Well, BYD sells BEV’s with less than 250 mile range. I think they’re a serious EV automaker - they’re the largest EV automaker in the world, and the second-largest in pure BEV’s.
Now, I think we’re kind of on the same page that a <200 mile range EV isn’t “equivalent” to an ICE car. Which is the point I was making to btresist. Yes, there are BEV SUV’s that are very close in price to ICE SUV’s - but they have <200 miles of range. So they’re not really “equivalent” to their ICE counterparts, which makes them poor candidates for arguing that we’re close to price parity.
Tesla pegs its selling price to demand, not cost of production.
It has in China. There seem to be only two companies capable of mass producing BEVs profitably, Tesla and BYD. They are therefore the only two companies with enough pricing flexibility to lower sales price in line with battery cost reductions. Tesla doesn’t because demand for their cars are high enough that they don’t need to.
BYD on the other hand is going all out to destroy its Chinese competition. Their new Seagull starts at a bit over $11,400 USD with up to 250 mile range. That’s a consequence of better and cheaper batteries, along with BYD using Tesla’s structural battery design strategy. You aren’t seeing the impact of cheaper batteries because BYD lacks a presence in Europe and the US. In any case, this gives an indication of the BEV price point possible with decent performance.
In addition, battery prices did not decline over the last two pandemic years. Covid was a major disruptor, especially in China. We’ll see what happens when supply chains return to normal.
Don’t think you are fully thinking this true, especially when the Tesla semi is also doing 450 mile runs across the Donner pass.
According to Amanda DeVoe, Pepsi’s transformation and strategy director, the company has found that it is most advantageous to run the trucks for around 12 hours a day on routes that are mostly under 100 miles.
However, three of the semis are dedicated to “long-haul routes” of 250 to 450 miles. Using Tesla Megachargers along the routes, the trucks can reportedly go from 5% charged to 95% charged in only 20 to 30 minutes… “Going across Donner Pass and back from [Sacramento] to Nevada, we’re able to, on the trip back, actually zero out, in terms of state of charge improving due to regenerative braking,” Dejan Antunović, Pepsi’s electrification program manager, said in the video. “It extends range for us in a way that is invaluable.” PepsiCo reveals truth about Tesla’s semitruck fleet after subjecting them to ‘hellacious’ and dangerous delivery routes.
Given that electrics with degenerative breaking have their biggest advantage over diesel in stop/go traffic, it makes economic sense to focus the electric semis on local city runs while allowing your diesel trucks optimal fuel efficiency on the interstate.
Then why expect that falling battery prices will lead to falling BEV prices? Everyone pegs their selling price to demand, not cost of production. It’s the mechanism of market competition that drives selling prices down to cost of production (plus a reasonable economic profit) - not the generosity of manufacturers. If there isn’t a competitive environment in selling BEV’s, then there’s no reason to expect that anyone’s going to come to market with a $25K BEV within five years (again, looking at the U.S. market for pricing). If Tesla really does price the way you describe, if Tesla comes up with a compact sedan they can make for $20K, they are more likely to sell it closer to $30K until they either hit: i) a volume wall; or ii) a competitor that undercuts them.
Because it allows Tesla to enter the lower price car market, just like falling battery prices are allowing BYD to try to dominate the Chinese entry level car market.
Not the OEMs with their BEVs, at least not sustainably. Can’t blame them if they are losing a ton of money on each sale. COGs typically represents the floor for sales price. Going below that at volume tends to be bad for business.
They certainly could focus on margin. Or they could decide to go all out to grab market share.
Either way I am sure you will find a pessimistic narrative for Tesla.
I should have added “in the USA”. China is a different market with different needs and different desires by the consumers (they are apparently much more price sensitive than US buyers). If you look at the top 10 best selling cars in China, probably only one or two of them are even sold in the USA in the first place. When it comes to vehicles, what sells in China is generally quite different than what sells in the USA.
Only at first. Once the price based on demand goes lower than the cost of production, they often choose to not participate in that market segment anymore. That’s why the two legacy US automakers (GM and Ford) pretty much stopped making small to medium size sedans. That may also be why they are slowing their transition to EV (well, that, plus recent UAW influence).
It all depends on what the goals are of the manufacturer. If they want to maximize profit, they will price it at what the market will bear. But if one of their goals is to proliferate EVs, especially their own models, as quickly as possible, then perhaps they will price it lower than market clearing price and customers end up on long waiting lists (and at least psychologically “locked in” as a future customer) as the manufacturer ramps up and meets the demand. And we HAVE seen this before with most of Tesla’s models, the 3 had a heck of a wait in 2019/20/21 and they finally caught up in mid to late 2022. The Y had quite a waiting list in 2021 and 2022, and they caught up in 2023. And now the CT has a waiting list, though that is obviously because none have been delivered yet, but it appears that the CT waiting list will be with us for a few years as with the previous models. So the same thing could potentially happen with the “model 2” (or whatever they decide to call it) if they price it at $25k instead of at $30k.
Again, though - why would they want to do that, if they’re pegging their sales price to demand? They don’t need to go down to $25K to enter a lower price car market than they’re currently serving. $30K would be a significant price reduction compared to the Model 3. Until they can’t sell all they can make of the Model 2, which won’t be for a while after they start production, which itself is not likely to happen for a few years…why would they price it that low?
It’s not a pessimistic narrative for Tesla. It could be very good for Tesla. I’m skeptical that BEV’s will be priced that cheaply (again, for the American market and European markets) by anyone in the near term. As you point out, Tesla won’t price that cheaply unless they’re forced to - so unless the incumbents or the Chinese manufacturers start offering $25K BEV’s at volume, there won’t be any forcing.
So if Tesla makes a breakthrough in production that lets them make a BEV for <$20K (again, I’m skeptical of that, but let’s assume), that’s not likely to result in a BEV with an MSRP of $25K if Telsa prices to demand rather than cost. Which could be very profitable for Tesla, at least for a while. As we’ve discussed at length, Tesla had enormous profit margins for a while until the Chinese and European automakers revved up volume enough to force them to cut prices to clear production. If Tesla is first to a <$20K production cost car, they’ll have another opportunity to post those kinds of margins in that segment.
True. Although the article btresist linked to was for South Africa, not China - and BYD is going to be entering the European market in volume relatively soon. Again, my point was only that we haven’t reached BEV-ICE price parity yet, and a short-range BYD import being offered in South Africa doesn’t really change that.
Perhaps - though note that Tesla was perfectly willing to raise prices significantly when there were supply chain disruptions during most of that 2021-2022 Model Y “wait list” era. They didn’t really act like the value of psychological “lock in” was worth leaving money on the table, and I’d be very surprised if they did that for the Model 2 (or whatever they call it).
While this is true, if you look at total cost of ownership, and include available subsidies, we are quite a bit closer to parity than most people think. The real turning point happens when you approach parity WITHOUT subsidies.
The goal of Tesla as run by Musk is to replace ICEs with BEVs. The strategy is to use higher priced, high performance models to fund development of lower priced models that can progressively reach larger markets. Tesla has been following this strategy, with the Models S/X funding the development of the Models 3/Y, which in turn is funding the development of the Model 2. The Model 2 is the end game.
The priority for Tesla up to now is to generate the cash flow needed for car development and, most importantly, the development/establishment of production facilities superior to the competition. They are still in this process. With the Model 2 I think the priority will shift to market share and the large-scale replacement of ICEs. Price wars!
The Model 3 and especially the Model Y are the precursors to the “Great Disruption”. The Cybertruck and Model 2 will be the “Great Disruption”, with or without FSD.
It is perhaps noteworthy that BYD may have a similar perspective as Tesla. Li is BYD’s executive VP.
Yes. But to echo a point from earlier in the thread, higher interest rates have a negative effect on the total cost of ownership. With BEV’s (like most investments in efficiency), you have a higher upfront capital cost that is “paid back” with savings in the future. Higher interest rates make that less attractive.
Except - again - as long as they’re supply constrained, lowering the price doesn’t increase the rate at which ICE’s are replaced. It doesn’t lead to rising market share. That’s why you (correctly) noted that Tesla prices to demand, not production cost.
CT seems unlikely to be relevant to the “Great Disruption,” based on Musk’s comments in the last call. At least in his view, they got so innovative in the design that production is not likely to be especially efficient or quick. They “dug their own grave,” in his words.
As for the Model 2 - who knows? They haven’t even described what they think it will be, in any great detail, let alone reveal a concept or prototype. If it’s a compact sedan that’s been value-engineered down from the Model 3 (smaller vehicle, smaller battery, and removing all those “extras” like steering stalks and whatnot), they might certainly sell a lot…but the compact sedan segment of the global marketplace just isn’t that big any more. Is that a “Great Disruption,” when the overwhelming majority of cars aren’t compact sedans?
If Tesla is still supply constrained at the levels they are planning to build the Model 2, then the Great Disruption will be definitely in progress. The simpler design of the Model 2 is intended to be easier and cheaper to produce than previous models. If in 2026 Tesla is producing 2M Model 2s per year and are still so supply constrained due to high demand that they have to sell them at $30K, I should double up on my investment.
One reason I think the Model 2 will be built in Mexico is that the country has a lot of trade agreements, including belonging to the TPP. I suspect the Model 2 will be the primary Tesla sold in South America, southeastern Asia, and India. Cracking many of those markets in volume will require a less expensive car. In this regard, note that Tesla is now hiring sales folks in Chile. Tesla Is Hiring In Chile! The EV Leader Is Finally Arriving In South America - CleanTechnica
Even with a delayed ramp I think the cybertruck has already been a big disrupter in making electric pickups acceptable. The OEMs lose money on every EV they sell, including electric pickups. Their financial self-interest is to delay selling EVs for as long as they can and sell the minimum needed to raise average MPG to government standards. Tesla has disrupted a lot of those plans to the tune of billions of dollars in OEM investments.
Why believe the Model 2 will be sedan? Probably be a hatchback, like the Corolla, which has been fairly successful. It will probably have unibody gigacasting and so will have a different design from the current Model 3/Y.
I think the production difficulty Tesla faces is primarily in the battery supply. Tesla will have to figure out the proper balance of car vs battery gigafactories and how much of the battery materials supply chain they are going to have to vertically integrate.
For example, India is a huge market for BEVs as ICEs in the major cities are causing major air pollution problems. The problem is a deficient electricity infrastructure. It may make more sense for Tesla to initially emphasize battery production in India to build out a charging network based on solar and storage then start building the Tesla Indian BEV.
Further sign of the coming Great Disruption is the recent deal with BP to put Tesla superchargers on many BP sites. Once people start seeing charging stations at the local Amoco, range anxiety will start to dissipate.
If Tesla is producing 2M Model 2’s per year in 2026, I’ll eat my hat. They haven’t even unveiled the car yet. They haven’t even pulled permits for the Mexico plant. Even if they moved with all deliberate speed, they’re still going to be early in the ramp for the Model 2 in 2026. Heck, they’re not building 2M Model Y’s per year, three and a half years after production started while they’re building it in four different locations.
Sure. I really didn’t intend to distinguish between sedans and hatchbacks, just (unclearly) using the term “sedan” as shorthand for sedans, hatchbacks, and wagons. Basically the “not an SUV/light truck” segment of the passenger vehicle market - traditional “cars.” I sometimes see that part of the market referred to as “sedans” in contract to SUV’s - but obviously that’s not precise.
TBH, I would expect that the “Model 2” would come in both a hatchback and sedan version - if not initially, then certainly before they start getting anywhere near the 2M per year range. Again, it just comes down to satisfying customer preferences with a choice of model types.
Again, Tesla didn’t produce 2 million cars across all its models over four factories this year. They’re not going to be producing 2 million additional units of a model that doesn’t exist yet, from a new factory that doesn’t exist yet, in 2026.
In India (and likely elsewhere) there is a network for battery swaps rather than recharge the battery in the car. That would promote a smaller battery (shorter range) but also make it less expensive to build and operate the vehicle (no charging hardware/wiring in the car).
I bet you would have said the same thing to a claim in 2020 that the Model Y would be the best selling car in the world in 2023. Heck, probably would have said the same thing to the claim that any vehicle priced at the luxury level would compete in sales with the likes of Camry or Corolla.
Back in 2016, Musk predicted that the Model Y would eventually attract demand of about a million/year. The run rate projected by Tesla for the Model 2 is 4M/year.
Tesla is a bit like the old Apple. It doesn’t just enter markets, it redefines them. The old metrics don’t apply. That is the nature of disruption.
That experiment is being tried in China with the likes of NIO. It doesn’t seem to be catching on, especially with new battery technologies. CATL announced it will be mass producing batteries that can add 400km of charge in 10 min, while BYD and Tesla are demonstrating that structural batteries allow for a lighter and cheaper car.
Nope. Because the Model Y existed in 2020. Giga Shanghai was already open. They were scheduled to (and began) actual construction on Berlin in the first months of 2020. And the CEO hadn’t just finished an earnings call indicating that the company wouldn’t be going “full tilt” on new factories.
I certainly would have been skeptical (and wrong) about whether demand would support 1.2 million Model Y’s by 2023. But the car existed, one of the factories to build that increased production volume was already done, and they already had begun the construction process on the other. None of those things is true of the Model 2. They’re just not in position to ramp to 2 million units that quickly. The car doesn’t exist yet. The Monterey plant hasn’t even started permitting.
Apple doesn’t build its products itself. So if Apple comes up with a unique and innovative product (like, say, an iPhone), it can scale from 1.4 million units in 2007 to 72 million units in 2011 without having to build its own factories. Tesla can’t do that.
Whether “old metrics” still apply, Tesla can’t sell two million Model 2’s unless it builds the facilities to build two million Model 2’s. And until the production ramps for all those facilities have run long enough to get to that level of production. That takes time. Whether they’re “disrupting” a market or not.
