How does focusing on the lowest margin product help the rebound? In normal times, the $35k M3 was not nearly as popular as all the whiners would have led us to believe before it went live. I doubt any of the bitches that claimed it was only a shell game by Tesla to keep buyers on the sidelines for as long as possible, never bought one nor had any intention to.
Instead, due to reduced production and dwindling inventory, the fact that Tesla is still the BEV leader in every measurable category will ensure the demand will be even stronger once the economy unclutches the pearls. I see us back to a 400,000 backlog
.
Lastly, stripping out OTA software doesn't save Tesla a dime. It works just the opposite. After the development costs have been amortized, it prints money. They would need to reduce real, physical car parts to save money.
I'll explain my thinking...
I don't think there is a certain demand problem, but Tesla is better off throwing too many demand levers than not enough demand levers.
If they accidentally create excess demand in a economic downturn that is a good outcome, they then only need to focus on supply.
- Making more Model Ys and additional variants is one demand lever.
- Exporting Model Y to Europe is another demand lever.
- Having the 35K Model 3 on menu is big demand lever, especially if the cheapest Model Y is at least 7K more.
We need to look at they the 35K Model 3 was off menu, it was not profitable at that price, or wasn't an good use of batteries 6 months ago.
I'm suggesting a lot can change in 6 months and I have always expected it back on menu, because that was the original aim and it unlocks a lot of additional demand.
Why I say that about demand is, every buyer has their maximum price, the 25K-40K price band is particularly price sensitive, and the "Tesla stretch" will be less common in an economic downturn.
But i don't want the 35K Model 3 back on menu at any price, I want it at a price where it is profitable, stripping out software, is possibly synced with dropping the price of basic autopilot and increasing the price of FSD. The hope is that the buyer will upgrade to autopilot + FSD later.
What I think has improved in the last 6 months to allow Tesla to lower prices (or improve margins) is:-
- More plant depreciation
- Process/productivity improvements
- Cell chemistry improvements
- Higher combined volume Model 3 + Y
My argument is at present Tesla is better off selling a higher volume of cars at a lower gross margin, than a lower volume of cars at a higher margin.
The 35K Model 3 might not be the right demand lever at this time, but one day soon it will be.
Return of LR RWD Model 3 is another possibility..