Streetwise Professor

March 6, 2019

Fists of Fury Fly Over Tesla’s Price Cuts

Filed under: Climate Change,Economics,Energy,Tesla — cpirrong @ 8:29 pm

According to this Seeking Alpha post, Chinese buyers are furious at the Tesla price cuts. The WSJ concurs.

And with good reason. In my post yesterday, I wrote that Tesla cut prices by 6 percent–which was another of the company’s half-truths. Or maybe fifth-truths, because for the pricier models the price cuts are on the order of 30 percent. The Model 3 Performance version price cut is 8 percent in China, and the pricier the car, the bigger the percentage discount. So no wonder buyers are furious. They look like suckers because if they’d waited, they would have saved as much as $50K.

A 6 percent price cut by an ostensibly demand constrained growth company is bad enough. 8-30 percent price cuts is Armageddon time.

As I noted in yesterday’s post, this is a sign of a truly desperate company. Or maybe a completely delusional one. Because anyone in their right mind would know that price cuts–especially of this magnitude, and especially on what should be the most profitable vehicles–vaporize customer goodwill. Especially the goodwill of the type of customers who are vital to making the company profitable by buying the high margin vehicles.

You only do that if you are so desperate for cash today that you say f-the-future, it will have to take care of itself: if I don’t get cash today, I won’t have to worry about the future.

But they’re not done with incinerating their credibility faster than a flaming Model S that lost a wheel and hit a tree! The company also cut prices on its “Autopilot” function–and won’t refund those who pre-ordered and pre-paid. And oh, it just said that what it had previously said about self-driving capability was, what’s that old phrase?–no longer operative.


But hey. Why listen to me? Elon’s got some really, really cool stuff coming . Trust him! What could go wrong?

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  1. So… who do we all think will buy Tesla’s assets?

    There’s another relevant story: They recently started laying off production line staff (again, not consistent with being capacity-constrained), and the axe allegedly fell harder on the more experienced (i.e. more expensive) staff. Which wouldn’t bode well for future product quality or efficiency… and the difference in pay didn’t even seem that big…

    Comment by HibernoFrog — March 7, 2019 @ 8:29 am

  2. It’ll be interesting if Tesla is an accredited party to the NTSB investigation(s). Elon made some, unapproved by the IIC, comments during the first NTSB investigation of a fatal Tesla crash and got thrown off the investigation.

    Comment by The Pilot — March 7, 2019 @ 10:36 am

  3. I’m reasonably cheerful: effectively someone has found a way to tax conspicuous consumption and virtue-signalling. Good on you, Musky. But can you play the same trick twice?

    Comment by dearieme — March 7, 2019 @ 1:47 pm

  4. Does Musk own Space X ?
    I thought that was a successful operation.
    Where does the money come from to run that?

    Comment by Peter — March 7, 2019 @ 7:27 pm

  5. @Peter: Well, he bailed out his solar-panel business with the then-successful Tesla. I wonder if he will merge Tesla with SpaceX…

    Comment by HibernoFrog — March 8, 2019 @ 7:43 am

  6. Warren Meyer at Coyote Blog has been following and offering opinions on Tesla’s financing and future for quite some time now. His latest:

    Comment by ColoComment — March 8, 2019 @ 4:44 pm

  7. The people who buy Tesla are spoiled kids who want an expensive toy today no matter what the mommy says, and don’t mind for it to be suhsidized to the hilt by the sucker taxpayer. They self-selected for sucker.

    Comment by Ivan — March 8, 2019 @ 7:33 pm

  8. I think “You’ve been Eltoned will soon enter into common usage.

    Comment by sotosy1 — March 10, 2019 @ 12:32 pm

  9. Two comments. I think Tesla did themselves no favor by bringing out the ‘low cost’ model 3. The only market they cut into was the market for their own higher priced car in the model S. Now if the market were wider, and they could see cutting into the market of other makes, then sure – offer a discounted model and suffer some undercutting of our own, while chipping away at the other guys. Hence, price cuts on the top models, maybe a panacea while one is on the site shopping for a electric car.

    Which leads to; I moseyed over to the Tesla sight and started to ‘build’ my model 3, and keep that vaunted $35,000 price. Well, let me tell you, I didn’t get far. It was supposed to be 320 mile range for $35,000. But no, if you want your model 3 for that darling of a price, you will have to go with bone stock, low battery, black only, black only interior range of 220 miles. Well, we knew there was going to be a fly in the ointment. Backing up I chose the long range option to get my 320 mile range. Oh yes, I had to take the ‘upgrade’ options along with the big battery. No choice, when you go long distance, you also have to take the optional equip. I stayed as bone stock as I could, and the price now was – gulp, $43,000! They advertised 320 mile range for $35k, what happened? Read the fine print. They are assuming a $5000 gas allowance, and about $3000 in rebates. From – somewhere. To get the car, you gotta pony up the full $43k plus tax and fees. Suppose I want a red one? Suppose I don’t want the flat black interior? Suppose I want decent wheels? How about cruise control, and the ‘autopilot’ too. Might as well get the options they are famous for. Total is; $60,000! Whoa boy. Cya – wouldn’t wanna be ya.

    Comment by doc — March 12, 2019 @ 11:27 am

  10. @doc–Yes, Elon is the master of the bait and switch, ain’t he?

    I always was amazed that people said that the Model 3 would be a game changer. Sedans are low margin cars at best for other automakers, and often money losers that they build in order to bring down the fleet MPG number sufficiently to allow them to build more higher margin SUVs and pickups. It was/is delusional to think that one is going to create a highly profitable auto company based on sedans. Especially very expensive but still low margin sedans.

    Comment by cpirrong — March 12, 2019 @ 6:17 pm

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