Thekiwi
Active Member
There are 3 reasons Tesla would sell cars at zero margins:
1) The invisible hand
The selling price of a good is dictated by market demand. If you want to sell something at $50 but the market is only willing to pay $40, you must sell at $40, regardless of how much it costs you to produce the product, unless you choose to cut production. Interest rates and the expectation of a recession have severely impacted demand for premium-priced vehicles such as all Tesla models. And Tesla will not cut production because of
2) Scalability
Tesla's long-term goal is to cut production cost by 50%, and in order to achieve this target or even get anywhere near it, Tesla needs to constantly expand production. Even if they didn't make any money on the cars being produced, they'll make up for it when the economy rebounds and Tesla has the most favorable cost structure.
3) Propagation of platform
Tesla's end game is to sell software, i.e. FSD, to Tesla vehicle owners. Scaling production as fast as possible and selling everything is the prerequisite for this strategy. Classic printer & ink business model, just at a much larger scale.
Need to find a better analogy than printer & Ink business.
A printer is useless without the ink, its singular job requires ink.
By contrast a Tesla is a perfectly great usable product without software upgrades. Many people can buy one and never need or think about paying anything extra for software upgrades or services.