Everyone is far too hung up on this $66k price tag for the Model Y, or this whole Teslas
are too expensive they cant be mainstream.
I am starting to think that this is one of the reasons the stock is not performing so
well.
The market may now think that Tesla has niched themselves as a luxury EV, and not going to
be the mainstream brand for EVs in the future.
And that market will be left for the Chinese.
So many people telling me that Tesla have priced them out of the market.
Now bear in mind this is just for the Long Range Model Y in the US.
Tesla also offer lower cost EVs too, like a RWD Model 3 for $20,000 less.
DEMAND I have to hear this a lot, but I think these
are just disappointed consumers, who really want a Model Y, but now it is out of their
price range.
But what difference does it make if Tesla still sell every car.
At least as far as us shareholders are concerned, in fact this is all good for the stock price.
It just shows how strong demand is, and how much value the vehicle offers that enough
people are still willing to pay for it.
Besides the car gets $7,500 off next year, so that makes it more affordable for many.
COST But looking at the sticker price of the product,
at least an investor, is not what's important.
I mean if that was the case, then we might think that legacy autos are going to win.
I mean a Nissan LEAF is around the mid $20,000, vastly undercutting a Tesla.
I think as stock holders its far more prudent to focus on the actual cost at which Tesla
are making their vehicles.
I also get bombarded with people continually telling me the Chinese EVs are going to outsell
Tesla as they cost less.
Well they may cost less to buy, but what matters is that they cost more to make.
That's what matters.
Remember the Chinese are losing money on their BEV businesses, and legacy too, all because
they are trying to compete with Tesla, and despite lower prices, they still don't have
close to the demand Tesla does.
Even when they try to offer 3 or 4 times as many different EV models than Tesla offer.
Tesla have so much demand just with 2 models as it is, well even enough just for one Model.
The Model Y is so popular Tesla are barely even bothering to expand Model 3 production.
And Tesla don't just sell every vehicle they make, they have a massive waiting list for
future vehicles they are going to make.
Also this future list is not even linear, as in not linear to a consistent production
rate.
No, this list actually is also taking into consideration Tesla's ramping and increased
production over the period of this waiting list, at what might be around 50% a year or
so, or what looks like to be even more.
So bear that in mind too, as I don't think many people consider that fact.
MAINSTREAM So many people, and I really do hear it daily,
love telling me how I am so wrong about Tesla and the Chinese EVs.
The overall narrative being that I am wrong to think that so many car buyers can afford
to buy a Tesla, and that Tesla will not be the mainstream EV player, but more on the
luxury end.
And it will be the Chinese companies that come in at the bottom of the market, and outsell
Tesla, as more people can afford a Chinese EV.
Well these Chinese EVs have a mission, to try and make as much profit as they can, which
will eventually saturate when they hit their market clearing price.
Tesla, well they have a mission too, to ensure that we transition the world to sustainable
energy.
There are 2 billion ICE vehicle to replace.
This includes used vehicles too.
There are still only a small portion of the world who can even afford a brand new Chinese
EV as it is.
How are we going to get the rest of the world of non-renewable transport?
Tesla has to do whatever it takes to achieve this.
But with their software and AI capabilities, they are able to leverage vehicles with this
technology, as never before seen.
With things like Robotaxis and Robobuses.
Suddenly one EV can replace perhaps as many as 50 ICE vehicles.
No one is going to make 2 billion EVs, to replace the entire fleet.
It would take take almost a century, even for Tesla.
New solutions need to be sought.
Robobuses with capacities of perhaps a couple of dozen at a time are going to offer so much
leverage, whilst also cutting down on congestion.
It would just be a numbers game, when economies of scale kick in.
And the fact that Tesla can undercut even the cost of a Wuling when it comes to cost
per mile traveled.
No, not everyone will be able to afford a Tesla, but everyone, absolutely everyone in
the world, may be able to afford to use a Tesla.
No one else is going to be able to do this.
Tesla just about already have.
Even vehicles from a decade ago have the necessary hardware..
AV And many in developed nations will still be
able to afford their own private Tesla, that will eventually drive itself.
And Tesla are without a doubt going to be the mainstream AV player too, as no one else
can make autonomous, with no signs of them coming.
As we have seen over the last several years just how difficult a task this has been of
Tesla and simply how much is involved.
And Tesla are making the worlds most powerful computer in order to do this too.
Do you think BYD or Ford have the skill set to make a computer that powerful, or have
any kind of clue?
People are going to pay for AV, a lot of money, and a lot of people.
And before you say, not everyone can afford 2 or maybe 300 a month, well sure, I never
suggested they could.
However, someone who can afford a brand new Tesla most likely can.
For those who cannot, can still benefit with Robotaxis.
LOWER COST But remember, the reason Teslas are so expensive,
as they like to say, isn't due to them costing a lot to build, its due to Tesla not being
able to make enough to cater to the overwhelming demand they have.
But Tesla are building more factories, and expanding production, and wont stop all decade.
Eventually they may even reach a point where they actually make enough Model Ys and 3s
for the market.
And how low might the price be then?
Well what about a Model 3?
Tesla even used to sell them for as little as $35,000 at one stage, years ago.
That was obviously a Fremont version, when they were barely at volume production, using
2170 nickel cells.
Oh and no structural battery pack, not front and rear casting.
I think that Tesla could truly get the cost of a model 3 down to possibly $15,000 per
vehicle.
Perhaps excluding a little inflation here and there.
But either way, it is clear there is so much opportunity to get the cost of that car down.
The could also be using LMFP cells, manganese with iron phosphate cathode.
Which would be incredibly low cost, and perhaps in the 4680 form, as a structural battery
pack.
These should be capable of mid 300 miles of range.
Which is about what Tesla are getting on the Long Range model 3 now, except as we said
the cost is down significantly.
Tesla could possibly sell them for around $30,000.
It would just depend on getting the price point right.
I think software limit the range to perhaps 280 miles, and the acceleration to around
6 secs to 60.
Then offer upgrades to perhaps 350 miles and 5 seconds to 60.
Also offer options for charging speeds.
And remember this is not some basic low cost EV, this is still a Tesla, a robot smart car,
that can drive itself.
AFFORDABLE If you are complaining about not being able
to afford a $60,000 Tesla, ok, sure it kind of sucks not being able to have a Tesla, and
$60,000 is still a fair amount of money, its sometimes not possible in anyway for people
to come up with those kinds of funds.
But $30,000, well just about anyone in the US can find that much money for a new Tesla
if they really wanted.
Given all the cost savings.
I even had a Patreon member telling me that I had convinced him to buy a model 3, from
one of my videos about how affordable they are, and even took my advice on uber driving
with it, to help with the payments.
It just depends how badly you want it.
Most people have plenty of time to watch youtube, tik tok, netflix or even TV, which they could
quite easily be using to Uber to cover their finance payments.
It's just about priorities.
UPGRADES And then once they pay that car off, perhaps
in 5 years time, well instead of getting a new car, they can spend a further $10,000
to improve the range and performance and unlock other features the vehicle might have.
You might think this is bad business for Tesla, when they should be looking at repeat business,
and trying to get customers to keep buying a new Tesla as regularly as possible.
But no, I don't think that's Tesla's business model, which is why the cars get these free
updates all the time.
A big reason for a lot of people to buy a new car is for new features, yet Tesla just
give them to us for free.
MORE DEMAND Why, if thats bad business?
Because Tesla dont need any more demand.
And if there is a $30,000 Tesla for sale, then they really wont need any more demand.
On top of that I have a feeling that if there was a Tesla around these lower sort of price
points, it wont be customers who are looking at getting a new car currently, to replace
their old one.
I think it will be everyone looking to replace their car.
Its new technology, with better living standards.
No need to wait a few more years and get a bit more mileage out of the old car, just
dump it now and get your Tesla.
Yes, Tesla's demand could truly be above 100 million a year, if they so chose.
Of course the major new technology would be FSD.
Why wait 3 more years driving your BMW, when you can sell it now and not have to drive
a Tesla.
You know, because it will drive for you.
PROFIT And then Tesla have all these extra customers
who can afford these lower cost Teslas, well the ASP will be down, although margins could
be just as high, due to a lower cost vehicle, gross profit per vehicle sale will be lower.
However, the profit from the FSD will still be higher.
UPGRADE And then people can probably upgrade their
cars too.
Ownership length might be at different paradigms, we might think about owning a Tesla for 10
years, maybe even 20.
Perhaps the seats might need to red upholstered or something, but Tesla can offer all those
services.
And the car is modular, so new chips and other various hardware parts can be added over time.
Tesla service centers will eventually become very profitable.
But not because the parts are wearing and tearing, but because the consumer simply wants
to upgrade them.
SUMMARY Anyway, the entire point is that Tesla can
choose to offer much lower prices whenever they wish, and still make a huge profit.
The lower prices can undercut all the competitors and still make said profits, whilst the competition
are still losing money.
Tesla will be able to manufacturer faster than any of them too.
As an investor this is what matters.
And the potential addressable market is so big, that all competition should be welcome,
as we need to transition as fast as possible, and none of the competition are going to take
Teslas market share.