Elon Musk has some good news, and he has some bad news, plus some news that you may find good or bad, depending on your perspective. One thing’s for sure, there’s a lot of news – Tesla has announced a wide-ranging package of changes to its lineup, pricing and sales strategy.
The big piece of good news is that the long-awaited $35,000 Model 3 is finally here. “The standard Model 3, with 220 miles of range, a top speed of 130 mph and 0-60 mph acceleration of 5.6 seconds is now available at $35,000!” says Tesla. “Although lower in cost, it is built to achieve the same perfect 5-star safety rating as the longer-ranged version.”
Tesla is also introducing “the Model 3 Standard Range Plus, which offers 240 miles of range, a top speed of 140 mph, 0-60 mph acceleration of just 5.3 seconds and most premium interior features at $37,000 before incentives. For 6% more money, you get 9% more range, more power, and an upgraded interior.”
The other big chunk of news is that Tesla will be closing most of its stores (or “galleries” or whatever we’re allowed to call them in states that don’t allow the company’s direct-to-consumer sales model). This seems like a shame, considering the political struggle Tesla went through to open some of these…er…facilities. However, the company is presenting the move as a necessary measure to allow it “to achieve these prices while remaining financially sustainable.”
“Shifting all sales online, combined with other ongoing cost efficiencies, will enable us to lower all vehicle prices by about 6% on average, allowing us to achieve the $35,000 Model 3 price point earlier than we expected,” says Tesla. “Over the next few months, we will be winding down many of our stores, with a small number of stores in high-traffic locations remaining as galleries, showcases and Tesla information centers. The important thing for customers in the United States to understand is that, with online sales, anyone in any state can quickly and easily buy a Tesla.”
More good news: “At the same time, we will be increasing our investment in the Tesla service system, with the goal of same-day, if not same-hour service, and with most service done by us coming to you, rather than you coming to us. Moreover, we guarantee service availability anywhere in any country in which we operate.”
And yet more: “We’re implementing a number of firmware upgrades for both new and existing customers. These upgrades will increase the range of the Long Range Rear-Wheel Drive Model 3 to 325 miles, increase the top speed of Model 3 Performance to 162 mph, and add an average of approximately 5% peak power to all Model 3 vehicles.”
And now for the bad news: Tesla is having to take back its promise of ongoing profitability: “Given that there is a lot happening in Q1, and we are taking a lot of one time charges, there are a lot of challenges getting cars to China and Europe, we do not expect to be profitable in Q1 [of 2019]. We do think that profitability in Q2 is likely.”
So, on balance, is this bundle of news good or bad? It can, and will, be spun both ways. The stock market is sure to focus on the broken profitability promise – TSLA shares slipped in after-hours trading after the announcement. However, it’s worth pointing out that, after years of big losses, for Tesla to post a small loss in Q1 represents huge progress.
Also bad news: as Electrek pointed out, most of the “inefficiencies” Tesla will be trimming by closing stores are jobs. The company isn’t saying how many people are facing layoffs.
On the other hand, there’s an awful lot to like in this package of incremental improvements. One enterprising Reddit contributor has endeavored to list them all. In general, Tesla’s vehicles will be a little cheaper, a little faster and a little better. However, the really momentous (though not unexpected) news is the crossing of the $35k finish line. Reaching this price point will allow Tesla to reach a much larger market of potential buyers, and with Europe and China opening up, the sky’s the limit for future growth (and long-term profit).
In 2003, a group of far-sighted entrepreneurs set an ambitious objective. After years of struggle, thanks to some brilliant inspiration, a lot of hard work and a tremendous slice of luck, that objective has now been reached.
Source: Tesla, Electrek, Bloomberg