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Theory on Options Pricing

Discussion in 'Model 3' started by eloder, Jul 29, 2017.

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  1. eloder

    eloder Active Member

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    I thought of something when reviewing the options pricing the other night and I was curious if people might agree or not.

    Would it be possible that the options pricing (no reduction from a $70k+ vehicle) is designed to entice reservation holders into an S and X, while simultaneously thinning out the reservation list due to the 1.5+ year backlog? Tesla could afford to have half of their reservation holders cancel, and they would still have a solid 9 months of lucrative high-margin production assuming not a single additional person reserves. People who are more willing to shell out a lot more money will be getting their cars sooner as well, which is in-line with the signature program for the S and X in years past, and this will also help prevent the Osborne Effect until Model 3 production and demand are at healthy levels.

    In addition, this segment is a lot more price-sensitive to tax incentives dropping away (US fed tax credit). It seems like starting high would give Tesla plenty of demand levers to pull to help capture additional sales, in order to compensate for a tax credit phase-out.

    Thoughts? Does anyone else expect the options pricing to trend downward sometime late next year?

    Edit: Just in case it pops up, I'm 99% certain I'll still be holding onto my day1 reservation!
     
  2. boaterva

    boaterva Supporting Member

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    Interesting theory... I'm still wondering what happened to the overall idea of 'we won't charge the same for the 3's options as we did/do for the S and X, as those are the premium cars subsidizing the 3'. Seems like EAP and FSD are the same, and the PUP is hard to gauge with different contents....

    (Yes, that may change down the road, but if the 3 ends up with the same ever-changing options like the S and X, I don't know if the audience can take it; not the same as for the other cars....; heck, I can barely take it, seeing a completely different X waiting a week (no leather, no options except PUP, lol!).)
     
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  3. R.S

    R.S Member

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    This is what you will get, live with it. I spent months trying to convince people not to overhype the Model 3. It is a great car, for what it is. Don't talk it dow by speculating about cheaper options!
     
  4. eloder

    eloder Active Member

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    I remember that too, and I doubt they would turn away from that philosophy entirely.

    The new Premium package on the S is $5k as well, though funny enough the $5k on the S seems to get you a lot more (advanced air filter, premium interior lighting, more cold weather features).

    I'm not going to give up a year+ of driving a Model 3 just because I think options will become much cheaper sometime later.

    I've been around the forums long enough to know that if you wait for a better Tesla before purchasing, you'll never own a Tesla :p
     
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  5. No2DinosaurFuel

    No2DinosaurFuel Active Member

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    Those prices are there to pump the stock and subsidize the model Y. It is a never ending cycle. Looks like affordable EV is still a few years out.
     
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  6. OBX John

    OBX John Autonomous Driving Enthusiast

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    I think they are just trying to capture both the value buyers and still make as much profit as possible on the less price sensitive buyers. Pretty much the same reason most cars have such a price differential between "base" and "loaded".
     
  7. kbM3

    kbM3 Member

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    It is true that more affordable EV's are a few years out. But what is amazing, is that the model three is competitive with internal combustion engine cars in the same price segment.

    No other EV manufacturer can make this claim.
     
  8. zer0cool

    zer0cool Member

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    Tesla has established itself as premium brand. It aims for brand prestige the level of Porsche. Option prices increase with brand prestige. The premium option is actually a good deal by German premium standards.

    Option prices on the Model 3 is a way to reinforce the brand prestige.
     
  9. timk225

    timk225 Member

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    OP - your assessment could be correct.

    I am certain the Tesla 3rd quarter financial report will be bad, possibly very bad, with low sales. For 2 reasons:

    1. People will hold off on buying Model S and Model X, to see how the 3 turns out, go on test drives, "I have to think about it", etc.
    2. At the same time, 3 deliveries will be low, due to the ramp up.

    That will ding the stock price, but it should not be cause for concern, as in Q4 and then Q1 2018, sales and profits will be going UP. Tesla knows the 3 sales are there, but they have to do everything they can to keep S and X sales going strong through Q3 2017. Which we are in now.
     

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