Tesla car prices seem to fluctuate and surge irregularly, according to CleanTechnica. However, Tom Randall, writing for Bloomberg Hyperdrive (paywall), claims that some intelligent people have researched and believe they have the solution.
He asserts that all you need to know is the typical price paid for a new car in that market segment in the US. That is if you want to forecast the cost of Tesla’s entry-level vehicle at any time. The average difference between the two figures is around $300.
According to a recent analysis of pricing data assembled by Bloomberg, that correlation has remained for the previous five years. To closely match the $34,944 average price of a new car at the time, Elon Musk set the starting price of the Model 3 at $35,000. A Model 3 costs $46,990 today, five years and an inflationary wave later. In America today, a brand-new car costs, on average, $47,692.
Musk’s decision to break from the established company model in the auto industry allowed Tesla to implement its unique floating price strategy, which is unheard of among automakers. First, he refused to support the franchised dealership model, which gave Tesla control over the final price of its vehicles. Recently, Jennifer Sensiba wrote about how Chevy dealers, on the other hand, are adding $5,000 “market adjustment” fees—and some people are paying them! Second, Tesla does not follow the industry standard of establishing prices at the start of each model year and maintaining them until the beginning of the following year. Tesla frequently adjusts its prices, sometimes several times annually.
Every year in August, automakers fix the features and costs of every vehicle they sell. Dealerships may make incentives, levy surcharges, strike deals, or haggle over options and financing, but the MSRP never changes. This car pricing structure was established in the middle of the 1930s to stabilize employment during the lean holiday season. Old habits are hard to break, according to Randall.
From 2012 to 2016, when Tesla started producing the Model S and Model X, it defended many of its midyear price changes by introducing new features or improving performance. A base model’s battery range was extended by 17 miles, or a cheap model was available with some options disabled by a software lock. But everything changed when the Model 3 went into mass production in 2018. Many customers were upset by the price changes that occasionally occurred from week to week, whether or not the model lineup changed.
Tesla said that imitation is the highest form of flattery
Henry Ford established the fundamental guidelines for how US auto dealerships operated more than a century ago. Most states later codified these guidelines into law. One of them is that only dealerships can negotiate the final terms with customers; manufacturers set the recommended price. Dealerships charging thousands of dollars more than the MSRP for models like the Hyundai Ioniq 5, Ford Mustang Mach-E, and Porsche Taycan were frequently mentioned early last year. Dealer markets often exceed $10,000 for the Ford F-150 Lightning. These strategies are viewed by many as price gouging.
In a meeting with dealers in September, Ford CEO Jim Farley provided a deadline. They would have to agree to no-bargain pricing and spend a lot of money building charging infrastructure. If they choose not to, they will no longer be able to sell Ford electric vehicles after this year. So far, two-thirds of Ford dealers have agreed to the terms. Last year, the business announced that Volvo’s electric cars would be available online at transparent, fixed prices. Only some of its dealers are satisfied with that mandate.
According to Ivan Drury, an analyst for Edmunds, traditional automakers have mostly stayed the same MSRPs mid-year. Because consumers want to feel like they’re getting a good deal, MSRPs are intentionally set a little higher than what the market will bear before using incentives to lower the price.
Covid Revolutionizes the Standard Sales Model
Automakers essentially retracted their incentives, saving hundreds of millions of dollars due to high demand outstripping supply chain capacity and rising raw material costs. Some dealers added mandatory services and new fees. The average US buyer paid more than the MSRP for at least six consecutive months last year, the first time since Edmunds began keeping track of prices 20 years ago. Until November, when more of the new suggested retail prices for 2023 went into effect,
Dealers need negotiating room at those times to move cars off their lots. That is why, according to Drury, “they have targeted the dealership changes exclusively for the EVs.” “Because they believe the demand will remain that way for years,” you ask. Ford changed the MSRP of the F-150 Lightning three times last year, taking advantage of its newly discovered pricing control for electric vehicles. The price of the entry-level Model has increased by almost 50% since it first went on sale.
Tesla has changed its model offerings or raised prices twelve times in the past year. Musk acknowledged the swings were unusual during its second-quarter earnings call in July. “We have frequently raised our prices. Elon Musk said, “They’re at embarrassing levels.” But in addition, there have been numerous production and supply chain shocks, and inflation has been out of control. Therefore, I hope—and this is not a promise or anything—that we will eventually be able to lower the prices slightly.
Musk is also raising hopes for a new entry-level model, which he previously predicted would compete with the Model 3 while costing about half as much. He estimated the smaller Tesla would cost about $25,000 two years ago. That target will likely become aspirational and may require some inflation-based adjusting if the price history of the Model 3 is any indication. The company announced last week that the generation 3 platform, which will likely be used to create a smaller, less expensive model, will be discussed during an investor day scheduled for March 1,
The all-wheel-drive version of the car cost $50,000 when Tesla started taking reservations for it in 2019, which was almost the average price for a large truck that year. Today, the typical large truck costs over $56,000. Prices for the Cybertruck were long since removed from Tesla’s website.
