Which option set do you think will make a Model 3 get priority?

[Dogwhistle]

I think the magic combo to get priority build status will be the larger battery, dual-motor, with Autopilot combination. I don't think the Performance version, assuming there is one, will be the first type off the line. My reasoning is that Tesla will want to stay on message with electric for the masses, and this combination will most likely be the most popular version. Just pumping out $60,000 P versions for the first several months would be antithetical to the 3's mission, and could potentially be a PR nightmare. Looking at the stats on Model3tracker.org, over 80% of reservationists in it's data set have said that combination is what they want. So, my not-so-educated guess is that is what we'll see first, then after a few months we'll see base cars and P cars worked in as well. So fun to speculate, huh!?

 

[CmdrThor]

Jamie Albertine (Analyst - Stifel Nicolaus):

Great. Thanks for taking the question. On the Model 3, if I may, I think a lot of folks are trying to do work as it relates on the margin trajectory over time. It's clearly going to be volume-dependent and timing around the launch. I was wondering if you could help us understand, given that it's one-third of the transaction price of roughly your initial Model X deliveries, what are some of the efficiencies you're hoping you can draw upon, beyond the battery cost reductions?

What are you leveraging in the Model 3 from investments you've already made, and the knowledge you have around initial launch costs on the higher priced vehicles at this point?

Elon Musk (Chairman & CEO):

I think the way to think of the cost difference is really that the Model 3, being a sedan, it is about 20% lighter than -- and actually, quite a bit less complex to manufacture than the Model S. The Model S was really the first car we ever made ourselves. It was -- we were designing to make it work, as opposed to designing it from ease of manufacturing, whereas the 3 is really designed for ease of manufacturing.

Then we expect through economies of scale and general design improvements to get another 30% improvement. That's where the 50% improvement comes relative to the S. So $35,000 versus $70,000 of 3 versus S, is the way to think about the difference.

Our default plan, as we've done in the past, is that the initial sales are relatively highly optioned versions of the car. Because obviously, we've got to pay back the investment of all the tooling and everything. It makes sense to have the higher-optioned versions first. That's what we did with the S, and obviously again with the X.

While it was unfortunate the way the X pricing got reported, that they reported the fully optioned Signature series as though it was the base price volume number in some publications. This is just a misunderstanding of how things work. I think it's also normal to see this in many other industries. If Intel comes out with a new CPU or a faster CPU, or NVIDIA comes out with a new graphics card, in the beginning it's a lot more expensive, and then over time the price drops.

Elon already answered that relatively highly optioned versions of the car will go out first. So whichever options are most expensive, probably battery and performance.

 

[ucmndd]

More money = first. They've been pretty transparent about this.

 

[Darryl]

I can tell you what option moved you to the top of the list with the Model X. I had a reservation sequence number of over 8,000 but I got one of the very first cars to come off the production line.

I believe what moved you up for the Model X will be the same for the Model 3. Of corse employees and current Tesla owners will be allowed to order first. If they order the performance edition (P90D) which comes with the larger battery, AWD, electronic suspension and electronic spoiler and add the premium option group and autopilot option this will take them to the top of the list. The $10k ludicrous mode didn't effect delivery, nor did better wheels, more expensive paint, towing option, larger charger or better radio. The total for the car was around $150k which was $80k in options not including the ludicrous mode option. I expect since the Model 3 is 1/2 the cost of the base Model X the options will probably be 1/2 the cost of the Model X options. This would mean the first cars to be delivered will be cars averaging around $75k to $80k. Based on what has been input in Model3Tracker.info many will be ordering loaded cars.

 

[AlanSqB]

Agree, basically you'll need to emulate a signature model car.

 

[Dogwhistle]

Maybe so, we'll see. But I still think this is a different ballgame and the rules are slightly different. I guess it depends on how much Tesla is concerned about explaining why their $35,000 car is actually 60,000 for the foreseeable future. But in the end, I suppose $$$ will win out over crappy PR. And I think the D model would still be "relatively high-optioned", just not maxed out.