Thursday, February 28, 2019, after markets closed: After creating a lot of anticipation with some cryptic tweets, Tesla announced the base Model 3 and a new, more reasonable, pricing structure. The big question for all of us was, how did Tesla get production costs down enough to offer the $35,000 base model? Short answer: it didn’t. Let us look at the new prices first.
There are four rear-wheel drive configurations.
|Standard Range Base||$35,000||220 miles||130 mph|
|Standard Range Base Plus||$37,000||240 miles||140 mph|
|Mid Range Premium Interior||$40,000||264 miles||140 mph|
|Long Range Premium Interior||$43,000||325 miles||140 mph|
There are two all-wheel drive options.
|Long Range Premium Upgrade Package||$47,000||310 miles||145 mph|
|Performance Premium Upgrade Package||$58,000||310 miles||162 mph|
Fancy wheels is still an $1,500 extra.
A white interior is $1,000 extra.
Another paint color than black will set you back $1,500 — for Midnight Silver Metallic and Deep Blue Metallic. The two multi-coat colors are a bit more, $2,000 for Pearl White and $2,500 for Red.
That was the simple part of the upgrade.
Now the complex part: the new cost structure for the autonomous driving features. I only mention those for new cars — the upgrade costs and free hardware upgrades for HW3.0 are grandfathered in.
In the old structure, there was Enhanced Autopilot (EAP) for $5,000 and Full Self-Driving on top of EAP for $3,000. With OTA upgrades, EAP functionality has been added and enhanced. FSD is still promised sometime in the future.
In the new structure, there is no EAP anymore. There’s plain Autopilot, which is essentially Traffic Aware Cruise Control with Autosteer in a single lane, for a nice $3,000 ($4,000 if added after delivery). And there’s an extended Full Self Driving option for $5,000 ($7,000 after delivery).
The enhanced options of EAP have been transferred to FSD. Those are:
- Navigate on Autopilot: automatic driving from highway on-ramp to off-ramp including interchanges and overtaking slower cars.
- Autopark: both parallel and perpendicular spaces.
- Summon: your parked car will come find you anywhere in a parking lot. Really.
And later this year:
- Recognize and respond to traffic lights and stop signs. (We’ll call this Autostopping.)
- Automatic driving on city streets.
Because of regulatory constraints, the driver has to be alert and ready to take full control in all situations at all times. Real self-driving, where you are allowed to be drunk or sleeping, is still a few years away.
Interior Trim Levels
- Manual seat and steering adjustment
- Cloth seats and base trim
- Basic audio
- Standard maps and navigation
- Tinted glass roof with ultraviolet and infrared protection
- Auto dimming, power folding, heated side mirrors
- Music and media over Bluetooth®
- Custom driver profiles
- Center console with storage and 4 USB ports
Partial Premium Interior is Standard interior with extra/upgraded:
- 12-way power adjustable heated front seats
- Premium seat material and trim
- Upgraded audio – immersive sound
- LED fog lamps
- Center console with storage, 4 USB ports and docking for 2 smartphones
Premium Interior is Partial Premium Interior with extra/upgraded:
- Heated rear seats
- Premium audio – 14 speakers, 1 subwoofer, 2 amps and immersive sound
- Satellite-view maps with live traffic visualization and navigation
- In-car internet streaming music & media
- Internet browser
- Location aware automatic garage door opener
How Tesla Kept an Impossible Promise
With the boring facts out of the way, what took Tesla so long? That is simple — it tried and it failed. Yep, that is harsh but true.
Meanwhile Tesla did have a promise to keep. Well, Tesla never lacked creativity. With a streamlining of the sales process, the company could save some money. Remember my recent article about “Tesla’s European Problem” – not enough stores? They canceled the stores. Problem solved.
The many US states where the dealer association blocked Tesla stores? Only sales over internet now. Again, problem solved. Only some galleries to touch and sniff the cars, to ask some questions and perhaps buy some Tesla merchandise. Don’t have a Tesla store in your area? No worries, others won’t either. In exchange, that is compensated by a large expansion of the service and delivery infrastructure.
No more test drives in most locations. People have an impression from friends and such, and if they are serious, they can order the car of their dreams (in the configuration that they can afford). Deposit the whole purchase price, test drive it for a week (but not more than 1,000 miles), decide to keep it or return it to Tesla and get the whole price back.
In Europe, we have a law for internet purchases that has far wider customer protections. In Europe, the period is 14 days. But there is an exception for goods made to order or clearly personalized – such as a tailor-made suit. There will be discussion about Tesla — are these cars made to order, or is the lack of configuration options enough to make it standard trim levels?
If the European rules apply, it is 14 days and unlimited miles. Some lawyers have some work to do on this situation.
I am not so sure that this new sales model will be well received in the EU. We are used to the former Tesla sales model for nearly all new car purchases: Go to dealer showroom, test drive the top trim level of the model, place a highly customized order, wait a few weeks to a few months, receive vehicle.
Back to the promise Tesla had to keep: a $35,000 base model with a 220 mile range. Between making the promise and now, the engineers did make some progress on range and such. The base model as designed does have a slightly bigger range and higher top speed than initially indicated. Tesla just had to limit it by software to the promised specifications, have the interior a bit spartan, and offer it for the promised $35,000.
But here’s the slick move: Tesla’s offering a less software-limited version with a more Tesla-like comfortable interior and audio for $2,000 more. The extra costs for the nicer interior is likely less than $500, (an unfounded assumption, based on the rule that a customer upgrade should also upgrade the carmaker’s margin). Only masochists or people who can not really afford the car will order the $35,000 version. But that’s generally how cars go — few people buy the base version, because the automaker puts the goodies you really want in higher trims.
The last important action on the price front was harmonizing the prices with the added functionality. The price of the Long Range RWD Premium Interior Model 3 is now $6,000 lower than when it first hit the streets.
The original $14,000 premium over the Standard Range base model of the first Model 3 was a big premium for being one of the first to drive the novelty. The $8,000 premium for 105 miles of extra range and the upgrade package is very reasonable, and should entice many buyers to go for the higher trim.
- Tesla kept its promise.
- Tesla is not going to have a margin problem caused by the Standard Range base model, as few consumers will buy it.
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