Missing reservation holders

[bwilson4web]

Source: http://ir.tesla.com/static-files/f732b430-ef16-4f65-9617-033599efb109

Our Q4 Model 3 deliveries were limited to mid- and higher-priced variants, cash/loan transactions, and North American customers only. More than three quarters of Model 3 orders in Q4 came from new customers, rather than reservation holders.​

Source: https://www.washingtonpost.com/busi...cb38be-0eb8-11e9-8f0c-6f878a26288a_story.html

This suggests that the vast majority of reservation holders are either waiting overseas, where Tesla says deliveries should start next month, or (and this is probably the bigger group) are waiting for cheaper variants such as the long-promised $35,000 version. That latter group poses a potential threat to Tesla’s profit margins in the quarters ahead, especially as Model 3 production remains below previous targets.​

Source: http://ir.tesla.com/static-files/0b913415-467d-4c0d-be4c-9225c2cb0ae0

. . . our operating margin remained strong at 5.7% in Q4 . . . ​

Musk reported the 'reservation' system was primarily a market research tool. Would anyone buy our EVs. The answer was a resounding YES. Time passes and Model 3, premium models are available but only ~20-25% of the reservation holders buy (well Tesla was still volume limited.) Do I care?

The lowest level Model 3, the midrange, is listed at $42,900. So doing back of the envelope:

$42,900 - $35,000 / $35,000 ~= +22.6% price over original $35k Model 3​

So what is the cost savings needed for a zero margin Model 3?

22.6% - 5.7% ~= 16.9% gap
16.9% * 42900 ~= $7,250.00 :: required cost savings

$7,250 / $25/hr ~= 290 labor hours :: having seen the Munro video, seems unlikely
$7,250 material / $150 / kWh ~= 48 kWh

vs 75 kWh ~= 36% of existing 249 mi range ~= 90 mi :: battery only​

This is not a trivial problem but interesting. Perhaps the Shanghai plant can make the $35k Teslas and import to the USA. Perhaps an optimized line at Gigafactory 1.

Bob Wilson

 

[interestedinEV]

A lot of my friends either bought the car or took back their reservations. I waited for a long time and took it back recently.

How does Tesla get it down to $35,000. One obvious place is range, which could be bought down to say 220 miles, which is decent. This will reduce the battery cost, but it will not give you the $7500 reduction. (The 320 mile car was initially sold at $49,000 and 270 mile version at $45,000 I believe. So 50 miles reduction in range gave about $4000 drop in price). It may not be that high but say reduction in battery costs could bring it down by about $2500 to $3,000. Next would be the cost of the upholstery and other upscale elements in the car, which can be substituted with cheaper material. Say this adds another $500 to $1,000 in savings. Third, I would be reduce warranty to say 2 years 24,000 for the car and 8 years for the battery. Again, this is not a direct cost reduction, but reduces the provisions they have to make for warranty costs. All told it may bring down by say $5,000 to say about $37,000. If they can get it that far down, I think they should go with it. I do not think that $37,000 should be hard number something close enough. Again, these are guesses/suggestions based on some obvious areas, so we can politely and reasonably disagree if you believe that this not the way to go.

 

[bwilson4web]

I suspect Elon had greater expectations for automation to reduce the labor to build the $35k Model 3. Facts and data have shown it helps but is not a 'magic wand.' Elon was expecting automation to reach a point where 'air resistance' was a significant factor.

Bob Wilson