TESLA Gets Aggressive With Its Model X And LOWERS Its Base Price With The 60D

Fascinating! So let us conclude the following:

(a) Tesla sales (Model S and X) are falling off the cliff so Tesla must resort to discounting;

(b) The "take-rate" on the Model X "wait list/interest-free loan" list must be quite low - 20% of the deposit holders? So now Tesla is putting cash on the hood to move the merchandise.

(c) I guess my hysterics 3 months ago about people on the Model X wait-list, not being allowed to buy a cheap Model X, was all for naught, because MAYBE that waitlist was a little fictitious?

(d) Consider that Tesla just eliminated its "buy-back" program http://www.reuters.com/article/us-tesla-prices-idUSKCN0ZT1HH

(e) The story ends if the unit growth stops. They need to move cars no matter how much money they lose.

(f) For the first time ever, the Model S is showing year-on-year sales declines. These shouldn't be taken lightly as the Model S is what is holding together gross margins.

(g) NHTSA's probe into autopilot performance has widened. Initially, it was seen as just covering the autopilot fatality, whereas now NHTSA is trying to get a better grip on autopilot performance in general. This widened NHTSA probe might well expose Tesla's recurring untruth about the safety of its cars while on autopilot. Tesla is the only automaker actively trying to mislead the market regarding the feature's safety. Furthermore, Tesla makes autopilot more of a selling point than other automakers do.

(h) Finally, the culmination of all of the above - Tesla's "inventory" picture is really unclear. Where other carmakers report a "Sale" when a unit is purchased by a dealer...Tesla builds the cars, ships the cars, FedEx's the cars to customers, hammma..hammmana...hammmana...how many cars does Tesla really have unsold in inventory? Its a big question.

I think this whole Tesla thing is toast before Lexus' "December to Remember" holday ad's start rolling!
Consider all the other "promises" that Tesla has quietly walked-back.

@mre30...SanJoseTeslaTool will accuse you of being me or The Steve....

ANd - they also discontinued their guaranteed resale value program as well.

This is what happens when a company over-promises and under delivers.

I have predicted a problem for them when other manufacturers got into the EV business to compete - but what actually happened is that - with the cost of gas having bottomed out - there were actually only so many people interested in buying an EV at those prices - and when the market got saturated - sales have dropped off for both EVs and Hybrids of all types. I will bet that a great many of the Model 3 deposits were on speculation - and they will now be recalled by the purchasers - since there is no real market to drive the prices UP.

I agree that this is the beginning of the end for Tesla though - the Model 3 simply will not be profitable enough (The cost of Lithium has not come down) to make up for losses already on the books. Either they will have to RAISE the prices - or they will need to de-content the cars. Either will result in fewer sales.

In ISOLATION, this move by Tesla is perfectly normal. We must note that lowering the sticker price by introducing a lesser version of a product is something manufacturers often do! If you’re an audiophile A/V gear manufacturer, you create the “best” reference grade disk player (Blu-ray/DVD/CD/SACD/etc.) for $3,000. When you’ve tapped out that market, you release the lesser unit for $2,000. As you tap out each successive market, you move further down market. Remember when Mercedes built only very expensive luxury sedans and roadsters, and then they started turning out “economy” entry-level models (the W201 design 190E comes to mind). Today, their B Class starts at the price of a well-optioned Toyota Camry.

However, if we don’t look at this single topic in isolation, and we look at it within the whole context of Tesla, and especially when we notice a number of other troubling Tesla factoids all lined up, we might see this in a different light: Tesla trying to do anything to generate more cash flow. Note I said “cash flow” and not profit, as Tesla has always been running at a loss, and incurring increasing debt along the way. When they run out of cash, they lose their ability to pay suppliers and the interests on their debts. That’s when suppliers stop supplying, and the house of cards collapses.


(PS: re MDarringer’s first comment in this thread: +1 :-D )

"(a) Tesla sales (Model S and X) are falling off the cliff so Tesla must resort to discounting;"

It's not a discount. Is a BMW 328 a discounted 335? This is a new model option with a lower base price, exactly like what was done with the Model S. The price of the 75D, 90D, and P90D are all unchanged. A $75k Model X with 200 miles of range is pretty compelling, especially since it still has 200 miles of range, AWD, and free supercharging. I wouldn't be surprised if the 60D becomes the most popular Model X.

SanJoseDriver: If we view this one event in isolation, then I completely agree with you!

However, BMW has been profitable for decade after decade, even in horrid recessions. They routinely make their sales targets, while maintaining profitability. They’re selling to a known audience. They have a proven track record. They have demonstrated over the long haul that they have what it takes to be (arguably) the most admired car company in the world (with respect to how they’re run; not alleging they make the “best” cars).

Tesla doesn’t have any of that going for them. If we view this one event within the context of all the troubling things we know about Tesla, one would be unlikely to compare it to just another model release, a la BMW-style.

Ultimately, time will tell. Let’s all stay tuned and see how the Tesla story unfolds.

Regarding cancellation of the guaranteed resale program @TomM mentioned. How did it work? Does Tesla buy the car back at the guaranteed price regardless of the owner buying another Tesla or not? I believe HenryN and SanJose are Tesla owners and there are probably others. Could someone explain the program?

@Vette71: I don't own a Tesla (not yet anyway) so I can't comment on this. A quick internet search can yield a ton of info, but I'm not sure of the details of the official deal.

Vette71: According to the article linked below, under the program introduced in 2013, Tesla would buy back a Model S after 3 years, guaranteeing “at least 50% of the base purchase price.” Tesla quietly discontinued this offer on July 1, 2016. The article claims the program was discontinued because it was costing Tesla too much.

http://www.investopedia.com/articles/markets/071516/tesla-quietly-ends-car-buyback-program-tsla.asp?partner=YahooSA

Tesla's stock price is based on delivery numbers, not profit or anything a real company is based on.

Since demand is starting to dry up, of course they have to make cheaper priced cars to up their delivery numbers or else the stock tanks.