This is the trend of every US auto manufacturer though no?
It's not like somebody is making a 25k SUV; the average price for a new car is like 40+k. Why leave 15k on the table?
You can't just replace Musk and Tesla starts selling a 25k car.
It's not like somebody is making a 25k SUV; the average price for a new car is like 40+k. Why leave 15k on the table?
You can't just replace Musk and Tesla starts selling a 25k car.
That said, Musk has brought nothing to the table that someone else couldn't have, he gets far too much credit. He's just a talker. For example, the Cybertruck apparently had some great design ideas before he overrode the design team
If we only look at the future costs to supporting a consumer vehicle over the long term there could be significant savings by avoiding those costs.
No need to overengineer - design for X km not Y years. No need to engineer for fixing some accidents - maybe cheaper to write off vehicle: removes infrastructure costs and reduces parts inventory. No need to support vehicle after Y years - reduce long term maintenance. Design for fleet refreshes every Y years. Designing vehicle to be written off on accounts (depreciate - no resale): paper gains matter hugely to corporations. Optionality... If robotic hardware is improving rapidly then may be cheaper overall to build new vehicles than upgrade older fleet. Design for recycling. Handover old fleet from US to Mexico - keep using old vehicles in jurisdictions where liability and modern branding is less important.
How many more customers will you get with $25k cars instead of $40k cars?
But to your actual question, the thing that matters is customers * margin. If each car comes with say 15k of overhead then even if you can double your units sold by dropping the price from 40k to 25k you are behind 20% in total profit.
Sure there is: people ain't gonna pay an extra $15k for gits and shiggles. Unless those $40k cars are substantially better than the $25k cars, people are going to try to buy the $25k cars first.
> If each car comes with say 15k of overhead then even if you can double your units sold by dropping the price from 40k to 25k you are behind 20% in total profit.
So aim to sell double and a half, and then you've hit the same profitability as those $40k cars. Every extra sale past that would represent increased profit from the lower price-point.
And this assumes that the extra sales volume (and therefore the production volume to satisfy it) wouldn't translate to reductions in that overhead due to economies of scale. If that doubled volume translates to a 16.67...% reduction in overhead, that'd also be enough to hit the same profitability as those $40k cars. Every extra sale or extra reduction in overhead past that would represent increased profit from the lower price-point.
Can't you?
As a shareholder, I'd welcome a proposal to fire Elon Musk, whether his replacement could produce a 25k car or not. It's clear to me that he has no interest in the success of the brand and will gladly see it fizzle if he has his way.
The payment is literally the last 3 years of profit [1].
[1]: pg 38 -- https://ir.tesla.com/_flysystem/s3/sec/000162828025003063/ts...