Tesla Model 3

Tesla's Missed Opportunities To Lower Cost and How Can It Finally Make the $35,000 Model 3

Tesla must drastically reduce costs to make the $35,000 model 3 possible. Currently the lowest priced model 3 is $42,900. Tesla has to reduce the cost almost $8,000 to make the $35,000 Model 3 possible. It is important for Tesla to get this vehicle to market as soon as possible to transition to retain profitability and to truly bring sustainable transportation to the masses.
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In order to make the $35,000 Model 3 available in the market Tesla has to make major component changes. Let's start with the powertrain.

Reduce battery size to 60KW this should lower cost by almost $3000 and still yield 220-mile rated range. Software add faster acceleration as a $2500 option across all models. Change aluminum wheels to steel wheels and hubcaps, and charge $1200 for aluminum aero wheels. At the same time Tesla could change the tires from all season to fuel saving tires to compensate for the added weight. 50% plus clients would add the aluminum rims. Reduce the interior components from a premium to a cloth interior, savings $1700. Change roof to a standard roof, savings $1000.

That's $6,900 a vehicle savings.

Minor component change

Change folding mirrors to manually folding mirrors, savings $200. Software disable homelink $200 add. Enable and charge for internet streaming $12.50 a month / $150 a year-. Change door and window trim from chrome to black plastic, savings $100.

$650 a vehicle, savings and profit

True economies of mass scale production of both Model 3 and Model Y. That's $500 a vehicle minimum for true mass production

Total Savings - $8050

Low and behold the $35,000 model 3. Let the production everyone has been waiting for, begin now.

Tesla's Missed Opportunities

Tesla could have easily disrupted the entire auto insurance industry.

With increased safety of enhanced auto pilot (EAP). Tesla could offer something no other auto manufacture offers, auto insurance. This is a multi-billion-dollar industry. Cheaper auto insurance offered solely to Tesla drivers could potentially synergize sales. Insurance is an industry ripe for disruption.

$500 a vehicle profits every year

Change base paint to a flat black matt finish without gloss coat, savings $500. Many customers would choose this option it looks futuristic. Many model 3 owners are not worried about factory color offerings. They choose to wrap their vehicles different colors in the aftermarket. Tesla could add factory window tinting, vehicle wraps, and ceramic coating. Adding a clear wrap to the front of the Model 3 is almost a necessity due to paint softness, and the model 3 bumper easily collects rock chips. One local car wrap store, touched up 47 rock chips over a 6-month course of driving before adding a clear wrap. Almost all Tesla drivers opt for 1 or more of these options. Tesla could easily add these multi-million-dollar services to its Service Centers.

That's another $500 a vehicle savings minimum and potential profit.

Autopilot

Tesla could reduce the price of autopilot software add on to $2500 across the board. Right now, approximately 40% of owners do not opt for autopilot software upgrade due to the $5000- $7000 price addition. A 90% (EAP) Enhanced Auto Pilot adoption rate helps Tesla and clients. At $35,000 it’s 1/7 the price of the entire car. If Tesla pushes out 200,000 model 3s and Ys a year, that’s an additional 500 million in revenue. If autopilot cars are 40% safer, then Tesla can boast the increased autopilot safety ratings across the entire fleet.

That's $1000 a vehicle profit, minimum.

Total missed opportunity profit gain.

$2000 a vehicle

Ludicrous car – Tesla vehicle sharing platform

GM and Audi are first to market on their own vehicle sharing (with GM Mavin and Audi Silver car), but Tesla could quickly catch up. A “Ludicrous” vehicle sharing platform can synergize Tesla with increased profits. Owners could easily share their vehicle via Tesla’s Mobile application by handing over a unique vehicle share code. Tesla sharing could potentially 10X Tesla sales by owners easily sharing their Tesla experience with thousands of other drivers. Tesla could offer a lower percentage of profits over other mainstream vehicle sharing platforms while till earning a profit. This program could easily be combined with Tesla vehicle insurance. If Tesla expedited its own car sharing platform it could synergize profits by allowing owners to offset vehicle costs and use those savings to add to vehicle options.

Potential profits - millions

Extended vehicle warranties

Tesla could offer their own extended vehicle service contracts and warranties. Offering better service contracts and warranties than 3 rd parties could keep warranty profits in house. Tesla is losing millions in opportunity lost profits by not offering services in which their owners are turning to third parties. Vehicle paint protection, wraps, window tinting, warranties, vehicle sharing, and insurance. Tesla needs to bring all these in house and own the complete vehicle sharing and ownership experience.


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Comments

I'm skeptical of the claimed savings . Even if those saving are not vaporware, Tesla cannot compete in the U.S. market with their missing tax credits. The Electra Meccanica Solo is the first affordable, mass market electric car. And I have no clue as to why anyone thinks an electric car is "sustainable" or even why anyone would care whether it were sustainable or not.
I have to disagree almost across the board with these ideas, but the first one is the biggest. I do not believe that having a $35,000 base price is the key to Tesla's sales success. Sure they would increase sales and make their cars available to more people, but at what cost to the brand. Mercedes went through a cost cutting phase around 1998, and the resulting loss in perceived quality hurt the brand more than the short term profit gained. If you ran BMW and someone told you that the base 3 series was too expensive (at over $40,000), and you should build a cheaper model with flat black paint and steel wheels with hubcaps, losing amenities and features, and adding car sharing, you would probably advise them to buy a Honda, or Hyundai if price is that critical to them. Because if they built a severely diminished base model you just know that is the one model that the press would actively compare to cheaper competitor cars that were loaded with extras for the same price. Then good luck in trying to sell the higher end, more expensive models and options after that. Also if you cut Autopilot's price in half, you would lose more profit than you would gain. Another way to see it is that today they are getting 60% of their customers to purchase Autopilot software at $5,000-$7,000 a car, so if they sold 100% of their cars with Autopilot software at $2,500 a car they would lose money compared to today. One look at the high prices for European car's options, and you can quickly see that the final price can jump 20-40% over MSRP, but many buyers see that as having to pay extra to get a superior car with the coolest options, customized to their satisfaction. As more luxury, performance EVs enter the market, and buyers have more options, the Model 3 ages, and as Tesla loses their government incentives, then we will naturally see Model 3 prices drop. But for now, the competition is not there yet, and it is a smarter move to gradually drop the car's price as they bring the Gigafactories into full swing, make production more efficient and reduce battery costs. Cheaper is not always better.