Yes Of Course Tesla Will Sell A $35000 Model 3

[EinSV]

After Tesla’s delays ramping up the Model 3 program we now see many posts stating that Tesla will not sell a $35000 Model 3 or raising doubts about it.

I think the naysayers should be ignored and these doubts should be set aside.

Tesla originally estimated that it would ramp up Model 3 production to 5000/week in December 2017 and then introduce the base $35000 Model 3 in early 2018, after production was ramped up.

That 5000/wk target has been delayed by six months to June 30 2018. So, not surprisingly, the standard battery Model 3 has also been delayed about six months — from “early 2018” to “late 2018” for owners at the front of the line. My Tesla account has had the “late ‘18” date for a “Base $35000” Model 3 for a couple months.

So it shouldn’t be any surprise that the base Model has been delayed until after Tesla has ramped up to 5K Model 3 per week. That was the plan all along.

Given all of the challenges Tesla has had with battery pack production, it would have been idiotic to start production of a second battery pack before they had ironed out production issues with the first one. Much better to streamline mass production of one battery pack first, and then apply those lessons to the second battery pack, especially since the smaller pack is at a lower price point.

But the natural delay to the base Model that has resulted from the delay of the entire program in no way suggests that Tesla has deviated from its plan to build the standard battery Model 3.

In fact, the more affordable Model 3 is essential to Tesla’s mission of “accelerating the advent of sustainable energy, so that we can imagine far into the future and life is still good.” Master Plan, Part Deux

The Model 3 is designed to give a “hardcore smackdown” to ICE even more than the new Roadster. To maximize the impact it is essential to offer a version that is as affordable as possible so that it can be a meaningful option to as many people as possible so that they are excited about making the transition from ICE to EVs.

Also, Tesla is targetting 25% gross margins on the entire Model 3 program. This eventually will include more expensive AWD and P models, as well as the least expensive versions. Tesla, like other manufacturers, doesn’t need a huge profit margin on a “stripper” for the program as a whole to be profitable. In any case, most people who order the standard battery Model 3 will want to order options like PUP or EAP or both.

But if people want to order a base Model 3, they will be able to, and it will be awesome. No doubt about it.

 

[DanL3]

Volume,volume volume. What Tesla needs is volume. If they find that they can get volume with a $49,000 car then...
But they will always get higher volumes with a lower cost car.

The key here is that they need the volume to drive the cost of parts down. Today, at 1000-2500/week, Tesla is still paying a premium for every part in the car. So nothing is profitable. But as the volumes go up the part prices will come down. So the bottom line is that Tesla needs the lowest price car to get the volume to make even the high priced option cars profitable. 90% of the parts in the high price option car are also in the lowest price car. The volume of the the low priced car drives the profitability of the high price option car.

 

[EinSV]

Volume,volume volume. What Tesla needs is volume. If they find that they can get volume with a $49,000 car then...
But they will always get higher volumes with a lower cost car.

The key here is that they need the volume to drive the cost of parts down. Today, at 1000-2500/week, Tesla is still paying a premium for every part in the car. So nothing is profitable. But as the volumes go up the part prices will come down. So the bottom line is that Tesla needs the lowest price car to get the volume to make even the high priced option cars profitable. 90% of the parts in the high price option car are also in the lowest price car. The volume of the the low priced car drives the profitability of the high price option car.

Great point. In addition to parts and production at Fremont, the whole purpose of building the Gigafactory was to reduce battery costs through high volume production, and the lower cost base model will increase the number of customers.

 

[azred]

I hope they never build a $35,000 car. I like feeling special.

 

[T34ME]

I hope they never build a $35,000 car. I like feeling special.

you are already special.

 

[McRat]

They will absolutely make a $35k EV. No doubt at all.
So just be patient and defer your order. It will come sooner than you think.

In particular, if you are legacy owner, or a line waiter, you'll be first up for the $35k edition. You will be so happy you waited and save tons of money.

 

[Carnook]

Nope. Not gonna happen.

First, it would be at least $35k plus $1k delivery so it’s already $36k. Second, by the time they actually ramp production they will realize they can’t make money on a base price of $35k and they’ll either just cancel their plans, make some kind of add-on package mandatory, and/or increase the price.

 

[vinnie97]

They will absolutely make a $35k EV. No doubt at all.
So just be patient and defer your order. It will come sooner than you think.

In particular, if you are legacy owner, or a line waiter, you'll be first up for the $35k edition. You will be so happy you waited and save tons of money.

So you don't think the larger battery is worth $9k, I take it. Coming from a hybrid (and not even engaging in many road trips), I can't help but think the comparatively disappointing range would sit well with me when I get the car in 2019 (hypothetically speaking of course).

 

[03DSG]

Nope. Not gonna happen.

First, it would be at least $35k plus $1k delivery so it’s already $36k. Second, by the time they actually ramp production they will realize they can’t make money on a base price of $35k and they’ll either just cancel their plans, make some kind of add-on package mandatory, and/or increase the price.

Already $36k? Always was $36k. When did they say delivery would not be included?

 

[Carnook]

Already $36k? Always was $36k. When did they say delivery would not be included?

I do get your point and you’re right they haven’t changed the delivery pricing. My point is that if a customer can’t drive it off the lot for $35k then it’s not a $35k car. It’s $36k. And there is an argument to be made it’s actually $37k because most people don’t want flat black paint and Tesla knows this.

 

[Wolverinegeoff]

I do get your point and you’re right they haven’t changed the delivery pricing. My point is that if a customer can’t drive it off the lot for $35k then it’s not a $35k car. It’s $36k. And there is an argument to be made it’s actually $37k because most people don’t want flat black paint and Tesla knows this.

This is pretty standard advertising that everybody is aware of. Every other “car price” is presented in this way, in addition to every product in existence that has multiple tiers or options. “Starting at...” is advertising 101 and just creates an anchor in your mind of it being a certain price and then we ignore pricing of additional add ons because the initial price seemed like a good deal. No reason to put themselves at a disadvantage to BMWs that “Start at” $35k but quickly get above $45k with pretty standard stuff people want in a car.

 

[number12]

I can’t believe there will so many people that want a Tesla with all the AP hardware and not switch it on..

 

[NerdUno]

Elon likes calling the Model 3 a $35,000 car. What he likes better is charging $50,000 for it and still getting the press to call it a $35,000 car.

 

[Wolverinegeoff]

I can’t believe there will so many people that want a Tesla with all the AP hardware and not switch it on..

I’m almost positive that once the software is “complete”(whatever that ends up meaning) and they have a couple hundred thousand people into Model 3’s, they’ll do what they did with S and give a free trial to everyone to try and convert the holdouts. For AP1, the best sales job was just getting to try it and realize how big a difference it can make in daily driving in traffic and big trips.

 

[yak-55]

They’ll eventually do a handful so Electrek can write a fawning article about promises kept ... then it will be discontinued in the face of ‘overwhelming demand’ for higher optioned (priced) variants. It’s the S40 unicorn scenario, Part Deux. Good luck buying one.

 

[McRat]

Nope. Not gonna happen.

First, it would be at least $35k plus $1k delivery so it’s already $36k. Second, by the time they actually ramp production they will realize they can’t make money on a base price of $35k and they’ll either just cancel their plans, make some kind of add-on package mandatory, and/or increase the price.

Actually I want folk to read the title and few posts, then defer so I can get my $56,000 Model 3 (no black, w/ACC)

 

[NCAviator]

After Tesla’s delays ramping up the Model 3 program we now see many posts stating that Tesla will not sell a $35000 Model 3 or raising doubts about it.

I think the naysayers should be ignored and these doubts should be set aside.

Tesla originally estimated that it would ramp up Model 3 production to 5000/week in December 2017 and then introduce the base $35000 Model 3 in early 2018, after production was ramped up.

That 5000/wk target has been delayed by six months to June 30 2018. So, not surprisingly, the standard battery Model 3 has also been delayed about six months — from “early 2018” to “late 2018” for owners at the front of the line. My Tesla account has had the “late ‘18” date for a “Base $35000” Model 3 for a couple months.

So it shouldn’t be any surprise that the base Model has been delayed until after Tesla has ramped up to 5K Model 3 per week. That was the plan all along.

Given all of the challenges Tesla has had with battery pack production, it would have been idiotic to start production of a second battery pack before they had ironed out production issues with the first one. Much better to streamline mass production of one battery pack first, and then apply those lessons to the second battery pack, especially since the smaller pack is at a lower price point.

But the natural delay to the base Model that has resulted from the delay of the entire program in no way suggests that Tesla has deviated from its plan to build the standard battery Model 3.

In fact, the more affordable Model 3 is essential to Tesla’s mission of “accelerating the advent of sustainable energy, so that we can imagine far into the future and life is still good.” Master Plan, Part Deux

The Model 3 is designed to give a “hardcore smackdown” to ICE even more than the new Roadster. To maximize the impact it is essential to offer a version that is as affordable as possible so that it can be a meaningful option to as many people as possible so that they are excited about making the transition from ICE to EVs.

Also, Tesla is targetting 25% gross margins on the entire Model 3 program. This eventually will include more expensive AWD and P models, as well as the least expensive versions. Tesla, like other manufacturers, doesn’t need a huge profit margin on a “stripper” for the program as a whole to be profitable. In any case, most people who order the standard battery Model 3 will want to order options like PUP or EAP or both.

But if people want to order a base Model 3, they will be able to, and it will be awesome. No doubt about it.

If everyone thinks/says that the first goal should be to get to 5000 units per week; then the $35,000 version should have been first. Much easier and faster to make a smaller battery. Much easier and faster to build a non-PUP version. Musk is not thinking about meeting the 5000 unit number. He is thinking about the margins and how makes the most money fast.

Time will tell if he was right. What we do know is the folks that want to order the $35,000 version need the tax break more than the $55, 000 model. For those folks they are not buying a $35,000 car. They are buying a $27,500 car. Much different demographic.

 

[30seconds]

If everyone thinks/says that the first goal should be to get to 5000 units per week; then the $35,000 version should have been first. Much easier and faster to make a smaller battery. Much easier and faster to build a non-PUP version. Musk is not thinking about meeting the 5000 unit number. He is thinking about the margins and how makes the most money fast.

Time will tell if he was right. What we do know is the folks that want to order the $35,000 version need the tax break more than the $55, 000 model. For those folks they are not buying a $35,000 car. They are buying a $27,500 car. Much different demographic.

I think I'm going to go with building 3 $50k Model 3 LR + PUP is easier than building 4 $35k Model 3 SR w/o PUP

 

[Carnook]

No reason to put themselves at a disadvantage to BMWs that “Start at” $35k but quickly get above $45k with pretty standard stuff people want in a car.

Unless Tesla is trying to be a better car company. That’s a good reason.

Also let’s separate something. Other cars that “Start at...” can actually be purchased at their advertised price. The Model 3 can’t and never will be.

 

[Wolverinegeoff]

Unless Tesla is trying to be a better car company. That’s a good reason.

Also let’s separate something. Other cars that “Start at...” can actually be purchased at their advertised price. The Model 3 can’t and never will be.

I totally agreed with your initial thought there before you edited, and I think they are generally doing this with their sales model and getting rid of the high pressure tactics and sleaziness (with some exceptions). However, I don’t think they should throw out decades of advertising research either. I think they are generally as good or better with some of the fine print stuff. Most advertised prices don’t include delivery and destination or tax on their prices either. I highlighted an example here of what they are up against from other companies. Do you think anybody truly walks in to a Cadillac dealership and gets a $99 lease? Most dealers also have very limited supply of the barebones cars in my experience and tend to stock ones with at least a few options. Then if you ask to “order” what you want, they’ll heavily dissuade you and say “that’ll take months to get here”. Speaking from personal experience.