Tesla pricing - inverse piramid

[Ugene]

I call Tesla pricing policy an inverse pyramid - it entices new buyers while alienating considerable percentage of previous ones. I've seen this happen to a few folks who could afford earlier Model S/X. They could afford the car but wanted to feel good about their purchases and they didn't due to how fast the value and uniqueness/rarity of their purchase went down. Those folks are waiting for the likes of Porsche/Audi to take their money to next; while performance/price may not be as good as Tesla the car would feel more luxury and more unique and they'd feel better about the purchase.

I miscalculated ... I wanted a fast sleeper car that would give me freedom to politely move through the traffic and have fun on twisty side roads and mountain roads. A car with few other cars on the road to match the performance. I projected my cost of ownership over 6-7-8 year I planned to own the car and ordered Model 3 Performance. I was pissed that Tesla forced me to pay $5K when I didn't want a $67K car without a modern cruise control so I got EAP.

Now 8 month later the same configuration I wanted is $16K less (I would have been happy with basic AP). So, the resale value of my 8 month old car is more where I saw it in 5 years or more. These $16K very considerably increase the amount I pay for tabs ($900/year in Seattle area) and insurance (my insurance company gives lower quotes for 2019 M3P compared to 2018, crazy, yeah?). This can easily amount to more than $1.5K additional over my expected term of ownership. Accounting on $7.5K-$2K bigger tax break than the current buyers are getting and $1.6K more tax I had to pay it is still roughly $13.5K more translated to the new car price. So, my projections of the cost of ownership were very considerably off. Performance wise the car feels much less unique as much higher percentage of Tesla buyers in Seattle area buy Model 3 Performance. Autopilot actually got less usable for me as, due to phantom breaking, I am more reluctant to engage it during my daily commute to work.

Am I sorry I got a Tesla? Somewhat. My other option was to spend less than 2/3 of price of my Model 3 to get a slightly used performance car and modify it to improve handling and performance to have 0-60 at 4s or slightly below. Compared to Model 3 Performance it would have less immediate torque and slightly slower 0-60 but would be more playful on twisty roads and in the snow. It would have held its value way better.

 

[kchau]

Do you like your car?

 

[Ugene]

Do you like your car?

Very much. Of course. I think I can drive it well.

 

[kchau]

Very much. Of course. I think I can drive it well.

Because most of us here don't even have our cars yet, some of us have gone beyond the estimated delivery timeframe, and the wait is pure agony. So it sucks to read about people that have their cars complaining about price when we are in a black hole of waiting and really all we want is the car.

 

[Ugene]

So it sucks to read about people that have their cars complaining about price

I understand. I still hope that my musings will be useful for new Tesla buyers that try to optimize the timing and decide on buy vs lease.

 

[Twiglett]

Some folks think that buying a car is an investment instead of a depreciating asset.
For some reason they also seem to think that the selling price of the car should remain static during their ownership period.

The lesson?
Buy the car you want, when it suits you. If you delay because you're waiting for some future feature or price drop you will never get it.
I'm sure my car lost at least 10K the moment I drove it off the lot - but that was a year and 20K miles ago. Its probably worth less than that now, but that's what happens to depreciating assets.

 

[MTSN]

I was pissed that Tesla forced me to pay $5K when I didn't want a $67K car without a modern cruise control so I got EAP.

Now 8 month later the same configuration I wanted is $16K less (I would have been happy with basic AP). So, the resale value of my 8 month old car is more where I saw it in 5 years or more.

Problem number one is you had a very unrealistic expectation of a 76% residual after 5 years. That is highly unlikely and you're setting yourself up for disappointment unfortunately. The reality is we don't know what the future holds for Tesla pricing and residual, so everyone needs to run their own calculations to see if the car makes sense at the time you buy it. Nothing is impervious to price fluctuations both up and down for any product - everything changes in value over time. Generally speaking, the heavier a product is on the tech side the quicker it depreciates, and there really aren't any cars on the road today more advanced tech wise than Tesla.

The way I look at it, I'm going to save at least $3,500 a year driving the Tesla compared with what it replaced. Regardless of where the residual ends up, the car will eventually pay for itself monetarily, but the real win is in the fact it has materially improved my life. It sounds ridiculous, but my commute was so bad before autopilot I had been looking for a new job. My stress level was so high from traffic getting increasingly worse over the last few years, when I got to work in the morning and when I got home, it was literally (negatively) affecting my well being. I absolutely love "manually" driving the Tesla, but when traffic starts to grate on me, I just turn on autopilot which has completely changed the way I feel at both ends of the day. My family loves it as much as I do, and that combined with the safety, fun, tech, performance, etc. makes it worth it to me regardless of what kind of crazy price changes Tesla makes and where the residual ends up.

 

[ewoodrick]

Why can't people understand that ALL manufacturers change prices, but generally as rebates to dealers?
And that they bought a piece of new technology, not an classic car. Heck, don't you have more features today than when you bought the car.
If I remember, I think that the Model T went through some price changes as well.

I'm sitting next to a Ford dealer right now. I think that I can see a $15,000 sticker now

 

[T3SLAROD]

So what you are really saying is Tesla is all HYPE and are really not fun to drive, basically not worth the money at the price point it has been selling.

I’m into performance also, the one thing A Model 3 has going for it is consistency. No Intercoolers that get heat soaked, no chance of trying to improve performance while causing other issues.

 

[T3SLAROD]

Why can't people understand that ALL manufacturers change prices, but generally as rebates to dealers?
And that they bought a piece of new technology, not an classic car. Heck, don't you have more features today than when you bought the car.
If I remember, I think that the Model T went through some price changes as well.

I'm sitting next to a Ford dealer right now. I think that I can see a $15,000 sticker now

Again, name one Manufacturer who has changed MSRP quarter to quarter.

Your argument would be valid if Tesla offered real incentives instead of just lowering the MSRP every 4 months

 

[AKinDC]

Performance wise the car feels much less unique as much higher percentage of Tesla buyers in Seattle area buy Model 3 Performance. .

This line is really telling to me.
I totally understand being upset that there's a cheaper version of the car you bought so soon after you bought it.
But being upset that it's so popular that you don't feel unique any more? Don't think you're going to get too much sympathy here for that.

 

[irongash]

For all the defenders of Elon and Tesla...great...love you all!

For individual car owners who are feeling the pinch of the price drop...I am with you!

I paid almost $5K more for my car less than 30 days ago--
- $1910 Price Cut
- $1500 white paint (which was supposed to be "special" but now is "inexpensive enough" to be the default)
+ $1000 State Rebate since I could have gotten the car without EAP and be under $50K
+ $213 State Tax

I will recover $1875 out of this amount due to Federal Tax incentives. As much as I want us to love the car, it feels painful to know that waiting for a few more days would have been $2,848 cheaper ($4723 - $1875), for the same exact car I ordered.

Part of the appeal of Tesla versus the other cars is that they are not changing their model every year and that they are not negotiating the price...so there is also an expectation of price stability in a major investment each one of us has made in this car and this brand.

Car manufacturing (and any tech manufacturing) is not, and should not be a volatile endeavor with prices fluctuating as often.

It would be great that Tesla would extend an incentive such as lifetime supercharging for the "early" adopters or folks who may have purchased within the 30 / 60 days prior to any such major change. A company should not alienate the customers on whose shoulders the company was built. Each of the Tesla owners are the ambassadors and advertisers of this brand--don't leave a bad taste in our mouths for adopting this brand.

My arguments for keeping price stable / offering something to folks who commit to Tesla sooner than later:
The risk is that folks who are almost ready to make the decision will wait on the sidelines for longer because they know there's another price drop that may happen the next month or next quarter.

Part of the reason Apple has been successful with the iPhone is the control on the price. A person purchasing an Apple product knows that their purchase (the mini-luxury investment they are making) will retain its value over the course of the 1 year until the next model comes out when it may be lowered in price.

 

[JamesBrown]

Again, name one Manufacturer who has changed MSRP quarter to quarter.

Your argument would be valid if Tesla offered real incentives instead of just lowering the MSRP every 4 months

Every single manufacturer offers adjusted month to month rebates/incentives to boost sales. They can swing from $1000-40,000 depending the the car and time of year. There is minimal difference between lowering MSRP $5,000 and offering a $5,000 discount to move inventory. Both impact resale value of current owners.

 

[T3SLAROD]

Every single manufacturer offers adjusted month to month rebates/incentives to boost sales. They can swing from $1000-40,000 depending the the car and time of year. There is minimal difference between lowering MSRP $5,000 and offering a $5,000 discount to move inventory. Both impact resale value of current owners.

Rebates and Incentives are not MSRP or Invoice. Rebates and Incentives can be kept be dealers if they choose to go that route.

Does anyone even know the invoice of Model 3?

Who buys a Tesla for resale value? Its a run of the mill commuter car with a bit of ooooommmmph who most likely become obsolete in the near future. Its not a Ford GT, NSX or any other Supercar, no matter for fast it is 0-60

 

[Ugene]

Problem number one is you had a very unrealistic expectation of a 76% residual after 5 years.

I paid $80K with tax new. I hoped to recover about 40% of that in 6 years. Call it not realistic but I was on the spot or even a bit pessimistic when projecting cost of ownership of my previous cars. How much do you think I can sell my 8 month old $80K car for right now? 55%? Am I on track to 40% in 6 years?

The way I look at it, I'm going to save at least $3,500 a year driving the Tesla compared with what it replaced.

I did incorporate this math when calculating how much I was willing to pay.

Why can't people understand that ALL manufacturers change prices, but generally as rebates to dealers?

I just was way luckier with the Acura and the Audi I had in my family with the cost of ownership estimates.

So what you are really saying is Tesla is all HYPE and are really not fun to drive, basically not worth the money at the price point it has been selling.

The car is a blast to drive. I will gladly shake hands with engineers who designed the basic driving platform - the chassis, steering, suspension, battery, torque control, etc. Having said this, this is not the only fun car to drive.

But being upset that it's so popular that you don't feel unique any more? Don't think you're going to get too much sympathy here for that.

For me and for many people I know this is a part of the equation when calculating the cost of ownership. Actually, for me personally, it is much less important.

 

[JamesBrown]

Rebates and Incentives are not MSRP or Invoice. Rebates and Incentives can be kept be dealers if they choose to go that route.

Does anyone even know the invoice of Model 3?

Your comment only proves why direct to customer is a better solution than dealerships. Rebates/Incentives are manufacturer driven and are independent of dealers. When BMW announces a $5k loyalty rebate, it is available at all dealerships. If the rare occasion occurs where a dealership refuses to honor a manufacturer discount, just go to a different dealership.

Either way, the point still stands. Adjusting MSRP $5k or offering a $5k sales incentive impact the resale market the same.

No one knows the actual build cost. Estimated to be around $28k
German car engineers tore apart a Tesla Model 3 to see how much it cost to build

 

[ohmman]

Moderator note: This thread is being locked and price drop discussion can continue at the existing thread. Thanks for understanding.