What other automotive manufacturer has their vehicle prices all trending down?

[insaneoctane]

I know a lot of people are upset about being collateral damage to Tesla's pricing changes....but is anyone else amazed that while every other car manufacturer keeps raising their prices year after year,Tesla, even though their vehicles are in high demand, keeps lowering theirs? How can anyone catch up?

 

[ninpb]

First phase of new technology. When it matures, battery is one major component and say it can't get any more efficient then we'll level out and even start to increase in price. Take iPhones costing 1k now.

 

[Magnets!]

Cars aren't typically sold for sticker price so you don't really know what their ASPs are. Some consumer incentives (rebates) are published but a lot of incentives go to dealers to allow them to sell at lower prices and still earn a profit.

 

[TheGrimSweeper]

The internal combustion engine has probably been priced down as low as it can go at this point. It's matured and been around for over 100 years.

Batteries and EV technology are still relatively new. The prices will keep coming down as it follows a technology cost curve. Similar to how computers did, cell phones, TV's etc.

As the gigafactory continues to scale up I would imagine Tesla would be able to lower prices on their cars even more.

So while I understand people are upset, Tesla cars cost less now then they did. It's just the technology starting to mature. It will keep happening probably for the next 10 years.

ICE car prices will stay stagnant basically as this curve is already done.

 

[Magnets!]

I know a lot of people are upset about being collateral damage to Tesla's pricing changes....but is anyone else amazed that while every other car manufacturer keeps raising their prices year after year,Tesla, even though their vehicles are in high demand, keeps lowering theirs? How can anyone catch up?

I question the 'high demand' statement. Tesla would not be dropping their prices with high demand. In my opinion demand for the higher priced spectrum of the model 3 has fallen off a cliff worldwide.

 

[Evbwcaer]

I think the responses so far are missing something, that the average cost of a car, inflation adjusted, is on a steady trajectory upward.

This makes Tesla price cuts all the more notable, because they are on the cutting edge of tech and many manufactures are on the dying end, at least for significant components in their cars. Traditional cars should should arguably not be be seeing inflation adjusted costs increases as their tech is old and there are many sunk costs. I do understand that modern cars are continually offering more power, safety, reliability, etc.

Here’s How Much a $35,263 Car Today Would Cost the Year You Were Born

 

[AltLogic]

2013 Ford Focus Electric $39,200 with a 76 mile EPA range. No DC fast charging.

2018 Ford Focus Electric $29,995 with a 115 mile EPA range and DC fast charging. Only major lost feature is homelink garage door opener in visor.

That must have been painful.

 

[TMarque]

@Magnets!

You are absolutely right, there is no way they would have cut existing configurations if the orders were still rolling in. For what reason would they choose to make less money on the work they do if they could sell all the cars they can produce at their maximum production, it would be just horrible business to cut the prices and increase lead times for those customers who are ordering.

It’s arguable whether or not Elon Musk is a genius, but it’s not arguable whether or not he’s ignorant of basic business principles. The only rational reason to cut prices across the board like they did is because they weren’t able to sell all the cars they can produce, because the demand wasn’t there at the prices they were offering. Lowering the prices should increase the demand, and opening up the SR will open up another level of potential customers. It should allow them to sell out their current maximum production and even create a queu for delivery.

Whether or not this was a smart business move is debatable. I personally would have liked them to focus on the high end market, somewhat like BMW. Someone mentioned that they should have kept the Tesla brand high end, and created another marque for the less expensive models they plan to offer. One of the hardest things to do in business is create luxury branding. It remains to be seen whether or not this was a smart decision. As a Tesla owner, I sure hope it was.

 

[TheGrimSweeper]

Damn, 30k for only 115 mile range. Does anyone actually buy those things?

 

[ohmman]

I think all of the responses have something to offer. I agree that with an ICE vehicle, you pay more because they're adding technology. The margins aren't as great, and there really isn't a lot of ability to further pressure the price downward. With an EV, there is a lot of downward pressure on pricing because the market is still being developed. So it is to be expected that Tesla prices will drop over the long term unless they have some incredible new offering built into the vehicles.

At the same time, the recent price drops are more than slight downward movement. They include quite a bit more drop than what would have been reasonably anticipated, which is why a lot of customers are feeling regret and angst. It seems to me that Tesla has made a decision that they want volume over margin. And honestly, that's not a huge surprise considering their mission statement.

To @TMarque's point, luxury dilution is a business strategy. It's not the only business strategy, but it's a very common one. For example, a winery will start with low production, meticulously crafted wines. Prices are very high and availability is only through the winery. As they get larger, they'll create a slightly downmarket offering with less expensive fruit, and it'll be sold not just at the winery but also at select specialty retail outlets. As that builds, they'll start offering an even more downmarket label that's sold nearly everywhere. And eventually, they'll sell multiple high production bottlings at Target and Safeway. This is how recognizable brands make it to your grocery store.

The big question is whether they can maintain the high end portion of their business while capitalizing on the inexpensive market. Some seem to manage, some don't. It partly depends on the quality of the inexpensive product, and if it's representative of the brand. Increased access improves availability and therefore removes some of the inaccessibility draw to the brand. But I don't think it kills it.

You are correct that many companies will create a subsidiary brand to slightly dissociate the less expensive from the more expensive, but I don't think that makes sense in the case of the Model 3 vs. Model S and X. They're all too close together to have a line drawn. Maybe if Tesla eventually comes out with a $15k sedan.

 

[insaneoctane]

First phase of new technology. When it matures, battery is one major component and say it can't get any more efficient then we'll level out and even start to increase in price. Take iPhones costing 1k now.

Yes, but when you look at the first iPhone, inflation adjusted to $605, I'll challenge you to show me a less expensive (inflation adjusted) flag-ship iPhone. Tesla has the same product (or better), for cheaper today than 1 year ago.

I agree that much of the ability to discount is probably from the economies of scale of the battery.

As for demand, once Tesla introduced the $35K vehicle (which is in-line with their mission), they forced themselves to adjust the line accordingly. They had to lower the price to make the increased margin options appealing enough to attract potential buyers to move up the line.

Nonetheless, I'm impressed that the best car available (IMO) with a real technology edge keeps getting cheaper, while the dino-burning old-school ICE choices get more expensive.

 

[ninpb]

Yes, but when you look at the first iPhone, inflation adjusted to $605, I'll challenge you to show me a less expensive (inflation adjusted) flag-ship iPhone. Tesla has the same product (or better), for cheaper today than 1 year ago.

I was actually thinking the entire mobile phone history. The 80s brick phone costing thousands in the beginning to the cheap prepaid burner phones at 7-11 for the mature stages to the now 1k Samsung's and iPhones.

 

[voip-ninja]

I know a lot of people are upset about being collateral damage to Tesla's pricing changes....but is anyone else amazed that while every other car manufacturer keeps raising their prices year after year,Tesla, even though their vehicles are in high demand, keeps lowering theirs? How can anyone catch up?

Consumer confidence is a very big factor in pricing of cars, especially luxury brands.

Rolex intentionally raises the prices of their watches every year regardless of demand... they do this so that someone buying one today doesn't have to worry about it being devalued in a few years if Rolex slashes prices.

Everyone anticipated Tesla would eventually release a lower cost version of the Model 3. What hardly anyone anticipated is that Tesla would slash prices on the other models, devaluing them. That, along with slashing option prices, closing stores, it all creates an impression that the company is weak or desperate... regardless of what the reality is.

 

[GoTzillaR]

@Magnets!

You are absolutely right, there is no way they would have cut existing configurations if the orders were still rolling in. For what reason would they choose to make less money on the work they do if they could sell all the cars they can produce at their maximum production, it would be just horrible business to cut the prices and increase lead times for those customers who are ordering.

It’s arguable whether or not Elon Musk is a genius, but it’s not arguable whether or not he’s ignorant of basic business principles. The only rational reason to cut prices across the board like they did is because they weren’t able to sell all the cars they can produce, because the demand wasn’t there at the prices they were offering. Lowering the prices should increase the demand, and opening up the SR will open up another level of potential customers. It should allow them to sell out their current maximum production and even create a queu for delivery.

Whether or not this was a smart business move is debatable. I personally would have liked them to focus on the high end market, somewhat like BMW. Someone mentioned that they should have kept the Tesla brand high end, and created another marque for the less expensive models they plan to offer. One of the hardest things to do in business is create luxury branding. It remains to be seen whether or not this was a smart decision. As a Tesla owner, I sure hope it was.

I believe that's exactly what's happening to Tesla. If the demand is high, no business owner will cut the profit to half when it can bring double.

My coworker put the deposit down for a Model 3 two weeks ago, OA contacted him back on the same day saying there is a brand new Model 3 with the same specs he wants built in "Dec 2018" if he wants it sooner.