35,000 dollar baby
The 'affordable' $35,000 Model 3 that Elon has been promising finally arrives but it comes at a cost...
With the Polestar 2 unveiling it comes as little surprise that Tesla has reacted with a price drop to that magic $35K price point for their baby Tesla. Even though the Volvo backed start up won't ship a car until 2020, and its launch edition will cost €59,900 (about £50,000) for at least the first 12 months. It's perhaps got Elon Musk concerned that people will move their $1,000 deposits elsewhere...
So Elon has shuffled chess pieces around the board to reduce the BOM (bill of materials) to achieve the $35,000 price tag (before tax incentives). But in order for us to enjoy this cheaper vehicle, some sacrifices have had to be made, and that's at the cost of closing down the majority of the 80 or so US showrooms of the 200 around the globe with the exception of 'high traffic' locations. There's a human cost too as that means anything upwards of 500 to 1,000 retail job losses. With the 7% 'low-performing' workforce he dispensed with earlier in the year, it does make you wonder whether Tesla operates under the 'sausage factory' analogy, i.e. everybody loves to eat sausages, but you don't necessarily want to know how they are made.
Is it a step too far?
Musk says these changes to make Tesla a pure online car company would help him claw back 6% of margin. But is this a step too far? Sure Amazon did this to books, consumer electronics and groceries, but we can still go in to physical shops to preview a book or try out a gadget before taking the least cost route. A car is a big ticket item to consider ploughing a big chunk of your savings or pay check into, sight unseen or without testing it.
Musk counters this speed bump in the retail road by also offering a 7 day, 1000 mile money back guarantee. But this (like their original referral scheme) could be rife for abuse with unwanted and rejected cars having to be sold on as used. How does that fit in to the Tesla master plan of profitable mass market electric vehicles one wonders?
Will Europe benefit?
The Model 3 has been on sale for nearly three years in North America now. EU shipments have finally begun, but these are different specced vehicles. High-end launch editions with AWD and long range batteries with a price tag starting at around €55,000.
If Tesla is going online, there's no strong reason that we on the other side of the Atlantic couldn't immediately benefit from lower prices, especially as the steering wheel is on the same side as the US (with the exception of the UK). But it seems unlikely that Tesla will pass on these cost reductions immediately and will probably argue that EU homologation and different charging plugs, an alternate source of Unicorn tears(!) mean that at launch at least, European-spec cars will probably be nowhere near €35,000 let alone £35,000 until the end of the year or beginning of 2020. So for now, buying a cheap baby Tesla isn't as clear cut as you might think.