Like buying an airline ticket, one of the challenges of buying a new car is timing when to do it to get the best price. Taking advantages of slow-downs in sales can provide negotiating power with the dealer and often yield direct cash rebates or financing deals. Rarely do manufacturers ever actually reduce the sticker price of a vehicle. But Tesla as they like to continuously remind us is different. They claim they don’t do discounts. However, lately they have been cutting base prices including some massive cuts this week that included the launch of the mythical $35,000 Model 3. Of course with the sugar, comes some medicine, in this case, increased pricing on some options including Autopilot features which effectively went up by $3,000.
It’s not unusual for an automaker to shuffle around option packages from one model year to the next. Some options will be dropped while others might be made standard equipment if the cost drops enough and the customer demand is sufficient. A prime example of this advanced driver assistance systems (ADAS) like adaptive cruise control, blindspot monitoring and lane keeping assist. In the past two years we’ve quickly seen once costly ADAS packages become standard equipment on high volume models like the Honda Accord and Civic and the Toyota Camry.
Also commonplace in the industry is the addition of entry level trims that have been decontented to get the price down. In most cases with mainstream models an automaker takes a good, better best approach with the mid-level trims comprising the highest volume of sales, followed by the premium trims and the entry level models typically accounting for about 5 to 10% of sales.
Usually an automaker launches production with the medium and upper trims in order to maximize revenue early on when there is anticipation for the new version. The entry level might follow by a few weeks to a couple of months. In the case of the entry Model 3, because Tesla is likely losing money on most of the cars it sells, it waited more than 18 months after initial deliveries. Until very recently, Tesla CEO Elon Musk had indicated that the entry level Model 3 was still several months away because they would still be losing too much money on it.
While much of the focus in the announcement was on Musks decision to shutter almost its entire retail network in favor of online sales and home deliveries, Tesla did make other moves to pad the bottom line to compensate for the cuts in the sticker prices. One of Tesla’s biggest selling points besides being electric is the Autopilot features and the promise of full self-driving which effectively got significantly more expensive. .
Since the October 2016 launch of Autopilot V2, Tesla has offered a $5,000 enhance autopilot (EAP) function which the company has regularly updated to try to improve its capabilities. Among those was the recent addition of Navigate on Autopilot, autopark and summon. On top of EAP, it offered the $3,000 full self-driving (FSD) option which promised to someday allow fully automated driving capability. Last fall, Tesla dropped FSD from the options list citing customer confusion over a feature that customers paid for but never received.
With the base price cuts, the FSD package is back and enhanced autopilot is gone. In place of EAP is simply Autopilot which is now priced at $3,000. That lower price comes with the loss of those enhancements, Navigate on Autopilot, autopark and summon which are now part of the FSD package. FSD is now priced at $5,000 on top of the autopilot package which is now limited to adaptive cruise control and lane centering, features that come at no additional charge on many cars that cost up to $15,000 less than a Model 3. Those features that cost a not insignificant $5,000 as recently as Thursday morning now cost $3,000 more. The same pricing changes also apply to the Model S and X.
Tesla like any other company has every right to adjust its pricing strategy in order extract the maximum amount of revenue and profits from the products it sells. Every automaker does it. They will package desirable options like navigation with less desirable features to entice you to pay more overall. Similarly, every manufacturer of just about any kind of product will try to make head to head feature and price comparisons as challenging as possible. Tesla is not doing anything wrong here. But customers should be aware that they are trading off a lower entry price for some potentially desirable options that are now more costly so the net price they are paying may actually end up being higher if they aren’t careful.
https://www.forbes.com/sites/samabuelsamid/2019/03/01/as-tesla-slashes-sticker-prices-it-quietly-raises-cost-of-autopilot-features/
2019-03-01T20:26:00+00:00