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Why not go all the way and offer 60/65/70/75/80/85/90, $3k each?

Discussion in 'Model S' started by tonglaji, Jun 10, 2016.

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  1. techmaven

    techmaven Active Member

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    I am wondering if the 60 kWh offering is an experiment. Maybe they want to find out just what is the incremental addressable market by dropping the prices a bit. Especially now that the Model X is shipping in volume which increases their ASP and with hopefully less problems which increases their margin. Therefore it's time to try out lowering their margin on the base S and see what kind of demand there is at that price point. Cost efficiency of the Model S might have hit a new high, giving them the capability of doing this. Plus, it might shake loose some more Model 3 reservations to commit to the S earlier.

    Now, offering a lot of options in between confuses the buyer. Ideally from Tesla perspective, the 60 kWh offering gets more people interested, but then more people actually end up buying the 75, either now or later. Plus, they can easily choose to change it to something else, like 65 later on, but I think many options at once would be too confusing. And if they get the vehicle back as a trade in, they get to unlock the rest before reselling it, potentially unlocking a big chunk of the value.
     
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  2. P85DBeast

    P85DBeast Side tEsLa

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    One word.......Confusion;)
     
  3. tonglaji

    tonglaji Member

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    I don't think this is a lot of options, it is just "one" option if you think about it. Instead of confusing people, I think this will give people freedom. It seems the consensus in the 60 announcement thread is it does not make sense to upgrade to 75. With the option to incrementally upgrade, people might actually choose to upgrade like you mentioned: to 65, maybe 70 next year as a birthday gift, etc, etc.

    The other idea about renting for a limited time is also intriguing.
     
  4. James Anders

    James Anders Member

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    Or since it's entirely a software thing why not make it user-changeable?

    So, if I'm taking a trip and need to bump up to a 90 I pay some fee for a period of usage.
     
  5. sandpiper

    sandpiper Active Member

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    In the free market, something is worth what someone else is willing to pay for it. Apparently lots and lots of people are willing to pay for the range; Tesla's top range vehicles have always massively outsold the shorter range vehicles. If they can regularly sell out their production capacity, why on earth would Tesla sell for less? If it's not worth the price to a given buyer then they always have the option to simply not buy it.

    As to the 60s... I'd argue the reverse. Tesla is giving buyers of the new 60s an incredible discount for shutting off that extra range - far far in excess of what it saves the company - which is next to nothing. It allows some folks to get into a Tesla that otherwise perhaps couldn't justify it, but who could be able to buy the added range later when they need and can justify the added cost.
     
  6. sandpiper

    sandpiper Active Member

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    I suspect that their production capacity has climbed to the point where they can't really sell a lot more at the current pricing. There are only so many folks out there who will buy a $100K vehicle. So they need to create some demand and have two choices... they have to either drop the prices of the existing vehicles or create another vehicle that fits into a lower price bracket.

    I think what they've done is brilliant. It's probably less of a hit on total gross margin to sell some new 60s at a discount than to drop the prices on the existing cars. And I'm going to bet that at least half of the 60s become 75s within 2 years - so can they recover some of the lost margin that way. Finally, when these vehicles get traded / lease returned, the extra range will be unlocked by Tesla and they will be sold as 75s at a higher price.

    I bet we'll see something similar very soon with the 85/90/100.
     
  7. techmaven

    techmaven Active Member

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    I don't think so... The software limited 60 is a temporary phenomenon to increase the addressable market. Not sure it makes any sense at all when the 3 starts to ship. Software limiting the battery pack size on the upper sized pack doesn't make as much sense. They do have a software limiter on the fuse in the upper pack (ludicrous mode) that increases the gross margin on the high end of the range.
     
  8. sandpiper

    sandpiper Active Member

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    I don't think it's temporary. The 3 won't be for everybody, any more than the Audi A4 or BMW 3-series is. There will be a range of trims/options/capabilities within every vehicle envelope. And as Tesla matures these will only increase.

    They're obviously going to stick with two battery pack designs in the S. It wouldn't surprise me if, when the 100 packs are available, they kept the 90 (or maybe 85?) and then offered a software upgrade to 100, as well as another to ludicrous.

    Keeping the 90/85 around would likely pull some folks up who might otherwise go for a 75 - and so there's a bit of extra margin to be had there.
     
  9. FlatSix911

    FlatSix911 Porsche 918 Hybrid

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    The 85 is long gone ... :cool:
     
  10. Ulmo

    Ulmo Active Member

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    #30 Ulmo, Jun 13, 2016
    Last edited: Jun 13, 2016
    Totally agreed.

    However, this all made me think of a workable modification to the OP: you can ONLY buy it at the "LOWEST" or "HIGHEST" price, and then anybody who didn't spend top dollar with the top badge can get the incremental versions after purchase. Then, that takes out the hard decisions. That's the nice thing about software upgrades.

    My idea was a little immature. I thought a bit more about it, and came up with this: In real life, there are physical limitations to the cost parameters eventually marketable due to different material product differences. A hybrid marketing approach might work well, offering a limited number of physical choices, and later software upgrades can be of any software increment at a set per-increment price.
     
  11. whitex

    whitex Active Member

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    Fist, too much choice leads to decision paralysis AND it actually takes away from the enjoyment of the decision made ("I could have picked something else" syndrome). It's actually a well studied psychological phenomenon.

    Second, since people don't go on many trips, for Tesla to recover the cost of higher batteries would have to charge a "rent" fee that would have people freaking out. For example, say an average person would like the 75KWhs for 30 days total during their ownership. So, $9,000 / 30 is $300 per day - and it should actually be higher when adjusted for time value (interest they could get on the $9,000 if purchased up front). People would freak out about paying $300+ per day to rent the additional 15KWh. If you don't think it's a high price, just rent yourself an S85 for your trips since you can get those at that daily price. Similar argument applies to supercharging. In 3 years of driving I visited a supercharger twice. I also paid for supercharger twice (as an option for my S60 and included in the price for my P85D). If I was just paying say $50 per visit, Tesla would have gotten a whopping $100 instead of the $4,000 they got to build new superchargers and maintain the current ones.

    And if you want a hyperbolic argument, why not just rent all of the car features only for when you are driving. I don't need my Ludicrous mode when the car is parked (no I don't keep a badge on my car), so I should ask to only rent it per hour of driving? Or maybe, only per second while my go pedal hits the floor? Considering how much time people actually need Ludicrous mode, that would like $100 per second? Race from the lights, yep, you just dropped $200. Even at $100 per second, something tells me some people would still save money vs paying $30K up front. Lol.
     

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