Tesla Cancels Sub $40,000 Standard Range Tesla Model Y

[TMC Staff]

Entry-level Tesla Model Y SR RWD below $40,000 will not happen. When Tesla announced the Model Y, it was expected that the car would be available in several versions, including the entry-level Rear-Wheel Drive and Standard Range (just at a later point than the all-wheel-drive Long Range versions). All the versions (LR AWD Performance, LR...
[WPURI="https://teslamotorsclub.com/blog/2020/07/13/tesla-cancel-standard-range-tesla-model-y/"]READ FULL ARTICLE[/WPURI]

 

[Electric700]

Tesla should just make everything AWD. We know Tesla's AWD implementation improves range by at least 2%. Plus, you have an added level of safety.

Production costs would go lower since AWD would be a standard configuration on every car / truck, but yes the base price might increase slightly with the addition of the extra motor / electronics. As the cost of other components including the battery goes lower, the $30,000 - $39,000 target entry level might be achieved.

 

[aaron0k]

Seems a bit like 2011, when Tesla announced they would make a sub $50k Model S (after tax incentives)... the "40" model. They were sold online, but were never really manufactured; instead they gave those buyers software limited 60's instead (no one complaining).

Elon's School of Psycho-Logical Marketing?

 

[No2DinosaurFuel]

I think this is purely a margin issue for tesla. I will probably get down vote for this, but base on my analysis, tesla will not make money on the cheaper Y. This is the real reason why they are not selling it. I mean they are still making and selling the model 3 in that range. Why not just use that battery?

The reason is clear if you analyze last quarter's number where they barely made money, though some have question the numbers a bit. In any case, they got a large chunk of money from other car companies for EV credits and yet barely made money all the while selling record number of vehicles and also cutting wages and contractors bracing for the covid 19 including a shutdown?

Until tesla can get rid of the human worker assembling their vehicles and replace them with robots running 24/7, i think they will need to continue to sell their higher cost vehicles to be sustainable.

 

[jsight]

I think this is purely a margin issue for tesla. I will probably get down vote for this, but base on my analysis, tesla will not make money on the cheaper Y. This is the real reason why they are not selling it. I mean they are still making and selling the model 3 in that range. Why not just use that battery?

I don't understand this analysis. Why would the Y at $41k be a problem when the SR+ is not a problem at $38k?

 

[No2DinosaurFuel]

I don't understand this analysis. Why would the Y at $41k be a problem when the SR+ is not a problem at $38k?

Exactly my point. Musk's comments on why they dont plan to sell cheaper cars because of lack of range is BS. It is just purely about margins. Also keep in mind the model y have some improvements compared to the model 3 which might mean slightly more cost such as the heat pump vs the resistive heater on the model 3. I wouldn't be surprised if tesla doesn't make money at all on the lower end model 3.

 

[jsight]

Exactly my point. Musk's comments on why they dont plan to sell cheaper cars because of lack of range is BS. It is just purely about margins. Also keep in mind the model y have some improvements compared to the model 3 which might mean slightly more cost such as the heat pump vs the resistive heater on the model 3. I wouldn't be surprised if tesla doesn't make money at all on the lower end model 3.

I don't see how the margin theory makes any sense. They've repeatedly said that the Y is similar in cost to the 3 to produce and this one would be (at least) $3k more expensive. Similarly, if they needed to bump margins on both the SR+ and the SR Y, it would be easy to bump the base cost by ~$3k along with a 10% larger battery.

 

[DanCar]

Theory: Cause is due to competition. e-tron, mach-e, Nissan SUV.
Tesla will drop the price of the Y long range single motor to $40K be end of 2021.

 

[hlin07]

As a former SR+ model 3 owner at 250 miles of range, I never really needed all that range. So for Elon to say it makes no sense for 250mile range Model Y, he's betting that someone like me who would be totally ok with 250 miles of range but would be fine to fork over extra few k for higher margin.
Tesla needs to know that the standard Range model Y is NOT competing with other luxury brands, rather it's competing with standard main stream Toyota Rav4, Honda CRV buyers. Just like Model 3 is poaching honda civic, prius owners.
Model Y at 40k is a much easier sell for me to buy it compared to 45k. I suspect 40k model Y will be available at a later date just like the SR+ was introduced later for model 3.

 

[jsight]

Theory: Cause is due to competition. e-tron, mach-e, Nissan SUV.
Tesla will drop the price of the Y long range single motor to $40K be end of 2021.

That's possible... the Mach E is smaller and slower at this price, but the 300 mile range version can be bought for $44k after the federal tax credit. The LR RWD Y would compare really favoribly against it at $45k. The 230 mile SR+ version would basically be even with the Mach-E, but the Mach-E might be closer to $36k giving it a really big price advantage.

Personally, I kind of think the batteries on the SR+ and LR will be increased some time next year, and both will stay at about the same price. The timing is just about right for a 10% bump, IMO, but obviously it is pure speculation.

 

[CyberShy]

Theory: Cause is due to competition. e-tron, mach-e, Nissan SUV.
Tesla will drop the price of the Y long range single motor to $40K be end of 2021.

This is actually an interesting thought. While I don’t think it will go that low, based on Musk’s comments about range, my guess is they prefer to stick with the performance feature and the LR RWD’s advantage will be great range with “reasonable” performance.

Also, margins still matter.

 

[suwaneedad]

I found this Elon comment to be nothing more than a way to pull waiters off the sidelines and into the existing offerings (ideally) or into the LRRWD (when offered, soon). Gets more purchasers of the increased production volume at as high an ASP as possible, before later "changing his mind" and offering an SRish version of the Y at a lower price point. SRish Y will be profitable if made later, as battery costs continue to decline and once all of the production capacity is online and being spread across so many many many units.

Personally I think there's too much production capacity coming online too quickly, given the state of the COVID economy. Elon consistently hedged his predictions of a consistently profitable Tesla by saying "ignoring the effects of a recession or something." Here we are.

 

[No2DinosaurFuel]

I don't see how the margin theory makes any sense. They've repeatedly said that the Y is similar in cost to the 3 to produce and this one would be (at least) $3k more expensive. Similarly, if they needed to bump margins on both the SR+ and the SR Y, it would be easy to bump the base cost by ~$3k along with a 10% larger battery.

Like I said before I wouldn't be surprised tesla is not making money on the standard range. Just look at their previous quarters results. Mostly model 3 and Y sales and they need 300 millions EV credit sales in Q1 to be bearly profitable. This quarter they needed at least 250-$300 millions (they received 450 millions) EV credit sales again to stay profitable yet selling more Model Y this time around at high margins ($49K model). Given this data, if they sold the 40K model Y, that will significantly eat into their revenue and profits if any on these cars. Remember Elon has been saying battery cost is going down significantly lately with their acquisitions and such.

My point has aways been tesla needs to get rid of the human workers in the fremont factory. They cost too much. they need a factory where raw materials come in and cars comes out with minimal human required. Basically robots building cars. Until that happens, they will be reliant on the EV credits amd/or high margins cars like model S/X or higher version 3/Y to be profitable.

 

[No2DinosaurFuel]

When you think about it, the model Y is essentially a strip down model X both in car as well as cost. Model X is 80K; model Y AWD long range is 50K. So what do you get for that 30K?

1) air suspension
2) a proper dash console (extra screen)
3) slightly more interior space
4) falcon wings doors
5) auto open/close front doors
6) currently 7 seater though model Y 7 seater will come out later but we all know it will probably not be useful
7) much bigger battery (100kwh vs 76kwh)
8) hepa filter system
9) until recently free unlimited supercharging

Now all the above might not add up to $30K, but you get my point about how the current model Y is essentially a stripped down version of the model X and this helps tesla maintain their margins to make selling their cars profitable.

Once they start selling the rear wheel drive only model Y Standard range, it will significant cut into their margins.

 

[aaron0k]

When you think about it, the model Y is essentially a...

Pregnant Model 3.

It's what happens after SEX.

 

[Reeler]

My prediction is that the current model is the standard range version. I think that is what EM was saying. Battery day will get a 400 or 500 mile long range version announced.

That will take the wind out of the sails of Ford and VW as they release serious competition to the Model Y with the full Federal tax rebate.

 

[Uncle Paul]

Tesla wants to expand their production of cells and automobiles by building lots of Gigafactories. This will take tremendous amounts of money. To raise all this money will take lots of profits, and that means margins on existing production needs to be significant.

While the marketplace wants great cars at rock bottom prices, that is not probably the current marching order.

 

[Reeler]

Tesla wants to expand their production of cells and automobiles by building lots of Gigafactories. This will take tremendous amounts of money. To raise all this money will take lots of profits, and that means margins on existing production needs to be significant.

Borrowing is next to free for companies right now. Governments are helping with loans. Tesla will need to compete with the onslaught of competitors from Ford, VW and Nissan in the cute-UTE segment. Those will all enjoy the Federal tax rebate too.

 

[ChadS]

I agree that margins (which implies sufficient demand to meet those margins) are likely the main driver. Tesla can't build enough cheap cars for everybody by themselves. If Tesla really want to achieve their stated mission of pushing the entire industry to switch to electric, they are going to be a lot more convincing to the other automakers if they maintain high margins. Of course this only works as long as they have enough demand for the high-margin trims.

If Tesla is lying about the mission and really just wants to make money...well, then the high margins are still a great way to go about it.

Cheap cars can't happen without high volumes (especially if you want LOTS of cheap cars, which is of course the goal and makes the point even more obvious), so to get there all the automakers have to get on board and build volume EVs. There are many really nice EVs on the market these days, but so far (at least in the US) only Tesla and the 2nd-gen LEAF are volume cars. More are promised, like the Mach-E and ID-4, but not here yet. Much progress has been made, but the industry still has a long ways to go to reach Tesla's stated vision.

(Side note: high margins don't always result in high profits. You can have really high margins and still show a loss if you invest a lot in growth. So the fact that Tesla barely made a profit doesn't mean they can't sell lower-margin cars; they'd just have to make fewer investments. That said, I think everybody agrees that selling higher-margin vehicles when you can is better for business).

 

[Uncle Paul]

My point is that by offering lower price point lower profit cars, growth would suffer. Tesla needs to show a path to profit in order to get financing for future factories.