Tesla Model S Price Cut; Model 3 Production News

 

Sunday, April 16 was the last day to order a Tesla Model S 60, the company’s least expensive model (until the Model 3 becomes available). The Model S 60 came with a software limited 75 kWh battery. Owners could upgrade to the full 75 kWh capacity for an extra fee. Originally, the upgrade cost $9,000. Later in 2016, Tesla reduced the price to $7,000. As of this morning, the price has now been slashed to just $2,000, which lowers the price of the new entry level Model S 75 to just $69,500 —  a mere $1,500 above the price of the now discontinued Model S 60.

Tesla Model S Price

The battery price cut has led to speculation that Tesla is seeing the cost of its batteries decline toward the magic “$100 per kWh” level, thanks to the ramp up of production at the Gigafactory in Nevada. Ben Kallo, an equity analyst at RW Baird, tells Green Tech Media that Tesla “could reach its <$100 per kilowatt-hour target in the intermediate term as Gigafactory production ramps. Additionally, we believe TSLA is ahead of expectations on reducing battery costs, and continues to have a significant lead on competing EVs.”

Tesla is jockeying its options and prices as it seeks to make space in its lineup for the Model 3. The latest news on that front comes from our friends at Cleantechnica who found a post quoting an unnamed source “who has been quite reliable so far” on the Tesla Motors Club forum, The source claims that Tesla is moving away from taking custom orders for every car it builds and moving toward building large groups of cars with identical option packages.

This is how most car makers operate today. 20 years ago, customers could order a car with power windows but without power door locks but they can’t do that anymore. Today, many popular options are bundled together. If you want a sunroof in your Honda Civic, you have to buy the EX package. You can’t get a sunroof in an entry level Civic. Some people complain it’s a gimmick by car companies to sell more high profit accessories. While there may be some truth to that idea, it also allows the companies to cut production costs, which helps keep prices lower.

“What I was told is that Tesla will be moving to more of an inventory sales approach with Model 3,” the source says. “This process has already started with Model S where Tesla is getting more and more incentivized for the owner advisors each quarter to hit their goals and to push more inventory cars that are prebuilt by Tesla.” Apparently, those who don’t want their Model 3 pre-configured by Tesla will have to wait a significant amount of time to get their car built.

Ben Kallo may be right about battery costs coming down because of the Gigafactory, but none of the battery cells for the Model S and Modal X batteries come from Nevada. Or do they?

 

 





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I have been a car nut since the days when Rob Walker and Henry N. Manney, III graced the pages of Road & Track. Today, I use my trusty Miata for TSD rallies and occasional track days at Lime Rock and Watkins Glen. If it moves on wheels, I'm interested in it. Please follow me on Google + and Twitter.
  • J_JamesM

    Alternative hypothesis: the battery costs haven’t come down enough to justify the sharp decline in pricing, but rather Tesla vales the ability to say “starting at around $60,000!” more than they value making a high profit on base models.

    • Steve Hanley

      Marketing is surely part of it. As an aside, if I paid $7,000 to unlock my battery recently, I would probably more than a little annoyed about this.

      • J_JamesM

        I imagine that Tesla owners have grown accustomed to sudden changes.

  • trackdaze

    Two things. Its now got a battery factory pumping out 2170’s faster than an M60.

    & its probably seeing a decline in model S sales with it being long in the tooth, Model X gaining, model 3 coming and others around the corner.

    • Ed

      If the Model S is “long in the tooth”, what does that make a 911?! But, I guess the matter is fully subjective!

    • Ed

      As to the battery costs, when I saw the 2170s marching down the line in the early stages of production startup, I realized that the Tesla folks are on a mission to drive down cost through volume, automation and continuous improvement. I am sticking with my prediction for Tesla’s cell costs:

      https://uploads.disquscdn.com/images/e3c4d1387afe0e95fe678f2319d25b9d4e5a7783004d5e63f3291b25e9169920.jpg

      • J_JamesM

        If only. That would make my dreams of converting my first car to electric that much closer to a reality.

      • James Rowland

        That’s lower than current material costs, so no.

        • Ed

          Oh ye of little faith!
          I know it is not an exact comparison, but I am one of many who who never have believed how rapidly solar panels would drop in cost as a result of volume and competition. IF it happens in batteries, it is the ultimate game-chafer for personal transportation.
          Here’s hoping.

          • James Rowland

            Have PV cells ever dropped below raw material cost?

          • Ed

            No, prices for everything tumbled as volume and competition ramped up..