Published on July 18th, 2019 | by Zachary Shahan0
Remember, Tesla Is Both An Auto Manufacturer AND An Auto Dealer — Prices Will Change Frequently
July 18th, 2019 by Zachary Shahan
It seems to be a monthly occurrence now — Tesla changes prices, people freak out, some media outlets write about it, and then everyone assumes nothing will change again for years (or something like that).
I don’t get it. Well, I get it — people don’t like to see a notable price drop on a product they just bought, since they then feel like they were idiots for buying too soon or were simply ripped off. But I also don’t get it. How is it truly controversial that a company is adjusting its prices to respond to the market and to respond to internal manufacturing changes? Isn’t that what companies are expected to do?
Aside from people simply feeling shitty that they paid more than they would have if they had waited an extra week or three, I think there are two main causes of the controversy.
First of all, people pay a lot of freakin’ attention to Tesla. Tesla is so closely watched that every minor change garners headlines. This leads to some things getting blown out of proportion — like price changes. Generally speaking, if you go searching for a consumer product and then make your decision and buy a specific option, you don’t continue to track that product and see if the price drops a week or two after your purchase. However, because so many people follow Tesla for various broader reasons, and because the media (CleanTechnica included) obsessively covers almost every move the company makes, buyers notice Tesla price changes after — as well as before — they make their purchases. That leads to some consumers getting upset when they get unlucky with their timing.
Secondly, people don’t seem to acknowledge that Tesla is an auto dealer as well as an auto manufacturer. Okay, “auto dealer” may leave a bad taste in your mouth and may not be the best term for Tesla’s sales arm, but it’s an important phrase to use for this story. Normal auto dealers are changing prices all the time in order to attract customers and convince waffling potential buyers to finally make a decision and purchase their cars. Normal automakers don’t have to worry about this since they don’t sell directly to customers. They put an MSRP for a new model on their webpage and that’s that. (Well, as implied above, they may well change their MSRPs a bit from time to time, but no one really cares enough to notice or get all excited or worked up about it.) Perhaps automakers frequently adjust prices for the auto dealers who buy their goods — I don’t know — but it shouldn’t really be necessary since dealers are essentially just middle men and don’t need to be stimulated to buy.
Since Tesla is selling directly to customers, it needs to fiddle with prices a bit to motivate the large variety of consumers out there to jump in and finally click “Place Order” on a new Tesla. Some will be motived by a price cut here, some by a price cut there, some by no extra charge on black, some by no extra charge on white, some by Tesla rolling basic Autopilot features into the car, some by Tesla rolling Ludicrous Mode into the Model 3 Performance. Tesla has to constantly play the game of grabbing consumer attention and tickling consumers out of complacency/inertia in order to close the deal. So, yes, just as you expect auto dealers to constantly be announcing new deals, expect Tesla’s prices and option mixes to change frequently. This is not really controversial. I mean, it shouldn’t be.
Furthermore, Tesla is growing super fast and evolving at an abnormal pace. As its economies of scale grow, as it changes manufacturing and development practices, as service center feedback comes in, Tesla is going to see changes it wants to make to its product offerings. The company will find ways to cut costs as well as specific features or options it wants to sell in higher numbers. Again, because consumers are buying products directly from Tesla, they will see the results of these ongoing feedback loops and product adjustments. We shouldn’t be surprised.
All of that said, I assume we won’t even be in the 4th quarter of 2019 before another pricing “controversy” arises. At least then I’ll have an article published explaining why it’s not really a big deal and shouldn’t be covered as a surprising and noteworthy story.
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