HAS MUSK BEEN HONEST WITH HIS CUSTOMERS ON PRICE

HAS MUSK BEEN HONEST WITH HIS CUSTOMERS ON PRICE?

Elon Musk, in the mass market reveal of his Model 3, told his adoring fans that at $35,000 dollars, before incentives, the Model 3 is the best car period.

I know what that means when I hear that. I should not need any upgrades to believe that the Model 3 is indeed  better than any other comparable car, of which their dozens, for that price. Maybe others have a different opinion.

None seems to doubt fantasy boy Musk at his games for creating a product that is desired. The question is whether he can create a product that is desired without subsidies infinite outside investor capital. The Model S and X are $100,000 MSRP priced vehicles. Musk has to dump them at much lower prices from time to time, but that is what they command generally.

It is pure hubris to think that the Model 3 is the best car possible while at the same time not killing his higher end margin cars. Or, that he’s been able to drop the cost of labor his Model S by 65% and still be able to make a net profit.

When will the majority of buyers figure out that the Model 3 is then the $50,000 car?

In other words, Tesla’s livelihood depends on the perception of buyers for its brand. That it has them truly well and truly hypnotized. That they can be disengaged from the reality that a battery powered car, priced higher up front than a normal or more sensible hybrid car, not to mention ride sharing, as virtually the only app getting increased download is Uber. That the consumer will ignore the launch and increasing buzz of of real live tests of pilot less cars this year in places such as Boston, with many other cities racing to get the benefits of autonomous driving vehicles rolled out in their jurisdiction as quickly as possible.

The configurator of options on Musk website will reveal the real price to his customers. More-ever, once the subsidy run is up, at $50,000 the demand will plummet. Musk has already gotten his best aspirational customers. The ones most inelastic to price so as long as the product delivers. Furthermore, those who have Model S’s on lease will now have decisions to make when their term comes up. Expect a glut Model S owners dumping their cars to get the next sexy thing from Tesla at an even lower price. Model S demand, which has already been suspect, should taper off if the Model 3 is the best Tesla car. Indeed, Musk as already hinted on his call that consumers might be having difficulties believing that the Model 3 isn’t the replacement for the Model S. I wonder why that is?

Of-course there is another elephant in the room that is just not appreciated. The US consumer, the developed market consumer, cannot afford a 50,000 mass market car period, no matter how good it is.

Categories:

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s