This is the real reason behind the FSD price drop
- Thread starter Bluenoles
- Start date
Clearly. Anyone who purchases AP or FSD adds 100% margin to Tesla’s bottom line. I suspect they are losing money on a base $35K car with no AP or FSD but are hoping that the majority of buyers will purchase those options.
TT97
Active Member
They are not dropping AP/FSD price on the $35k model, just for people who bought the cars before this most recent iteration of price drops.
If I were stretching to buy the $35k version, I would likely skip AP/FSD and just wait until they drop the price on that later on.
They are dropping the cogs of the autopilot system . The upgrade will money will reduce the price per car cost to build.
TT97
Active Member
They are trying to increase their profits (to offset the $35k cars) by doing a cash grab from existing customers. Issue is, the more often you do this and becomes predictable, the more your customers delay their purchases waiting for the next cash grab (and Tesla ultimately loses out as their avg cost decreases).
I am saving up for when they price cut the Roadster to $85k.
A few months ago, Musk said it would cost 38K to build the model 3 standard range. With the recent workforce reduction PLUS retail store closures, I suspect the number is close to 34K for the base model 3 (going by 2.1K price drops and 2.25K price drops announced right after the layoffs). So they may be making money on the cars, and are definitely cash flow positive on every car (they include warranty expense that doesn't need to be met until after purchase).
they need money and this 35K model 3 is def not helping and I honestly dont understand why they have to introduce this when they are financially constrained. But I do agree, that the price drop is to lure in more customers and bring in more cash that is urgently needed
ucmndd
Well-Known Member
This is an act of desperation. I’m not sure why more people don’t understand that. Massive price reductions and closing nearly all the retail locations is the latest “bet the company” move, arguably the most risky to date.
Also an interesting accounting trick - moving previously delivered “enhanced autopilot” features into FSD allows them to realize that revenue now instead of later.
Also an interesting accounting trick - moving previously delivered “enhanced autopilot” features into FSD allows them to realize that revenue now instead of later.
Atari2600
Active Member
ucmndd
Well-Known Member
I’m not arguing against it, necessarily. May well have been the only decision to make. Model 3 demand was obviously tanking at current price points. Guess it remains to be seen if the problem was actually price.
Atari2600
Active Member
I don't know what they should do but I want them to make future $25,000 and $15,000 cars and push ICE cars out of existence. All other efforts appear to be sub-par compared to what Tesla is doing.
TT97
Active Member
They can do that with sales going forward but they need to be careful with past FSD sales as the features were different for those sales which they have not achieved yet.
agree, Tesla needs cash especially now with the 35K model which I think should have waited on this. But moving EAP features to FSD was smart on their part. Lets hope company survives.
voip-ninja
Give me some sugar baby
The slashing of prices including AP & FSD is a desperation move.
Tesla should have gone private and continued getting rounds of funding. Less drama and less pressure.
they want to go private but they need an investor to cough up billions. Elon needs to go Gates and other billionaires and shmuze them into investing in Tesla
Thomas Edison
Active Member
He didn’t actually say “build”. I don’t remember it word for word but he said “the current cost would be” meaning their production costs were $3k above what they needed to be. With the store closures saving them 6% per car that brings $38,000 down to $35,720. So that just about puts them there.
Maybe my thinking is off here, but it would seem you are mixing fixed and variable costs. The cost to produce one more car is what is relevant here. If the incremental cost to build an SR M3 is $38K, then closing sales offices won't change that. They have to either build the car more efficiently (less labor), or reduce the cost of the parts. The argument for closing the sales offices is that they can get by making less profit per car if they reduce their fixed overhead because they don't need to make as much per car to reach overall company profitability.
He's specifically referring to cost of goods sold when he says cost. That includes parts but also includes a whole host of other things including labor. The 7% workforce reduction he announced in January will mostly affect that cost of goods sold.
Closing stores will affect SG&A. Not tied to cost of goods sold but that will affect the bottom line. In the end it will be a lower margin business with lower operating expenses.
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