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Ask HN: Why doesn't Tesla raise prices?
Tesla has a hard time producing enough units to fulfill demand.
Tesla has a money problem.
Why not raise their prices?
Say they would raise the average price of Model 3 from $55k to $60k. How low would demand go? 75% of what it is now? 50%? And how would it impact the bottom line? I would assume it would look great. A probably super thin margin would turn into a solid 10% margin.
What am I missing?
- bufferoverflow 8y agoMusk's goal is to make affordable electric cars that would become popular enough to make a dent in the carbon emissions. Money to him is just a tool.
- compcoffee 8y ago>Money to him is just a tool. Does any adult human actually believe this? The guy has a personal carbon footprint bigger than 99.99999% of people on earth. He just negotiated the biggest pay package ever, tied to market cap. He's being investigated by the SEC for stock manipulation. But it's all because he loves the environment. The mystique behind this guy is unfathomable. Tesla doesn't raise prices because it would harm already waning demand for their vehicles. The fact is, very few $60k+ sedans are sold around the globe, and it's a competitive space. At that price range, people have high expectations for luxury and build quality. The Model 3 gets points for being technologically advanced, but many buyers in this price range aren't interested in being beta-testers.
- bufferoverflow 8y agoHis personal carbon footprint doesn't matter, because he is actively working on reducing the emissions on a quite large scale. Model 3 was supposed to be cheaper, $35K, but they are concentrating on assembling the expensive versions first, which makes sense. They do need money to build more production lines. Unless a comparable competitor shows up, he will have customers for many years to come.
- M_Bakhtiari 8y agoBut the bottleneck to Teslas becoming popular enough to make a dent in the carbon emissions (however popular that is) is not the price, it's the production rate. My guess is that, as with so many Silicon Valley ventures, their value is mainly determined by the amount of hype, ie. number of people who want Teslas, regardless of whether they will ever be able to produce enough to meet that demand. If they go for break-even between supply and demand they'll probably make more money, but they'll be worthless. It's perverse, but I think that's the reality they'll be facing.
- anoncoward111 8y ago>What am I missing? Demand is already falling at 35k levels according to whatever articles you read out there
- TekMol 8y ago'falling' without actual numbers could mean anything.
- anoncoward111 8y agoI would have to go searching for the news articles that trickle out over the months but people are alleging that customers are canceling their orders and the company is trying to dump inventory elsewhere. It's really hard to quantify this stuff. We only have audited numbers about units built not units sold, currently.
- dragonwriter 8y agoThey are trying to raise the average price, e.g., by making two colors that were base price options into premium add-ons. They don't want to overtly raise the base price because of the optics.