What will separate S from 3?

[Phoenixhawk101]

So I'm very close to pulling the trigger on a Model S. Been eyeing it up for a LONG time. But as the news continues to come out about Model 3 it has me thinking. I am extreemly happy that all the Model 3 reservations holders are hearing such awesome news about the Model 3 and what it can contain:

Performance Model
0-60 in under 6 sec standard
AWD model
Autopilot features
Super Charger features
Measures in at about 6% shorter and 4% narrower (so about 90% total space)
Possible HUD
215 mile minimum
Air suspension options

So it got me thinking, in about 2 years time what will separate the lower end Model S from the upper end Model 3? Estimates come in that a maxed out Model 3 will likely be around $85,000. But that would give you a lot of features that you wouldn't get in a comparably priced Model S. So where is the break point? Will Tesla continue to increase Model S's cost with larger battery options until it's all about range and the performance models that set them apart? Perhaps do away with Model S's that start in the 70k's?

Just kind of curious what people think will make the Model S worth the premium cost in the future (and to be fair I am thinking 100% from a resale value stand point of buying a Model S today).

 

[JeffK]

You have to understand one of the goals of the Model S was to pay for the Model 3 so by its very nature everything in the Model S adds a Model 3 tax.
One thing that separates the two is if you have small kids you can fit two of them in the very rear of the Model S (with the rear seat add on). It can therefore technically seat seven where the Model 3 will ever only be able to seat 5. The Model S will always be able to hold a larger capacity battery (it also needs a greater capacity battery though). The Model S also has the aluminum body.

 

[TravelSD80]

I've been thinking about the same thing. I had an order in for a pretty basic new MS, then cancelled at the last minute. I then was looking at CPOs, but most don't have AP. After hearing about the M3 ramp up, and advancements in MobileEye in 2020/2021, and looking at leasing prices I made a decision. I'll lease a pretty well equipped M3, which should be 30-40% less than a MS lease. After my initial M3 lease is up, I'll probably buy a M3 if full autonomy hardware is included.

I think the MS is great if you want a larger car, hatch back, and more luxurious features like auto presenting door handles, air suspension (haven't seen that confirmed on the M3), larger wheels, etc. I DO think some MS sales will go to M3s. I could afford a MS, but financially it just makes more sense to get a M3 since I don't WANT a big car, I hardly drive, and spending $80K on a basic MS would be like throwing money to the wind.

 

[Kristian G]

Size and when it's available ..

 

[newtman]

So I'm very close to pulling the trigger on a Model S. Been eyeing it up for a LONG time. But as the news continues to come out about Model 3 it has me thinking. I am extreemly happy that all the Model 3 reservations holders are hearing such awesome news about the Model 3 and what it can contain:

Performance Model
0-60 in under 6 sec standard
AWD model
Autopilot features
Super Charger features
Measures in at about 6% shorter and 4% narrower (so about 90% total space)
Possible HUD
215 mile minimum
Air suspension options

So it got me thinking, in about 2 years time what will separate the lower end Model S from the upper end Model 3? Estimates come in that a maxed out Model 3 will likely be around $85,000. But that would give you a lot of features that you wouldn't get in a comparably priced Model S. So where is the break point? Will Tesla continue to increase Model S's cost with larger battery options until it's all about range and the performance models that set them apart? Perhaps do away with Model S's that start in the 70k's?

Just kind of curious what people think will make the Model S worth the premium cost in the future (and to be fair I am thinking 100% from a resale value stand point of buying a Model S today).

Faster
Longer range
Larger
More tech (air suspension, door handles, 17 inch screen, instrument cluster)
More comfortable seats
More storage
More passenger room

In other words very much the same way every luxury car maker differentiates their different lines.

 

[newtman]

Oh, and it's here today, as opposed to 2-4 years from now

 

[TravelSD80]

Faster
Longer range
Larger
More tech (air suspension, door handles, 17 inch screen, instrument cluster)
More comfortable seats
More storage
More passenger room

In other words very much the same way every luxury car maker differentiates their different lines.

We don't know longer range, until we know battery options on the M3. For all we know, M3 might have higher range.
We don't know the MS seats will be more comfortable or not. Maybe even same front seats?

 

[S'toon]

So I'm very close to pulling the trigger on a Model S. Been eyeing it up for a LONG time. But as the news continues to come out about Model 3 it has me thinking. I am extreemly happy that all the Model 3 reservations holders are hearing such awesome news about the Model 3 and what it can contain:

Performance Model
0-60 in under 6 sec standard
AWD model
Autopilot features
Super Charger features
Measures in at about 6% shorter and 4% narrower (so about 90% total space)
Possible HUD
215 mile minimum
Air suspension options

So it got me thinking, in about 2 years time what will separate the lower end Model S from the upper end Model 3? Estimates come in that a maxed out Model 3 will likely be around $85,000. But that would give you a lot of features that you wouldn't get in a comparably priced Model S. So where is the break point? Will Tesla continue to increase Model S's cost with larger battery options until it's all about range and the performance models that set them apart? Perhaps do away with Model S's that start in the 70k's?

Just kind of curious what people think will make the Model S worth the premium cost in the future (and to be fair I am thinking 100% from a resale value stand point of buying a Model S today).

I don't know any estimates that say a fully loaded 3 will be in the $85K price point, except for those who state that Tesla won't be able to make the 3 for $35K. Most people think that a loaded 3 will be just shy of the entrance point of the S.

As for what will the S have over the 3? Elon has stated that the S and X will have the most cutting edge features and technology. They will keep the shiniest toys for those with the deep pockets.

 

[Booga]

You have to understand one of the goals of the Model S was to pay for the Model 3 ...

I disagree with this. There's been no sign of profitability to allow for the Model S to "pay" for the Model 3. If so, that would be called a subsidy. Because Tesla has been operating at a loss for all of these years with a lack of operating income, there's been no such thing except to the extent that you're just referring to their institutional knowledge and understanding about building cars having increased. In that sense, sure, but you could then say that the Honda Hybrids "subsidized" the new Acura NSX, because the employees had a learning experience with Civics/Accords/etc. that allowed them to design a supercar, but no one would say that the hybrid owners "paid" for the Acura NSX.

It's the same thing here. Yes, that demand was crucial to building a business - if no one was buying those cars, then these future models wouldn't have been possible either, because the suppliers of capital, suppliers of components, batteries, etc., all needed to see that this was a serious venture and not just some garage based project of a hobbyist. To that extent, sure, it helped move it along, but that goes for anything new in life. My purchases of the early iPhones would then count. If they didn't sell at all, literally 0 sales, then of course they wouldn't have gotten to the iPhone 6S and likely 7 later this year.

I know the argument here is partially just semantics, because I do believe that a lot of credit is owed to the people that bought in early, but I give it because they took on risk and were willing to try something new and not because they gave money to a company that "paid" for future cars. If that was their goal, it was better to ask Tesla to do another equity offering and participate in it rather than buy a car for more than they should. (It's really inefficient of a concept since you pay sales tax on it, insurance goes up with the value of the car, etc.)

 

[ICE FREE]

This is my experience in regards to this issue.
When the m3 was announced I placed a deposit down on it but subsequently I went ahead and ordered a MS for delivery in June. The thing is, I could really use an electric car now. I drive 90 miles round trip to work and the savings in fuel justifies my purchase now. Yes, a $40k purchase price suites my budget better but I'm not confident that I'll get the M3 before 2018, in the meantime I would have used a tremendous amount of fuel by then with my current vehicle (suv) and I don't want to buy a Bolt or a hybrid BMW i3.
Also, while the MS is substantially more expensive than the M3, I believe that a lot of the standard features in a MS will be upgrades in the M3. I.e., supercharging, NAV, heated seats, internal charger, etc. And/Or, things like leather seats will come with a higher price tag than they are now, so that a similarly appointed M3 will be quite expensive compared to its base price and getting closer to MS price.
So, for me, I can afford the MS and I could use it now, so that's why I ordered the MS 70D.
Good luck in your decision

 

[zenmaster]

I don't know any estimates that say a fully loaded 3 will be in the $85K price point, except for those who state that Tesla won't be able to make the 3 for $35K. Most people think that a loaded 3 will be just shy of the entrance point of the S.

If Tesla wants to get into the performance-car market along with their stated competition, for example, then it could easily be in the $85K price point. Lacking that performance, I'd agree that $70-75K would be the highest assuming a $35K core.

 

[JeffK]

I disagree with this. There's been no sign of profitability to allow for the Model S to "pay" for the Model 3.

You can't disagree, because this is a fact (and was part of Elon's Tesla Master Plan)...

Margins are 20%+ on the current vehicles. Tesla is operating at a loss due to investment (research, infrastructure, gigafactory, etc), not due to Model S production. The R&D for the Model 3 is nearly complete already meaning it's been paid for.

 

[S'toon]

If Tesla wants to get into the performance-car market along with their stated competition, for example, then it could easily be in the $85K price point. Lacking that performance, I'd agree that $70-75K would be the highest assuming a $35K core.

I've previously stated my hypothesis that even if the 3 could outperform the S, they'd software limit the performance to prevent the Osborne effect from the higher end models, with a higher profit margin.

I read a rumour, emphasis on the word rumour, that the next generation Roadster would be based on the 3 platform.

 

[Booga]

You can't disagree, because this is a fact (and was part of Elon's Tesla Master Plan)...

Margins are 20%+ on the current vehicles. Tesla is operating at a loss due to investment (research, infrastructure, gigafactory, etc), not due to Model S production. The R&D for the Model 3 is nearly complete already meaning it's been paid for.

TSLA Income Statement | Tesla Motors, Inc. Stock - Yahoo! Finance

Which margin? On a gross basis, sure, 20%, but even if you exclude R&D and just consider their selling, market, etc., expenses, which won't go away, they broke even in 2015. And surely some of the R&D is not to be excluded, because it was devoted to the Model S and is what allows for continual software updates. You don't need to worry about infrastructure and gigafactory, because those were capitalized as PP&E and so they mostly impacted the statement of cash flows and balance sheet - maybe some marginal impact on the income statement, but probably not in a way that changes this discussion. At the end of the day, after including their SG&A, there's a net 0% profit margin on these cars. How could they be subsidizing the M3?

I don't know what Elon said or didn't say, but any statement about what he did has to be backed up by reality. Those sales really did help and I won't argue that, but it's not like the Model S or X or Roadsters have had above average margins to allow them to funnel money into the 3. They did help generate revenue for the firm, which allowed their institutional knowledge to improve and get better at building cars, yes, but they didn't subsidize the Model 3. If it wasn't for those early sales, the additional capital needed for the gigafactory, expansion of the factory, and so on, wouldn't have happened, and so I agree that the early sales were instrumental, but I wouldn't call those a subsidy.

 

[JeffK]

I've previously stated my hypothesis that even if the 3 could outperform the S, they'd software limit the performance to prevent the Osborne effect from the higher end models, with a higher profit margin.

People who can barely afford a spec'd out Model 3 are not in the market for a spec'd out Model S and probably never will be. They shouldn't worry about cannibalizing sales from the low volume high end car.

Instead wouldn't you agree that it'd be better to simply be best in class now then wait until future competition steals away from the Tesla brand by offering the performance Tesla could have had the entire time.

 

[Booga]

I've previously stated my hypothesis that even if the 3 could outperform the S, they'd software limit the performance to prevent the Osborne effect from the higher end models, with a higher profit margin.

I read a rumour, emphasis on the word rumour, that the next generation Roadster would be based on the 3 platform.

The people buying these cars, especially the higher end models, are unlikely to be deciding on performance. You can compare BMW's lineup and the entry level M models out perform 6 figure 7-series cars in tests like a 0-60. People don't move up to bigger cars for more performance - if you truly want performance, you go smaller. Most anyone is going to be satisfied with what any Tesla provides, because most people just want to punch the pedal once every commute just to bring a smile to their face. It's those g-forces that are fun. Tesla isn't the platform for a track car that you have to get used to repairing all the time, yet. Just IMO. (I race regularly at a track and repairs, both mechanical and body repairs, are the norm... you don't buy a Tesla for that purpose unless you just want to blow money or prove a point)

 

[zenmaster]

I've previously stated my hypothesis that even if the 3 could outperform the S, they'd software limit the performance to prevent the Osborne effect from the higher end models, with a higher profit margin.

Outperforming the S would be trivial due to the huge weight difference. They must make choices in maintaining compelling differentiation between Model S and Model 3:
1 - Have less available options on the M3
2 - Somehow cripple or reduce functionality of options on the M3
3 - Make options more expensive on the M3
4 - Some combination of the above

I personally think they will do #1 and to some extent #2. Generally, automakers use their top of the line models to introduce the newest features and let these trickle down in time to the lower end models. They can afford to do this as long as the competition does the same thing.

 

[melindav]

the Model 3 will not be limited, just to keep it 'less than' the Model S. EM tweets have already stated equiv options available on the S will cost less on the 3.
Car companies have multiple models because customers want different things in cars. Some want a full sized, some want a compact or midsize, some want a sports coupe... It's ok to have more than one option and not have one segment eat into another.

 

[FirstSea]

I also used to believe Tesla would limit the 3, but Tesla doesn't seem to know the word limit. Instead, I agree Tesla will continue to push the 3 to be the best possible car in its class, whatever upgrades and new features are made for it will be implemented in the S and X as well. And then the Roadster will bring better tech to improve the S, X and 3; so the cycle will continue.

 

[Twiglett]

TSLA Income Statement | Tesla Motors, Inc. Stock - Yahoo! Finance

Which margin? On a gross basis, sure, 20%, but even if you exclude R&D and just consider their selling, market, etc., expenses, which won't go away, they broke even in 2015. And surely some of the R&D is not to be excluded, because it was devoted to the Model S and is what allows for continual software updates. You don't need to worry about infrastructure and gigafactory, because those were capitalized as PP&E and so they mostly impacted the statement of cash flows and balance sheet - maybe some marginal impact on the income statement, but probably not in a way that changes this discussion. At the end of the day, after including their SG&A, there's a net 0% profit margin on these cars. How could they be subsidizing the M3?

I don't know what Elon said or didn't say, but any statement about what he did has to be backed up by reality. Those sales really did help and I won't argue that, but it's not like the Model S or X or Roadsters have had above average margins to allow them to funnel money into the 3. They did help generate revenue for the firm, which allowed their institutional knowledge to improve and get better at building cars, yes, but they didn't subsidize the Model 3. If it wasn't for those early sales, the additional capital needed for the gigafactory, expansion of the factory, and so on, wouldn't have happened, and so I agree that the early sales were instrumental, but I wouldn't call those a subsidy.

I think you're missing the point that the huge R&D bill that the Model S is funding is for the Model 3 and gigafactory.
Just like the huge R&D bill that the Roadster funded was for the Model S
All because they just call it R&D without saying what its for.
Just like any other startup