
Tesla cuts prices as Model 3 deliveries narrowly miss estimates - nopriorarrests
https://www.bloomberg.com/news/articles/2019-01-02/tesla-cuts-prices-as-model-3-deliveries-narrowly-miss-estimates
======
dmode
"Automaker sold 63,150 Model 3 in the fourth quarter" \- [and this is only in
North America] What Tesla has achieved is truly unbelievable and it is kind of
hilarious to see HN meltdown and Tesla bashing. To give you a perspective on
how much of a gigantic scale this is, BMW only sold 99,000 3/4 series in the
US in all on 2017 [1]. Tesla is a carmaker who only sold ~100 vehicles in
2011. It is amazing how much of Tesla's success is under-appreciated in this
forum.

[1] [http://carsalesbase.com/us-car-sales-
data/bmw/bmw-3-series-4...](http://carsalesbase.com/us-car-sales-
data/bmw/bmw-3-series-4-series/)

~~~
vkou
Meanwhile, Toyota, which is only at 3x the market cap of Tesla, sold
>2,200,000 vehicles in Q4. It ships more combined battery capacity in its
hybrids, then Tesla does in its EVs.

~~~
jsight
I think you are misestimating. Toyota sells ~1.5 million hybrids (plugin and
otherwise) per year. If I'm not mistaken, the average capacity is ~6kwh. That
works out to 9,000,000 KWh (9 GWh).

Tesla sold about 250,000 cars last year, with an average pack size of at least
70 KWh. That works out to 17,500,000 KWh (17.5 GWh).

Obviously, these are estimates, but Tesla is also running at a pace closer to
~320k units for next year with only marginally smaller pack sizes.

Revenue is another interesting metric. Toyota is at ~280 billion/year (USD).
Tesla is currently at ~27 billion/year.

~~~
iso1337
I think even these estimates of Toyotas battery capacity are too high. Here's
my attempt:

Prius Prime PHEV: 8.8 kWh Regular Prius: I couldn't find recent numbers, but
1st gen was 1.2 kWh

All other hybrids seem to have between 1-2 kWh
[https://en.wikipedia.org/wiki/Hybrid_Synergy_Drive#High_volt...](https://en.wikipedia.org/wiki/Hybrid_Synergy_Drive#High_voltage_battery)

European PHEV sales were 0.3% of all sales and 0.65% of all hybrids [1]

US Prius Prime 2017 sales (I think their only PHEV model) were 21k units. [2]
Note that 21k units just in the US out of 1.5m hybrids total gives us 1.4%, so
maybe the PHEV prius is not selling as well in Europe.

Let's say we have the following scenarios of 2.5 or 5% of the total 1.5m
number being PHEV to be conservative. Further assume that regular hybrids have
1.5 kWh. For the 2.5% scenario, if my math is correct, that yields 550,000
kWh. For the 5% PHEV scenario, that yields 874,000 kWh.

[1] [https://insideevs.com/only-0-3-of-toyota-sales-in-europe-
wer...](https://insideevs.com/only-0-3-of-toyota-sales-in-europe-were-plug-in-
hybrids/) [2] 2017 table from [https://insideevs.com/monthly-plug-in-sales-
scorecard/](https://insideevs.com/monthly-plug-in-sales-scorecard/)

~~~
jsight
Oh, nice job finding ratios of the PHEV to the rest. I felt like I was
probably overestimating, but it was hard to get a feel for how much. I agree
that the real number is likely closer to your estimates.

------
wnorris
The production and delivery numbers they came out with were very good and
higher than most had expected. These numbers will allow them another
profitable Q4 likely higher than their Q3 numbers.

The price cuts are likely to impact margins, but is in line with what Tesla
had done with the Model S and X as production efficiencies allow them to
reduce manufacturing costs.

The reaction looks like a big overreaction as the market is apt to do. Seems
like there is a lot of Tesla hate on the internet for some odd reason these
days.

~~~
qroshan
At $50B Market Cap, Tesla should be delivering at least $2B Annual profits.

It's clear Tesla has run through higher margin demand. There aren't many
people in the world who can afford a $50,000 car. Tesla is a niche market car,
but priced as a mass market (like iPhones) product.

Expect Tesla's sustainable profit to be around $500 Mil per year and it's
share price must be cut in half to justify that

~~~
johnvanommen
Once Jaguar, Porsche and Audi are able to produce electric cars in quantity,
things are going to get interesting. For instance, I was recently looking at
the Jaguar I-Pace, and was stunned by how long the wait and how high the
markups are. Clearly there's a demand for a $100,000 electric car, but things
are going to get difficult for Tesla once the competition arrives.

~~~
luckydata
Competition has been arriving for quite a while though. Having just bought a
Tesla, I can tell you I'm starting to appreciate more than just intellectually
the huge network of chargers and other infrastructure that company has laid
out. It's not perfect but anyone else wanting to play in this market will need
the same, and Jaguar is in no position to do it. I don't think anyone at Tesla
is losing any sleep over Jaguar TBH but they might be looking intensely
towards Toyota.

~~~
gamblor956
I live in a nice part of LA and I see as many iPace's as Teslas, and the iPace
has only been available for about 3 months locally.

And the iPace owners are absolutely _glowing_ in their reviews of the car in a
way I've never heard Tesla owners get. Indeed--while most Tesla owners I know
talk their heads off about the charging network[1], they tend to be defensive
about the actual quality of the car itself in ways that luxury car buyers
shouldn't be.

[1] While Tesla has a geographically large charging network, it's density is
pretty horrible. In DTLA for example, you're 9 miles away from the closest
Supercharger, and condo/apartment dwellers are SOL for installing their own
unless they want to pay excessive fees to have one installed in their parking
spot. There are a number of standard EV chargers through the downtown area,
and the number of non-Tesla chargers exceeds the number of Tesla-only chargers
by a factor of at least 10:1.

~~~
luckydata
We must be living on a different planet then if you never heard a Tesla owner
go on and on about how much they love their cars. Before buying one 4 days ago
I had plenty of that kind of experience.

~~~
gamblor956
I know quite a few Tesla owners, and they all love the _idea_ of the car far
more than the actual cars themselves. After about a week, reality sets in and
the misaligned panels, haphazardly responsive touchscreen, and relatively
pedestrian interior furnishings start becoming noticeable. After about 2
weeks, the Tesla owners who don't live in homes (i.e., condo/apartment
dwellers) even start to get annoyed at the charging cycle, since the
Superchargers in the LA area are not very convenient to get to and it's
roughly $10k-$20k (per charger) to get a charger installed in their parking
structure. One Tesla owner, who evangelized the car before buying it,
eventually sold his Model 3 (one of the first sold to the general public) and,
in his words, "upgraded" to the iPace.

Also, I've ridden in all of the Teslas (including the Roadsters, thanks to a
former boss who collected cars) and the Model 3, while comfortable enough, is
only roughly as comfortable as my Camry and certainly isn't as comfortable as
the $65k+ cars other friends drive. IMO, this is Tesla's big problem. Their
cars are expensive, but you're paying a lot of money for the brand and while
that can get you started, in the auto market you eventually have to start
competing based on features like comfort, etc.

~~~
zaroth
As a Model 3 owner, I have never been happier or more impressed with any car I
have ever driven.

It’s more fun to drive than my old Camero SS. It’s more comfortable than my
old Infiniti. I absolutely love the interior aesthetic. And I just paid $3,500
to PPF wrap it because I think it’s absolutely gorgeous and I want to keep it
looking that way.

Oh, and I paid $45k not $65k, and it saves me at least $100 a month on top of
that.

You are blowing smoke with “roughly as comfortable as a Camry”. The ride
quality is better than BMW in my opinion, and that’s before throwing in the
mental benefits of Autopilot combined with no engine noise making my commute
the most peaceful part of my day.

~~~
gamblor956
I rode in a Model 3 several times this past weekend and my Camry 3 all this
week. They are absolutely on par comfort-wise. Can't compare to an Infiniti
since I've never ridden in one, but the Model 3 can't hold a candle to the
Lexus's, BMW's, or Audi's I've ridden in.

~~~
zaroth
The driving experience and handling is waaaaay better than my wife's Mercedes.
I can’t really say from a passenger perspective.

------
andrewtbham
This actually a price increase because of a loss of the federal tax credit...
the title is bogus and should be changed imho.

"Moving beyond the success of Q4, we are taking steps to partially absorb the
reduction of the federal EV tax credit (which, as of January 1st, dropped from
$7,500 to $3,750). Starting today, we are reducing the price of Model S, Model
X and Model 3 vehicles in the U.S. by $2,000."

[http://ir.tesla.com/news-releases/news-release-
details/tesla...](http://ir.tesla.com/news-releases/news-release-
details/tesla-q4-2018-vehicle-production-deliveries-also-announcing-2000)

Edit: the mods changed the title. thank you!

~~~
izacus
In what way is it a price increase, why did Tesla count tax credits when
advertising price in the first place? Isn't that dishonest, since the cars
price tag was higher and the government gave them money?

~~~
jpollock
The purchaser factors the tax credit in, so the removal of the credit will
have the same effect as an increase in price.

The salesman will _definitely_ make the purchaser aware of the credit, in the
same way that a mortgage broker makes you aware of the tax benefit on mortgage
interest (in the US).

That doesn't make them dishonest.

~~~
FireBeyond
They also tried to include "cost of gas savings" in some of their "line item"
website pricing.

~~~
waisbrot
TCO seems like an entirely reasonable figure to advertise. It's a hard number
to trust, but I'm not sure how that gets fixed except by trying to regulate
advertisement in general.

~~~
FireBeyond
I think putting a number of "$x" on a page, and only when you click into the
details, seeing "Estimated fuel cost savings: $y" as one of the line items
there is totally misleading.

TCO is a reasonable figure to discuss, especially when changing paradigms.
It's not, however, reasonable, to include in a line item for vehicle cost that
is not in any possible practical way to attain (at least the fed credits are
more concrete) - imagine you go into a Tesla dealership and it says "$35,000"
and you say "Sold!", and they reply "Great, that'll be $38,000".

"But...?" "Oh, that price was only to give you a TCO after you factor in three
years of gas you're not buying now! It's not an actual discount or credit".

------
gok
Seems like the bigger issue is that they once again missed their delivery
targets, although only by a few percent this time.

~~~
mks_cam
Is not the historical lesson thus far maybe that the market does not care
about missing them as long as the general growth story is still there?

------
hinkley
The second line in the article:

> Prices cut by $2,000 to partially offset shrinking tax credit.

At that cost range I don’t know if I could ever know my customer well enough
that I would be confident that a 3% price break would get more sales but what
do I know. Also, this feels more like PR.

What fraction of the cost of a Tesla is the battery pack? Weren’t those
supposed to be getting cheaper due to all of the automation?

When your costs decline you lower your prices, add more features or increase
your margins.

~~~
mikestew
_At that cost range I don’t know if I could ever know my customer well enough
that I would be confident that a 3% price break would get more sales but what
do I know._

Would I have purchased a Nissan Leaf eight years ago had it not been for the
$7500 federal tax credit? Damned right, I would have. But since we're buying
one anyway, I'm not turning down free money. My point is, I wonder if there
ought to be a moratorium on tax credits for the first two years. The early
adopters are going to buy one regardless, save the tax credits for those that
are on the fence two years down the road. Of course the gaping hole in this
plan is something, something Osborne Computers (in two years, it might not be
better, but it'll be cheaper).

~~~
cjhopman
The tax credits aren't for the consumer, they're for the manufacturer.

> The early adopters are going to buy one regardless,

Some of them will. The idea that there's isn't a demand curve for early
adopters is insane.

------
adircasp
just look at google trends, Model S/3/X still trending higher while I-pace pal
plateaued

------
adamqureshi
Tesla is the ONLY player with a direct to consumer model. They are a native EV
start up. All others right now are legacy car makers (non native) using the
old franchise distribution model. Tesla OS is its bread and butter. They built
the vehicle from scratch for EV. They effectively "PULLED" ever other car
maker into the MIX. The legacy car makers had no other choice but to jump into
the fray and take their chances.

~~~
anthonybsd
>Tesla is the ONLY player with a direct to consumer model

You are saying it like it's necessarily a good thing.

~~~
adamqureshi
A fundamental principle of competition is that consumers – not regulation –
should determine what they buy and how they buy it. Consumers may benefit from
the ability to buy cars directly from manufacturers – whether they are
shopping for luxury cars or economy vehicles. The same competition principles
should apply in either case. States should allow consumers to choose not only
the cars they buy, but also how they buy them.

~~~
anthonybsd
First watch this:
[https://www.youtube.com/watch?v=H8ro6kpKlw0](https://www.youtube.com/watch?v=H8ro6kpKlw0)

Choice quote from the discussion on reddit:
[https://www.reddit.com/r/RealTesla/comments/abkk12/what_did_...](https://www.reddit.com/r/RealTesla/comments/abkk12/what_did_you_do_with_my_tesla_elon/ed11wgz/)

"The takeaway from this video, if no one has gotten the message by now, is
that Tesla only cares about the sale of new Teslas, which it doesn't do very
well. It does not care about selling used Tesla, servicing existing customers,
or supplying parts to customers.

Tesla made a shittier dealership and calls it innovation. It's hilarious that
it is simultaneously waging war on the dealership laws while doing the
dealership thing so poorly that it's like exhibit A in why dealership laws
maybe aren't that bad. If Tesla were this bad at being a car company pre-
dealership laws it would have been the reason they came into being in the
first place."

~~~
matchbok
Eh. I struggle to see what dealerships actually do at all. They don't make the
car...why are they the only ones allowed to sell it?

Also, that quote is just wrong. They didn't make a "shittier dealership". They
don't have dealerships at all.

~~~
anthonybsd
>Also, that quote is just wrong. They didn't make a "shittier dealership".
They don't have dealerships at all.

Where do you go when your Tesla breaks down? Yearly check-ups? Used Tesla
sales? The fact that they are a direct representative of Tesla themselves
changes very little for you as the consumer.

------
qroshan
Tesla is definitely hitting the demand ceiling. It's a good thing Musk isn't
producing 10000 M3 per week. The current rate of ~4500 per week is enough to
meet demand.

In fact, expect continuous price drops from Tesla as it struggles to drum up
enthusiasm

~~~
MBCook
I’m not pro-Tesla, I think they’re horribly mismanaged, but let’s be real.

The Model 3 is selling well, and ONLY in the US. Even if they hit peak demand
they can just start selling to Europe and China (planned for later this year)
and they’ll have plenty of new customers.

~~~
nihonde
China has a higher barrier to entry than any other market, esp. in the EV
market, which is going to favor the homegrown options. The current trade war
isn’t going to help Tesla. My prediction is that Tesla remains a novelty brand
in Asia. Japan is similarly capable of taking care of its own market, and I
wouldn’t want to take on Toyota when it comes to exports to South Asia,
Africa, etc.

~~~
xedeon
> China has a higher barrier to entry than any other market, esp. in the EV
> market, which is going to favor the homegrown options.

Tesla is already positioned ahead of other auto makers with the construction
of the Gigafactory 3 along with a deal with the Shanghai government to build a
wholly-owned local factory (a notable exception).

~~~
nihonde
Not ahead of Chinese automakers. And Tesla is paying for the privilege of that
foothold. Meanwhile, Toyota is firing up battery supply in Thailand. Not to
mention that Panasonic and Chinese suppliers are the real source of Tesla
batteries.

~~~
xedeon
>Not ahead of Chinese automakers. And Tesla is paying for the privilege of
that foothold.

The context was the barrier to entry in China. That was already implied? No
other foreign auto maker was able to cut the same deal as Tesla in China.

>Toyota is firing up battery supply in Thailand.

Toyota/Lexus have zero plans for electrification in the near future. In fact,
they have instead doubled down on Hydrogen with the Mirai.

[http://www.thedrive.com/news/22429/toyota-to-double-down-
on-...](http://www.thedrive.com/news/22429/toyota-to-double-down-on-hydrogen-
fuel-cell-vehicles-as-industry-goes-electric)

[https://corporatenews.pressroom.toyota.com/releases/toyota+d...](https://corporatenews.pressroom.toyota.com/releases/toyota+doubles+down+zero+emissions+heavy+duty+trucks.htm)

>Not to mention that Panasonic and Chinese suppliers are the real source of
Tesla batteries.

Not really sure what point you're trying to make here. Tesla is probably the
only automaker (outside of china) that builds their own cells and battery
packs in-house.

~~~
nihonde
You’re wrong about Toyota. They’re just not in the habit of rushing to market
with empty promises. [https://www.toyota-
global.com/innovation/environmental_techn...](https://www.toyota-
global.com/innovation/environmental_technology/electric_vehicle/)

The point about Panasonic is pretty self-evident: Tesla isn’t going to win
Asian markets if its upstream suppliers are all in Asia. They’re effectively a
middleman and they’re paying for the right to be in-country. It’s not hard to
see them being squeezed out by local firms.

------
pkaye
Another thing is the pre 2017 car-pool stickers for electric cars are expiring
in the bay area. The newer stickers have income caps of $150k (single filing)
or $300k (joint filing). I wonder what the impact will be on Tesla? The first
change helps them but the second hurts them.

~~~
tw04
Did they give any justification for the change? It makes absolutely no sense
to me why you'd put an income cap on that - don't you wan to encourage
EVERYONE to burn less fossil fuels, REGARDLESS of income?

~~~
drenvuk
What the GP posted is a bit misleading, you either get the rebate or the
carpool lane stickers if you're over the cap but not both. It does suck but I
think it's for the best. The hov lane in norcal is becoming relatively crowded
lately since electric cars were a rarity before but not so much now.

~~~
rconti
They've been crowded _at least_ since the yellow sticker 'Prius' program of,
what, 2007?

~~~
drenvuk
I wouldn't know. I'm part of the new blood that came to the bay area after
that to ruin everything. :)

~~~
rconti
You got your stories wrong, the new blood is ruining Portland and Seattle,
where they hate outsiders (as long as they carefully avoid having a racial
component to this complaint).

