. Getting the full credit will put the LR battery at $5,250.

 

[abasile]

I think the availability of the $35K base model, even in very limited numbers, will be necessary to get many prospective buyers "into the store". Upon making an emotional commitment to buy the car, I think a solid majority of those buyers will find themselves adding options. Merely adding AutoPilot and a paint upgrade will turn the $35K car into $41K.

While I believe that Tesla should sell as many highly-optioned cars as possible, I think it would be best for Tesla to start selling a trickle of $35K cars as soon as possible. Ideally, I'd love to see Tesla take care of all of the U.S. "line waiters" (those who waited in line at Tesla stores on 2016/03/31 to reserve their cars) before the end of 2018. It's probably a question of how soon they can begin production of Standard Range (220 mile) cars without seriously impacting their overall production rate. I'm merely saying this as a TSLA shareholder and supporter, as we've already ordered our dual motor Model 3.

 

[T-Will]

For those waiting for the $35k version, it might be worth waiting a year or so for the used market to grow. I've already seen a LR w/EAP and low mileage going for $48,500 in the used market (someone wanting to upgrade to performance).

 

[C141medic]

I don’t see Tesla offering the SR version before the end of the year. I think they’re going to ride the “high margin train” of the pricier versions as long as they can. Perhaps more competition next year from the other manufacturers may give incentive to Tesla to offer the SR sooner at that point.

 

[Moderatefan]

until they are capable of 10k vehicles per week, we wont see $35k model.

Don' agree with this...I believe EOY target is 7k and that's when they'll likely start ramping up SR.

 

[kengchang]

My own guess
SR+PUP opens up to people with reservation early Q4 with couple thousand delivery end of Q4.
SR barebone available to people with reservation late Q4/Q1.
SR barebone floodgate open a month or two into Q1.

 

[Moderatefan]

are receiving enough demand to push back the introduction of the base 35k model.

I think this article will support your narrative Tesla Model 3: More Signs of Weak Demand for the Priciest Versions (though it has factual error re: 350k)

It does seem that current LR orders are limited to 4 months worth. So, the question is if there'll be enough exposure to attract new orders during these 4mo. I'm sure that vast majority of people are not aware that orders are open to all and that they even have a limited window to get a full tax credit.
One point I think that is not fair is that "there isn't much demand for higher priced models".
If we consider those ~40k already delivered and ~80k to be delivered in the next 4mos, that's about 50% of overall U.S./Can reservations, which is not bad.

 

[Uncle Paul]

Believe there will be no pressure on Tesla to offer the base vehicle as long as there is +/- $10,000 tax credits available for those purchasing the more highly optioned models.
Once the tax credit begins to phase out, the volume of base production will also ramp up.

Tesla is under the gun to produce a profit, and until volumes increase, the base unit is not profitable to produce.

Not sure there ever will be a base unit produced that will receive the tax credits, unless the tax rules are changed.

Tesla is doing what they can to see that as many customers as possible will qualify for the tax credits, while still maintaining a profitable company.

 

[Uncle Paul]

Tesla is also bringing demo high performance Model 3s to their showrooms for demo rides. That should increase dramatically the number of people that will want to own one of those.

Potential customers will be able to experience the advantages of higher power and also AWD with dual motors.

When Tesla is better able to release more advanced self driving features, that also will have more customers lining up.

 

[Motor Mouth]

It does seem that current LR orders are limited to 4 months worth. So, the question is if there'll be enough exposure to attract new orders during these 4mo. I'm sure that vast majority of people are not aware that orders are open to all and that they even have a limited window to get a full tax credit.
One point I think that is not fair is that "there isn't much demand for higher priced models".
If we consider those ~40k already delivered and ~80k to be delivered in the next 4mos, that's about 50% of overall U.S./Can reservations, which is not bad.[/QUOTE]

Essentially, the author seems to be saying that only about 100,000 (22%) of the order backlog is going to be for anything other than the SR vehicle. First of all, even if it's accurate, that's not necessarily bad because we're only talking about reservation holders. There hasn't been enough time to make a call about how many new order will be placed for the LR / AWD / P vehicles. That's the real wild card right now. Assuming 22% is right, then 22% of any new orders can be expected to be for the higher margin vehicles as well. That alone could push the demand into 2019. Whether Tesla chooses to wait on SR or not, I think it's silly handwringing to say "Tesla's in trouble if it has to start filling SR orders." It really is just a matter of time in either event. He also concludes that Tesla needs a 25% margin to maintain its capital needs, but I can't believe that there's a meaningful make-or-break point between an arbitrary 25% margin and the estimated 18% margin that the company will likely make on a base 3.

 

[ucmndd]

They have zero reason to start delivering the short range car before the end of the year. There's plenty of demand for the currently available versions at current production rates, and the phase-out of the tax credit will push many of the people waiting for the short range car off the fence, converting those sales into higher margin deals.

If there's one thing Tesla is good at it's effective utilization of demand levers. The federal tax credit is the biggest lever in their toolbox right now, and they're not going to waste it on a single low-margin deal for a $35k car.