The tax credit phase out is a big part of the pricing analysis. It’s absolutely expected for ASP to go down dollar for dollar due to reduction of the tax credit, because the economic effect is that the credit is paid to Tesla.
Sticking with launch prices would have effectively meant rising the price $7,500 over the last year. That would imply that they massively underpriced their initial sales.
Aside from the credit effect, margins are also lower on the lower trims, and lower on Model 3 than S/X, so total blended automotive margin dropped from 25.8 to 18.9% Q3 2018 through Q2 2019 but has recovered to 22.8% in Q3 2019.
This is mostly due to production efficiency, but also worth nothing that they did recently raise the US price by $1,000.
I agree with everything you've written, but none of it addresses my point.
It is not accurate to say Tesla is production constrained, because if they were, they'd be focusing on higher end trims and charging more, and going from one spectacular quarter to another.
It’s a simple fact that they delivered more units than they produced in Q3 2019.
They can be production constrained across their full range of Model 3 ASPs, while it’s also true that they aren’t selling 100% fully loaded M3 Performance with FSDs each quarter.
The thing you’re missing is the SAM is bigger when you have lower ASP options. So you grow your SAM and then become production constrained. Yes, you could shrink the SAM to no longer be production constrained, but since it’s profitable to sell at all price levels that would be a big mistake.
Raising the price by $1,000 and a 10 week lead time is strong evidence of being production limited.
Sticking with launch prices would have effectively meant rising the price $7,500 over the last year. That would imply that they massively underpriced their initial sales.
Aside from the credit effect, margins are also lower on the lower trims, and lower on Model 3 than S/X, so total blended automotive margin dropped from 25.8 to 18.9% Q3 2018 through Q2 2019 but has recovered to 22.8% in Q3 2019.
This is mostly due to production efficiency, but also worth nothing that they did recently raise the US price by $1,000.