Getting off topic but I agree. My wife was born in Vietnam. She spent the first 25 years of her life in a small town not far from Saigon and knew nothing about any other country outside her condensed world. While she can speak, read, and write four languages today, she could not begin to tell you where Afghanistan, much less Kansas, is located on a map.
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Getting off topic but I agree. My wife was born in Vietnam. She spent the first 25 years of her life in a small town not far from Saigon and knew nothing about any other country outside her condensed world. While she can speak, read, and write four languages today, she could not begin to tell you where Afghanistan, much less Kansas, is located on a map.
I think upgrading the battery will be one of the most popular, if not the most popular of upgrades. If the cost to manufacture a battery pack is perhaps $150 kWh in 2018, throw in another 30% for margin, $10,000K would equate to an additional 45 kWh of extended battery, which I doubt unless the base model comes with something less than 50 kWh. It's possible; is it probable? I think the upgrade will be somewhere between the broad range of $2,500 - $7,499 but more toward the low end. If not, this car will get real expensive real quick. But that is also a good possibility.
One thing I;m curious about, is how liner the price is for the battery pack. A lot of figures have been tossed out on how cheaply Tesla can produce the batteries, but how about an extra 15Kw on top of the base. Lets say Tesla gets the price per Kw of the base down to $125, will it still cost them $125 to add on each Kw, or can they get those incremental Kws even cheaper? So, say the base is a 60Kw battery, and the price they manage for the base is $125/Kw. That would put the price of the batter at 7500. Lets say they decide the upgraded version is 75Kw, and they can produce each additional Kw for $100, that would put the bigger battery at $9000, or $1500 addiational.
If they manage that, than a $5,000 upgrade makes sense.
If they manage that, than a $5,000 upgrade makes sense.
This discussion seems to be missing the demand side of the economic equation. The larger battery increases the utility of the car and is more desirable from many reasons. The increased battery size is a major discriminator between the option levels of the car. Even if the delta cost between a 60 and 80 kWh battery was only $2000, why would they charge only ~$3000 for the privilege of the longer range?
Look to Apple's pricing scheme with the iPhone. In that case, the upgraded flash storage is exorbitantly priced if you look at the component costs. The iPhone 6s options are:
16 GB for $649
64 GB for $749
128 GB for $849
The difference in component costs between these 3 options is maybe $20, not the $200 as reflected in their prices. People pay for the larger storage because of the VALUE of that storage, not because of the cost of the memory chips.
Tesla should charge based on the additional value the larger range provides. I certainly doubt Tesla can get 10x the cost for additional battery capacity, like Apple can get for iPhone storage, but assessing that value and what the market will pay should set the price of the battery upgrade. The actual cost of the battery will only set the profit for Tesla.
Look to Apple's pricing scheme with the iPhone. In that case, the upgraded flash storage is exorbitantly priced if you look at the component costs. The iPhone 6s options are:
16 GB for $649
64 GB for $749
128 GB for $849
The difference in component costs between these 3 options is maybe $20, not the $200 as reflected in their prices. People pay for the larger storage because of the VALUE of that storage, not because of the cost of the memory chips.
Tesla should charge based on the additional value the larger range provides. I certainly doubt Tesla can get 10x the cost for additional battery capacity, like Apple can get for iPhone storage, but assessing that value and what the market will pay should set the price of the battery upgrade. The actual cost of the battery will only set the profit for Tesla.
Not sure it works that way. After the base model, I think most options will require a substantial uplift due to increased margins. I hope I'm wrong. So if the base model comes with a 60 kWh battery, and an optional uplift to 75 kWh is offered, it could be below $4,000 extra IMO. Indeed, that would be great for all.
Then again, I wonder if there could be two options for extended battery for the M3 to take into account extra driving range, performance and ludicrous modes. Who knows? Will battery options by 2018 go up to 90 kWh or more at a lower price? Economies of scale could evolve to make that happen, especially if you're talking 400,000 - 500,000 units per year and there are no geopolitical issues related to lithium procurement. Right now, I think Australia, China, Chile, and Argentina hold the largest reserves of lithium.
I agree. I love Apple products. In this case however, we're not talking $700 iPhones or $2,500 (plus or minus) laptops. I'm not sure one can compare smartphone memory prices to EV battery prices. Maybe I'm wrong. The 1,000 lb gorilla in the house is ICE and relatively cheap gasoline in the States.
There comes a point when people just go ahead and buy that loaded Lexus LS XXX, so they don't have to worry about superchargers while driving a 7-day loop through southern Utah and northern Arizona. I will always have one ICE car and one hybrid or EV car. Current hybrid is 2013 Prius Persona Edition and it suits me nicely. No, it's not a Tesla, but it suits me nicely.
I think you missed my point. I doesn't matter what the battery costs, it only matter what the market will pay for the value of that battery. The iPhone storage is just an extreme example but companies generally price their products this way, or at least they will if they want to extract the available margin from their products.
I disagree, even if the value is high. Many buyers of $35K cars will find it difficult to handle and justify $10K for the extra range when it comes time to buy. Yes, value is high but pocketbook is low. Many M3 buyers will be far different from those folks buying MS and MX Teslas fully loaded at $100 - $150K, especially when the $35K vehicle turns into $70K. It's easy to come up with $1K for a reservation deposit. It will be a bit more difficult to present a $50K or higher cashiers check at delivery time. Just speculating.
It'll be more expensive than you hope. That's a pretty safe rule of thumb when anticipating pricing. People will come up with a dozen rational(ized) reasons for why what they hope will be true, but more times than not they will be disappointed. My hope is the battery upgrade will be 5k or less, but I'd be shocked if the battery upgrade was less than 7500, and would not be surprised if it was over 10k.
I doubt it would be over $10k - that would be higher than the S for most of its life.
But the value proposition at $7k is really really high. Making guesses here but 215 mile range vs 265 - which is nice. But then take 0-60 from 6 secs to 5 secs. That is worth $3-4k alone on a typical $35k vehicle. So add range and performance and $7k is about right.
I sincerely doubt 10% margin on base and 30% margin on options. For day one, it will probably be 0% and 50% - which is why they won't deliver any $35k cars for a year or two. Now it might be 5% and 50%. Some options are probably 80% margin.
What I haven't seen people reminded of in this thread is BMW 3 series comparison. Look at the option prices to get an idea. I haven't looked in years but I'm guessing a larger engine model is a several thousand dollar option.
Dream what you want, but Tesla isn't building a Honda with Honda option pricing. But even still, I expect Honda has a 50+% margin on options.
But the value proposition at $7k is really really high. Making guesses here but 215 mile range vs 265 - which is nice. But then take 0-60 from 6 secs to 5 secs. That is worth $3-4k alone on a typical $35k vehicle. So add range and performance and $7k is about right.
I sincerely doubt 10% margin on base and 30% margin on options. For day one, it will probably be 0% and 50% - which is why they won't deliver any $35k cars for a year or two. Now it might be 5% and 50%. Some options are probably 80% margin.
What I haven't seen people reminded of in this thread is BMW 3 series comparison. Look at the option prices to get an idea. I haven't looked in years but I'm guessing a larger engine model is a several thousand dollar option.
Dream what you want, but Tesla isn't building a Honda with Honda option pricing. But even still, I expect Honda has a 50+% margin on options.
Johan
Ex got M3 in the divorce, waiting for EU Model Y!
One thing to consider is the recent publication of Tesla's pricing of Tesla Energy PowerPacks at $470/kWh retail (which may well be negotiable, as opposed to car pricing). I would suppose around $400-700/kWh for the battery upgrade based on this, likely closer to $700 because you don't have the same economics of scale in a small car pack (50-80 kWh) as opposed to a PowerPack att 100kWh.
I'd certainly hope the biggest battery available provides more range. That would be cutting it awfully close on what is required for our family. Or in other words, it's cutting it close if we can transition from ICE to BEV :/
Edit: let me clarfiy, and hopefully inspire more educated people to give opinions on what really is the cut-off point:
A couple of times a year we'll do trip during which we'll drive ~260km without charging options (round-trip, so around 130km one way). Now that itself shouldn't be a problem even the the basic version of Model 3, but the thing is, the 260km round-trip is from the closest supercharger, and I'd rather not need to charge to 100% at a supercharger (very slow, and not recommended in any case).
In addition to this, it does get quite cold here during winter, which will eat up range so expect a minimum of 50km of extra range to be needed as buffer / just-in-case. Plus vampire drain (which shouldn't be significant) and the off chance that some extra detour is needed. That's why I've estimated that ~500km range at 100% SoC would be the most optimal battery size for us. That way we wouldn't need to charge at the supercharger so much and still be able to make the trip without being too nervous.
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I'm not sure why Tesla would stick to 15-20 KWh add ons with the battery like most here speak of. To me, it would make sense to consider it to though purpose. with 60 Kwh and 220 mile range it serves perfectly fine as a second car for a household. ICE car will be used for longer needs of travel. With 90KWh and 330 mile pack it will be a choice for the only household vehicle. Lot more value there and different purpose for the car. That will be easily worth $10K for the sake of purpose.
I definitely see no purpose to talk about 15KWh add on. how often does that make a difference in ones life ie. cars purpose? I would pay "$0" for additional 15KWh to 60 base pack since it is still the same car in purpose. Add 40 Kwh to 60Kwh base (making it 100Kwh, 370miles) and I would pay $20K more..
I definitely see no purpose to talk about 15KWh add on. how often does that make a difference in ones life ie. cars purpose? I would pay "$0" for additional 15KWh to 60 base pack since it is still the same car in purpose. Add 40 Kwh to 60Kwh base (making it 100Kwh, 370miles) and I would pay $20K more..
Exactly. At a starting price of $35k, you are dealing with a whole new class of customer. This customer base once getting past the diehard enthusiasts will be a very price sensitive group. Demand for the S and X is relatively inelastic with regards to price. People who are buying one really came with their mind made up to buy one. With the lower price of the M3, this is a group that has other options and is at a whole new income bracket where these types of expenditures have to be balanced with many of the other aspects of daily life.
I think we're all agreeing here that the battery price will depend on what people are willing to pay for it, and Model 3 customer price sensitivity is different than the Model S's.
The poll question is flawed. The real question is how much are you willing to pay for an option that increases range by 60 miles or 25% and lowers the 0-60 mph time from 5.5 to 4.6 seconds?
My assumptions for the above are:
The poll question is flawed. The real question is how much are you willing to pay for an option that increases range by 60 miles or 25% and lowers the 0-60 mph time from 5.5 to 4.6 seconds?
My assumptions for the above are:
Rashomon
Member
There is a great misunderstanding of options pricing on this forum. Tesla will probably have an unacceptably low margin on the base vehicle, and will attempt to get its overall margin on the Model 3 family of vehicles to 28-30 percent with significant sales of the higher price vehicles -- so their margins have to be above 30 percent! That means the margin on the optional battery has to be 200 or 300 or 400 percent to move the margin significantly on the vehicle as a whole. Tesla's margin on something like a SP90DL is probably approaching 50 or 60 percent, while the base S70 may have a quite low margin, perhaps approaching zero.
I think that in part we may have a definition issue.
"The gross margin percentage G is the profit P divided by the selling price or revenue R.G = P / R = ( R - C ) / R"
Margin Calculator
If this is the correct definition, then what you are suggesting is impossible.
I think you mean that the margin for options would "have to be" from 50% to 75%.
I would be surprised if Tesla was looking for margins that high on an expensive popular option, but you may be correct.
EVNow
Well-Known Member
Musk says they expect $42k to be the average price.
Starting with $35k base and adding even a couple of Must have options would possibly take the price to $38k or so.
To make $42k the average price, Tesla must be thinking that base battery version will be the most selected option - not the higher sizes like in S. Average price of higher battery sized 3 would likely be closer to $50k, if not more. So, likely 75% or more of the 3s sold would be the base version.
So, superchargers would have to be placed at such distances as to make it possible to travel with the base car since vast majority of Tesla's in the future will have this base battery size - 60kwh or so.
Starting with $35k base and adding even a couple of Must have options would possibly take the price to $38k or so.
To make $42k the average price, Tesla must be thinking that base battery version will be the most selected option - not the higher sizes like in S. Average price of higher battery sized 3 would likely be closer to $50k, if not more. So, likely 75% or more of the 3s sold would be the base version.
So, superchargers would have to be placed at such distances as to make it possible to travel with the base car since vast majority of Tesla's in the future will have this base battery size - 60kwh or so.
