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When your capacity is limited, selling higher-end models with higher margin is the completely obvious choice to maximize revenue and profit. "Have a terrible quarter" is far worse than "get roasted" by random people on HN.

I agreee that they are bound to upset either investors or consumers but Elon often promises the moon for both and I think that is what gets him in trouble most often. Would there be record reservations if the Model 3 was advertised as 50k base?

No but then they would be lying because base is 35k.

They could win if they could ramp up production to hit their touted targets, and sell both models.

This will happen in Q3 - they want to get the maximum out of the "last quarter" of federal tax credits.