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S70D investor implications

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Note June delivery

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Couple of questions on marketing tactics

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Answer

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My take on marketing: No doubt gas savings are true, but in this case it might be an idea not to push the truth in this way as it seems to backfire.
 
So long as Tesla is cell constrained it is unprofitable to introduce the P100D or something 100D, but these make sense once there is a surplus of new cells and there is a need to increase ASP.

Do we have a source that confirms that Tesla is cell constrained? It has been repeated a few times in the forum as truth but I'm not aware with the source of it.

If this isn't true then the whole point is moot. Tesla might be using new batteries that are cheaper to produce and thus improving margin on the cars despite the higher capacities.
 
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Agreed. If you are interested in a model S you will know this already, or believe it when it is explained to you. Pushing it this way feeds bears.
Yeah, I'm not so sure about this either. Imagine of Ford advertised the new Focus as

$15,000*
*After 5 years of gas savings compared to the 2010 Focus

If they really want to push the message maybe they could put it this way:

The Tesla Model S 70D: $75,000 (ca. 57,000 after tax breaks and gas savings over 5 years)
 
Strange. Did they cut colors at the last minute then? And somehow black and different black passed the too similar test?
Take a look at the Design Studio this morning; the color range has been slashed:
Solid black
Titanium metallic (aka "warm silver")
Midnight silver metallic
Obsidian black metallic
Deep metallic blue (aka "ocean blue")
Pearl white multi-coat
Red multi-coat

So farewell to one of the two no-cost options, white, and to all the original 2012 colors except black and pearl white.
 
A lot of EV manufacturers will include the fed tax credit in the price, even though many consumers of the lower EV vehicles won't be able to claim the full $7500 credit.

http://www.smartusa.com/models/electric-drive/overview.aspx The smart ED even quotes "as low as" $12.490 for their ED price, as they include a $5k price reduction drop for taking their $80 a month extended battery insurance/maintenance/warranty program. If they included Musk's gas savings estimate as well, they could quote the car as costing only $2490 :love:

However, I still don't like including the gas savings bit because their calculations do not fit many customers. Someone like me who currently drives a 42 mpg vehicle 7000 miles a year won't even come close to that gas savings number.
 
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It sounds like you took up my challenge to build your own model for how the 70D adds incremental profit. I look forward to reading this. Good luck.
here is my table from the article - Genius Of The Tesla 70D: Sell More Cars, Use Fewer Batteries - Tesla Motors (NASDAQ:TSLA) | Seeking Alpha

70kWh %85kWhn %Extra Batteries Available (MWh)No of extra cars at same ratio%extra carsExtra Revenue M (100k ASP - 90k ASP)Extra Gross Profit (at 25%)No. of additional 10kWh home storage unitsRevenue at 10000 each (NYSE:M)Extra Gross Profit (at 50%)
2080253050.61317.7525002512.5
307010012422.4812230.51000010050
406017522154.4321453.51750017587.5
505025032266.4530676.525000250125
604032542768.5539999.7532500325162.5
7030400536910.7449212340000400200
8020475650713.01586146.547500475237.5
 
here is my table from the article - Genius Of The Tesla 70D: Sell More Cars, Use Fewer Batteries - Tesla Motors (NASDAQ:TSLA) | Seeking Alpha

70kWh %85kWhn %Extra Batteries Available (MWh)No of extra cars at same ratio%extra carsExtra Revenue M (100k ASP - 90k ASP)Extra Gross Profit (at 25%)No. of additional 10kWh home storage unitsRevenue at 10000 each (NYSE:M)Extra Gross Profit (at 50%)
2080253050.61317.7525002512.5
307010012422.4812230.51000010050
406017522154.4321453.51750017587.5
505025032266.4530676.525000250125
604032542768.5539999.7532500325162.5
7030400536910.7449212340000400200
8020475650713.01586146.547500475237.5

Great article! By principle I haven't loggedin to SA for over a year but your article was worth it :)
 
here is my table from the article - Genius Of The Tesla 70D: Sell More Cars, Use Fewer Batteries - Tesla Motors (NASDAQ:TSLA) | Seeking Alpha

70kWh %85kWhn %Extra Batteries Available (MWh)No of extra cars at same ratio%extra carsExtra Revenue M (100k ASP - 90k ASP)Extra Gross Profit (at 25%)No. of additional 10kWh home storage unitsRevenue at 10000 each (NYSE:M)Extra Gross Profit (at 50%)
2080253050.61317.7525002512.5
307010012422.4812230.51000010050
406017522154.4321453.51750017587.5
505025032266.4530676.525000250125
604032542768.5539999.7532500325162.5
7030400536910.7449212340000400200
8020475650713.01586146.547500475237.5

Great article, thank you.

A new model is quite a nice surprise from Tesla. I will not be surprised if 70D outsells all other Tesla models this year.

Reading comments on SA Tesla related articles reinforces my Tesla investment expectations. Usual bears with usual well worn out and discredited arguments are often bordering on comical.
 
Great article, thank you.

A new model is quite a nice surprise from Tesla. I will not be surprised if 70D outsells all other Tesla models this year.

Reading comments on SA Tesla related articles reinforces my Tesla investment expectations. Usual bears with usual well worn out and discredited arguments are often bordering on comical.

Thanks! Yeah it is fun to read comments and often frustrating. But as an author I hadn't posted anything for a long time now and I was getting argument withdrawal.
 
When did you make your last post before this one?

Thanks! Yeah it is fun to read comments and often frustrating. But as an author I hadn't posted anything for a long time now and I was getting argument withdrawal.

- - - Updated - - -

So basically your assumption is TM is battery supply constrained?

here is my table from the article - Genius Of The Tesla 70D: Sell More Cars, Use Fewer Batteries - Tesla Motors (NASDAQ:TSLA) | Seeking Alpha

70kWh %
85kWhn %
Extra Batteries Available (MWh)
No of extra cars at same ratio
%extra cars
Extra Revenue M (100k ASP - 90k ASP)
Extra Gross Profit (at 25%)
No. of additional 10kWh home storage units
Revenue at 10000 each (NYSE:M)
Extra Gross Profit (at 50%)
20
80
25
305
0.61
31
7.75
2500
25
12.5
30
70
100
1242
2.48
122
30.5
10000
100
50
40
60
175
2215
4.43
214
53.5
17500
175
87.5
50
50
250
3226
6.45
306
76.5
25000
250
125
60
40
325
4276
8.55
399
99.75
32500
325
162.5
70
30
400
5369
10.74
492
123
40000
400
200
80
20
475
6507
13.01
586
146.5
47500
475
237.5
 
So basically your assumption is TM is battery supply constrained?

Is there a source for this or is it a totally unsubstantiated assumption?

A lot of members are repeating it as if it was fact but I find it HIGHLY unlikely. Why would they be launching a battery intensive new product line if batteries were an issue?! It makes NO sense and would mean a huge management misstep.

To me it's more likely that they will use the stationary storage to absorb SURPLUS of OLD batteries. The NEW battery packs MIGHT be constrained in the short term though, but no information I've seen so far points to that.
 
Maoing, i made my last sa post sometime last year, probably October. It is not so much that they are battery constrained add opposed to them being able to meet demand (which I don't think is declining) with the resources they have.
 
I doubt that 70D was introduced due to battery supply constraint.

70D is likely to open up demand and enable Tesla to make more cars with less batteries.

Auzie, I agree with your second sentence. Particularly, selling more cars with fewer batteries is exactly what you want to do when your battery supply is constrained at least for the short run.
 
Is there a source for this or is it a totally unsubstantiated assumption?

A lot of members are repeating it as if it was fact but I find it HIGHLY unlikely. Why would they be launching a battery intensive new product line if batteries were an issue?! It makes NO sense and would mean a huge management misstep.

To me it's more likely that they will use the stationary storage to absorb SURPLUS of OLD batteries. The NEW battery packs MIGHT be constrained in the short term though, but no information I've seen so far points to that.

Yes, I'd like to see confirmation on this as well. My theory wirks out the consequences of a new cell which for at least the short run. So it is clearly a conditional thesis. While we may or may not get direct confirmation from Tesla on this--they like to hold their cards close to their chest these days--we can at least look at their behavior to see for clues. When Tesla is moving to increase ASP, this behavior is consistent with being unit constrained, e.g., the Fremont plant cannot ramp up cars per week. When Tesla is moving to sell more revenue per kWh, this is consistent with being cell constrained, at least for some kinds of cells, maybe not all. When Tesla moves to cut prices of existing models, this is consistent with being demand constrained. When Tesla is moving to offer new products or enhanced capabilities of existing products, this is consistent with an appetite to grow into new segments and markets.

So what I see with the 70D is not a price cut nor an attempt to raise ASP. It brings a new product with enhanced capabilities to a market segment that is more price sensitive and value oriented than buyers of the P85D; moreover, it optimizes revenue per kWh over the midline 85 and 85D. So this move is not consistent with being unit or demand constrained. But it is consistent with an appetite to grow into a value segment of buyers and being cell constrained on whatever kind of cell they are putting into the 70D and might want to put into other vehicles like the Model X. Once the Model S 100D or higher is announced, we'll know we're past the cell constraint.

So, yes, I would love to hear Musk confirm or set aside my hypothesis, but for the time being I must know the tree by its fruit.

We also need to wonder if Tesla will have new cells for the Model X. If so, then it may make sense to also introduce that to lower value version of the Model S. This helps Tesla manage the ramp up in production. If there is so much demand for high end Model X versions than the 70D can be sacrificed with longer wait times. OTOH, if sell supply exceeds demand for the Model X, then more 70D can be pushed out. The game is still about maximizing revenue per the new cell supply, while maintaining solid demand for the new cell so Panasonic can scale up with confidence.
 
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