Will Tesla cut prices on its Model Y in 2021 with three more factories open?

[LV1972]

Tesla will start producing Model Y at three more factories (Gigafactory Berlin, Gigafactory Shanghai, and Gigafactory Texas) in 2021.

With trend of battery cost reduction and performance improvements along with new competition (Audi,VW,Ford) i think we will see major price reduction soon.

That will also bring resale value down of current 2020 models.

What do you think?

I hope they will release RWD model soon in $40-44K price range

 

[patmurphey]

They just announced cutting the Model Y prices in China by over 30% due to local sourcing and updated construction methods.

See other thread.

 

[jsight]

With much more competitive offerings finally coming to market and real non-Tesla charging networks emerging, it seems inevitable.

I wouldn't expect them to be huge, though. Maybe 5% at most.

 

[Uncle Paul]

With the tremendous costs of building those 3 GigaFactories, I imagine that Tesla will want to keep their profits as high as possible until they have at least recovered those costs.

On the other hand, the newer battery packs plus the new large casting machines may reduce costs enough for them to reduce prices as well.

Safe predictions would be that Tesla will want to price high enough to remain profitable and keep stock prices high, while reducing selling prices as much as possible to keep increasing demand.

 

[CapeOne]

There was already a $3k price reduction about six months ago (e.g., the MY LR base price went from $52,990 to $49,990) but other reductions are likely as new competition enters the space. Price adjustments may also depend on what, if any, changes there are to the federal tax credit down the road.

 

[RoBoRaT]

Yes, by $2K on 2nd quarter 2021 end of quarter push.

My N-SWAG

 

[cusetownusa]

They just announced cutting the Model Y prices in China by over 30% due to local sourcing and updated construction methods.

See other thread.

They have yet to sell any Ys so they just announced the starting price. Still above the US price.

 

[mark95476]

Price adjustments are guaranteed.

Simply put: 1) Economies of scale and 2) Tesla intends to win.

Other BEV vendors aren't enjoying huge margins when they try to compete against Tesla's offerings.

Tesla will start producing Model Y at three more factories (Gigafactory Berlin, Gigafactory Shanghai, and Gigafactory Texas) in 2021.

With trend of battery cost reduction and performance improvements along with new competition (Audi,VW,Ford) i think we will see major price reduction soon.

That will also bring resale value down of current 2020 models.

What do you think?

I hope they will release RWD model soon in $40-44K price range

 

[Daks]

I can see a strategy of waiting for the other companies to put out EVs with slim slim margins (some may even release at a loss) Tesla then drops the prices putting them out of business... Rinse, wash, repeat. I'm a shareholder, but also a consumer. So I have mixed feeling on this strategy.

 

[tomagucci]

Tesla has shown they are willing to drop pricing when production efficiencies are achieved for the Model Y. I think each region will be localized in terms of pricing with their own factories.

Tesla has also shown they are willing to drop pricing to be competitive (dropped the price of Model S in regards to the Lucid Air pricing).

Used inventory models pricing is driven by demand. If Tesla dropped pricing but wait times are long (exceeding 4-6 weeks) you may continue to see used inventory continue to hold value.

Continue to root for competitors and I think that's the most sure fire way to see prices drop. Who knows maybe one of these other companies will present a product that is more worthy of your money =)

 

[Uncle Paul]

Most competitors are pricing their cars to compete with Tesla.

Often, by the time they get those cars to market, Tesla has lowered their own offerings to make the new competition more expensive.

See the same thing with capabilities. Competitor will benchmark Tesla when designing their new offering. By the time it gets to market, Tesla has increased range, upgraded features, improved Autopilot, opened more service centers and more Superchargers.

 

[mark95476]

Yes! Design and build something that will make me want to buy it.

(Hint: I'm not looking for a knock-off or cheaper version of something from another manufacturer)

Continue to root for competitors and I think that's the most sure fire way to see prices drop. Who knows maybe one of these other companies will present a product that is more worthy of your money =)

 

[patmurphey]

Tesla received over 100,000 new Chinese orders the day after the price cut was announced, so many that it bogged down their ordering site.

 

[enzo]

Having secured an incredible $12B via equity offerings in 2020 - which was virtually free money in light of the surging valuation - Tesla has $20B cash, enough to cut prices and still finish building the new factories. However, there is no good reason, as demand is strong for 3/Y at the current prices, and there is still no serious competition. Further, a net profit must be maintained, or the stock will tank and demoralize all the employees. I expect price cuts and lower profit margins once the manufacturing capacity starts to exceed demand, which seems unlikely for awhile. It could also happen if a competitor emerges with a serious threat to Tesla's brand supremacy and technological advantage. This recently happened with Lucid, and the S price was cut instantly.

 

[Zorg]

It's pretty much a sure thing that Tesla prices will go down over time, but it's impossible to predict the timing of those cuts. The biggest driver will be increased competition, but after years of announcing Tesla killers, we have yet to see any trying to sell volumes. Ford will only produce 50,000 of its Mach E in the first year, so it probably won't impact Tesla too much and prices are comparable. VW seems to really want to invest in the space. We'll see how many ID4 they can actually produce, as their prices are attractive.

I could see Tesla increasing specs and cutting a few $K off the 3/Y prices in 2021 to keep the competition at bay.

 

[user212_nr]

I can see a strategy of waiting for the other companies to put out EVs with slim slim margins (some may even release at a loss) Tesla then drops the prices putting them out of business... Rinse, wash, repeat. I'm a shareholder, but also a consumer. So I have mixed feeling on this strategy.

The difficulty with selling a product at a loss (really no such thing as "slim margins" when you consider development and factory costs) is that they won't sell many of them.

They are also limited by the amount of batteries that they can produce. No one doubts their ability to produce cars, but batteries are not their thing. I don't know what their capacity is, but since they have outsourced to 3rd parties, that means that the capacity will be shared among all the EV makers except Tesla and given a firm upper limit for the near future.

Tesla will start producing Model Y at three more factories (Gigafactory Berlin, Gigafactory Shanghai, and Gigafactory Texas) in 2021.

With trend of battery cost reduction and performance improvements along with new competition (Audi,VW,Ford) i think we will see major price reduction soon.

I don't expect Tesla to be under pressure from competition in the near future. In fact, I'm not even sure if the competition will even matter - there are so many gas cars on the road that the ICE makers may end up taking customers from their own ICE sales.

The factory in Berlin is producing the Model Y for customers in Europe who can now only buy the model 3. The same goes for China, though Tesla has started exporting. The Austin factory will increase capacity for the U.S., but also it will produce the cybertruck and the semi.

I hope they will release RWD model soon in $40-44K price range

You can already buy the Model 3 new at these prices. In order for Tesla to sell the Model Y for $40K, it would have to drop the Model 3 also.

I see no chance of something so radical in the next year.

Remember the Model 3 was supposed to be $35K and they just gave up on that. Sold the $35K model for a few days/hours or so. Prices aren't going to drop radically until Tesla can produce cheaper batteries at scale. More like 3-5 years.

 

[Tiger]

The whole purpose of building factories closer to their markets is price competetiveness.

 

[Sal24]

I don't see Tesla dropping the Model 3 or Y price any time soon. I believe they will always be in this price range. What lower costs and better efficiencies will do is allow them to continue upgrading the vehicles to better compete with other luxury cars in the 40-60K range. Think of things like better fit and finish, air suspension, vented seats, longer range, nicer materials. There is a lot they will want to upgrade as companies like Mercedes get competitive with range and sales.

The E-Class is close in price to a MYP and you never hear things like "surprisingly rough ride" and "bad fit and finish". If I get a vote, I vote that Tesla continues to refine the cars while leaving the prices the same. Five years from now the Model 3 and Y will likely be a lot more refined and then we may have a newer 20-30K Tesla that performs like a first Gen 3/Y from a comfort and build quality perspective.

And lastly, don't forget, a large portion of Tesla's profit for this year is based on selling regulatory credits. They will likely want to be profitable on vehicle sales alone and not relying on regulatory credits which will eventually go away as other manufacturers electrify. And with their capital spending staying high for the foreseeable future they will need to maintain good margins on the vehicles.

 

[Stavanger]

I don't expect Tesla to be under pressure from competition in the near future. In fact, I'm not even sure if the competition will even matter .

And thats were you are very wrong.
Tesla deliveries in Norway 2020 is only a few % of the total BEV deliveries. The competition is totally crushing Tesla here now. If this is already happening here it will also start happening elsewere soon.
There is just no way Tesla can compete with the big brands because they just dont have the capacity, Tesla building 2 new factories in 2021 is good, but to play in the big league they would need to make that into 20 new factories.

 

[patmurphey]

Tesla has a Europe problem with supply, transportation cost and import duties. Just wait until Model Ys from Berlin appear with competitive pricing and availability. Tesla is now selling every car it can build with waiting lists. When Berlin produces the Euro sized less expensive model in a couple of years, the lower priced Renault Zoeys and VW id3s will have a run for the money. Berlin Model Ys will be less expensive to produce with their new castings and structural battery packs with Berlin produced 4680 batteries. I wouldn't be so quick to write them off in Europe. Berlin's capacity will be 2 million cars a year, certainly competitive with any of the traditional OEM's projected BEV output.

At 2 million cars a pop, I don't think they will need 20 new factories to play in the "big leagues".