Tesla has been raising the prices of their cars all year. The prices for Model 3 and Y
are up nearly 20% for the year. Simultaneously the waiting list for a new Tesla continues to
increase. Also I am not sure many people factor in the fact that these waiting lists are increasing
whilst production levels are increasing, and planned to continue to increase.
Let me explain that to make sure you understand what is happening. Currently the Model Y
wait time in the US is not until June. Well by June, we would expect to have Texas at a run
rate of possibly 20,000 vehicles a quarter, going by the ramping of Model Y in Shanghai. Of course
Texas could ramp much faster too. But in other words the amount of Model Ys being produced is
not linear by June, we are expecting a higher level of production by this stage. Therefore
demand for June, being 8 months out, and although Fremont may only produce 20,000 a month,
these will start to be supplemented by additional production coming from Texas.
Then when you factor in the price rises, which should reduce demand, we are seeing increased
demand. I really think there is becoming a more collective awakening of consumers
that are starting to realize, that EVs are the future, and obviously Tesla is the future of EVs.
There are even baby boomers I talk to,
who are looking at buying what they call their last car, and starting to think that
FSD would be a brilliant thing to have, and that when they get older,
they may not be so up to driving, but this way they will still have a car that can drive them.
Tesla has created a great product. But it has taken a while for the masses to realize,
well I don't believe we are even close to the masses yet still, perhaps only just hit the stage
of early adopter, after innovator. But either way it's a lot of demand already, especially
when relative to how many vehicles Tesla can make. Yes, a great product a great price, and now the
demand is growing, then perhaps the product price can match closer to the value that it offers.
Oh yea, sure Teslas are relatively expensive compared to a Toyota or so, but a Tesla is
vastly superior to a Toyota. Toyota's server their market. A Tesla is a luxury car. Tesla
is comparable with BMW, Audi or Mercedes. To be honest I think BMW is possibly the closest out of
them, and its a brand I am also most familiar with having owned half a dozen of themself.
Comparing entry level BMW 3 series with a rear-wheel drive Model 3. The BMW starts at
$41,450, but when I start adding the extras that come standard on a Tesla, there is easily another
$2500 to $3,000 there. And something tells me that BMW's Driving Assist Package doesn't quite
off the same level assistance when driving a Tesla on Autopilot. BMW can't even put a price on that,
because it's simply technology that doesn't belong in their wheelhouse.
The Model 3 starts at $45,000, which is probably very close to the BMW with the
Tesla equivalent options. The BMW does do 0-60 in 5.6 seconds though,
compared to the Tesla at 5.8. Although this difference accounts for the new motor that
Tesla are using in the Model 3 now. Tesla have incorporated the Model Y motor into the Model 3,
this has about 9 miles extra range, but made the 0 to 60 time 0.5 seconds
slower. But the rear wheel drive version of the Model 3 now has 272 miles of range.
Oh and although the Model 3 is $45,000 now, it was under $40,000 a only recently. Implying it
was much even a fair amount cheaper than the BMW before this price rise. And as we know the Tesla
was also getting a lot more gross margin per car sold. Oh and now at a similar time to this
$5,000 price increase, the car has also cost almost $5,000 less to build, due to converting
the battery pack from nickel to iron based. Yes, the model 3 even in Fremont, must have
some crazy margins already, let alone one day when Telsa make it with front and rear diecast molds
and their own in-house LFP battery. Yea the future of Tesla is exciting, but it will take some time.
So in case I haven't told you recently, do not sell your Tesla shares any time soon.
And Tesla only raised these prices due to demand getting out of control. So we can all agree that
a Tesla is fairly on par for value with a BMW 3 series. But Tesla makes more than typical
family sedans. They are also renowned for their exceptional performance. What say we compare the
Model 3 Performance, to the BMW equivalent, the benchmark of high performance sedans. The BMW M3.
The Model 3 Performance is 4WD so we will take the 4WD version of the M3, the XDrive Sedan.
Starting price at $77,000. The Model 3 Performance is only $59,000. 0 to 60 time for the BMW is 3.4
seconds, whereas the Model 3 is 3.1 seconds. Of course we have to add things like the driver
assist package and all that too. Although the BMW does have a few unique options that
the Tesla doesn't offer like ceramic brakes. But the Model 3 Performance does have great brakes.
Anyway, we are probably comparing a slower $80,000 car with the equivalent
Tesla costing under $60,000. The Tesla is relatively good value in its class.
No wonder its the best selling in said class.
But these BMWs come with 3 liter engines. That's got to range from something like
$3-5,000 a year on fuel. Well perhaps to charge you Tesla for the same driving,
you are looking at about 1/5th that, or even less if you solar to compliment too.
That's a thought, the more electricity we consume, as the fewer fossil fuels we use,
then our electricity bills will increase, making solar more feasible.
Over 5 years, well that's a further $20,000 saving in fuel,
alright probably more like $25,000 after servicing and maintenance. The cost of ownership on an M3
over that period is more than 5 times cost of a Model 3. Alright perhaps not all consumers
have gotten their heads around it yet, that there is a huge cost of saving in ownership.
And again at the end of that 5 years if you are selling, well those BMWs, in a normal inflationary
environment, they've probably lost at least half their price from new. Whereas Model 3s, they were
holding their price impressively even before any supply chain issues or "chip shortages".
Again not something the consumers likely realize just yet, but it will be obvious when they start
looking at buying used Teslas, and realize its even cheaper to buy a new one, except you have
to wait, because everyone else caught on to this before them, and just how good they are.
Ok, so there is no arguing the cost of ownership of a Tesla is so much less than a BMW.
I mean I didn't get into the potential savings we might see with insurance.
But I dont think we can let this tax credit slide though can we. Right, we should be able
to instantly extract an $8,000 rebate off most Teslas too, except for the rear drive Model 3,
as the batteries are made in China, but they still get $7,500 off. Which is still
more expensive than the Model 3 was at the start of the year, without any discount.
Wow, Tesla have increased their margin. We talk about how they are reducing their costs,
and working so hard on that factor, but they also keep increasing their prices. Of course whilst
continually improving their product with more technology, and retroactively for older models via
OTA. And perhaps some of these price adjustments are pre-emptive for this upcoming discount.
But I bet you the waiting list goes through the roof. Put it this way, if you ever want a Model Y
in the near future, I'd order one now. A wait that long is tough, for something so life changing.
But in the Q3 earnings call we were told that some of these price increases are due to the
extra demand. And this is my point, there is so much demand, because this product is
great value, relative to the competition, and very few people still realize this,
and Tesla don't need people to realize, as they don't want the extra demand yet.
They can keep increasing their prices, and it may look expensive,
but as I just pointed out, it is still a lot cheaper to own than the equivalent in the market.
Also bear in mind that Hertz, and likely other rental car companies will follow suit,
will probably order about 100,000 Teslas a year, or possibly a lot more. Tesla does not
have a demand problem. These cars are still exceptional value, the prices could still
increase another 20% or so, and still undercut the competition for equivalent cost of ownership.
The number one thing consumers look for when buying a car, is safety too. BMW or Mercedes can
have all their flamboyant safety features, with great sounding acronomyns, but at the end of the
day, its antiquated technology, and is never going to beat a car designed from the battery up when
it comes to safety. Tesla make the safest cars. No matter how much extra you spend on safety features
with German equivalent. That is also value. But back to Autopilot, and the potential FSD to come.
Well this where Tesla is Google, and the rest look like the phone book. There is no comparison.
What am I saying then? Well Tesla can keep raising their prices, and they will still be good value,
and people will still buy them. When Tesla finally hit volume production with their new factories,
then perhaps they might start to drop the prices a bit, or release a standard range Model Y. Rather
than dropping the prices, offer a lower cost model instead, and maintain these crazy high margins.
Really, Tesla adding $5,000 on to the price of the Model 3 since about September,
and reducing the cost of the batteries. The margin for that has to be well in excess of 30%,
surely 35% at least, and that is being made in California, with no die cast molds.
With this tax rebate though, plenty of people will pay these prices for sure.
Which is a probable chance of the price increases. Tesla know its coming through.
Which means there isn't really much reason to reduce these prices for say the next 10
years! Think what kind of margins the Texas Long Range and Performance will have 4680 batteries
with these price increases. Some of you don't believe me when I say 45%, but add a portion
of buyers purchasing FSD, and we are there. These rebates are a big deal. We will see a
lot of profit from the US market. I wonder though how Tesla can manage the pricing internationally,
where there are not so many rebates. Oh well, Im sure Elon will think of something.
Thanks