How Will Tesla Pull Off The Model 3’s Low Price?


MAY 3 2017 BY EVANNEX 108

Tesla Model 3

Tesla Model 3


Tesla currently offers its flagship Model S in the large luxury category — competing (and beating) cars like the Mercedes S-Class, BMW 7-series, and Audi A8. Tesla’s luxury SUV, its Model X, even competes with the likes of the Bentley Baytaga. Historically, going all the way back to Tesla’s “premium-range Roadster back in 2008, Elon Musk’s car company has long catered to customers who want luxury.” However, this is all about to change. According to Inverse*, “When it launches, the Model 3 will be the Tesla’s cheapest vehicle by some distance.”

*This article comes to us courtesy of Evannex (which also makes aftermarket Tesla accessories). Authored by Matt Pressman.

That said, Tesla will still compete against the Germany’s automakers with its Model 3. However, based on vehicle performance, it’s likely that the $35,000 (base price) Model 3 will face off against their lower-priced offerings like Mercedes C-Class, BMW 3-series, and Audi A4. The question that everyone seems to be asking — will Tesla make a profit on the Model 3 with such a low price point? “Musk has said the Model 3 will generate $20 billion revenue with $5 billion gross profit. That means a margin of around 25 percent on every Model 3 sold.” Although Wall Street has many Tesla doubters, there’s good reason to believe Musk and his team will achieve cost reductions. Here’s how.

     Smaller size and steel construction

It’s critical to note that the Model 3 is much smaller than Tesla’s flagship Model S sedan. The Model 3 will also use steel in its construction which should provide significant cost savings.

“Model 3 has a frame that’s around 20 percent smaller than the Model S. Tesla is using a partial aluminum [partial steel] frame, as opposed to the more expensive all-aluminum frame on the Model S, to maintain some of the weight savings while also reducing material costs.”

Tesla Model 3

Tesla Model 3

And this reduction in vehicle weight will go a long way: “The weight savings means the company can pack in less battery to achieve the same range. The company confirmed… that the Model 3, which will have a minimum range of 215 miles, will have a battery pack smaller than 60 kWh as its starting model. This, combined with a plunging kWh cost, means big savings on an expensive component. By 2020, Tesla could be shipping a 50kWh Model 3 with a battery costing as little as $5,000, less than a fifth of total production costs.”

     Lower battery costs

So how can the electric vehicle battery cost structure dip this low? It turns out that battery costs are plummeting.

“McKinsey & Company found that battery prices have dropped nearly 80 percent over the past seven years: in 2010, batteries cost around $1,000 per kilowatt-hour (kWh), but by the end of 2016, they reached around $227… [and] vice president of investor relations Jeff Evanson said the company had already hit prices below $190 per kWh.”

And, with at least a 35% battery cost reduction already in the works at the Gigafactory, “Elon Musk is aiming for sub-$100 per kWh prices by 2020.”


As battery costs have plummeted, electric vehicle sales have spiked (Image: McKinsey & Company)

     A spartan, minimalist feature set

There’s another important consideration. The Model 3 won’t come with all the Model S bells and whistles. To clear up any confusion, Tesla posted an article on it’s blog in order to emphasize that the Model 3 isn’t the Model S. Musk also took to Twitter to note the stark differences: “Am noticing that many people think Model 3 is the ‘next version’ of a Tesla, like iPhone 2 vs 3. This is not true.” In fact, the “Model 3 is just a smaller, more affordable version of Model S w less range & power & fewer features,” Musk posted to his 8.2 million Twitter followers. It’s the “Model S [that] has more advanced technology.”

Above: Spy video taken recently of Tesla Model 3 on the highway (Youtube: Omg_Tesla)

And Musk reminded us that Tesla has implemented “a number of cost-cutting measures to the Model 3. The car has half the wiring of a Model S, and only contains one computer and screen where the Model S has two. The Model 3 will also have fewer seats (lacking the seven-seat option of the Model S), less cargo space, and features like automatically extending door handles will be missing, [as] Musk noted on Twitter. Performance-wise, it will have a lower range, slower acceleration, and less power.” So it appears the company has cut costs across the board. But that still doesn’t change that fact that the Model 3 is still a Tesla. Although costs are low, expectations are high.


*Source: Inverse

*Editor’s Note: EVANNEX, which also sells aftermarket gear for Teslas, has kindly allowed us to share some of its content with our readers. Our thanks go out to EVANNEX, Check out the site here.

Categories: Tesla

Tags: , , ,

Leave a Reply

108 Comments on "How Will Tesla Pull Off The Model 3’s Low Price?"

newest oldest most voted

My thinking is Model 3 will basically be an equivalent of a Honda Civic ($20K) + a battery pack (up to $10K) + a few cameras, so $35K doesn’t seem all that unreasonable. Looks and horsepower will position it against BMW 3 series and you have a winner. Final prices will be at around $45K anyway, so 25% margin makes sense to me…

Alexander H.

Feature content may be similar to a $20k Civic, but I’m expecting it to be much closer to a Honda Accord, at least in size. It’ll probably be shorter than the Accord, but it looks a lot wider, and looks to have a longer wheelbase than the Civic.

As far as pricing, I think they’ll make some money off the base model; maybe not much, and maybe not for some years (until full-scale production at GF and assembly factories, and full amortization) but I’d be surprised if they hit 25%.


I think they will make a load of profit on the base model. Not much to it. Metal box, seats, glass, a big motor, and battery. All of which is made in house.
I realize there is more to it than that… but you get the gist. Extremely basic car.


If you say its a cheaply made car why no other automaker are able to compete? Leaf sell has halted, bolt sale is affected by just announcement. Tesla won’t give you a metal box, battery to drive. It has lot of safety features, reliable battery and charging station and luxury look. Don’t compare this with Honda. It may be comparable with Aqura but not honda.


I never said it was a cheaply made car. I said it is basic, which adds to the bottom line.


Dude, basic cars are called “loss leaders”, which means they make very little (if any) money. They are used to bring people in the door to hopefully sell them a highly equipped model.


That works until you realize that a highly equipped 3 is still a basic car.


Show me the option that will add another screen to make it less basic and i’ll shut up.


In the case of ICE cars, they loose in the base price but make lots of profits in time, when the faulty ICE car needs spare parts. The spare parts are bringing 1000% and more profit.


Keep in mind that when GM, etc. sells to a dealer, there is another level of profit for the dealer- commonly 18% if I recall correctly.


Basic car? C’mon now!

-Glass roof
-Massive touchscreen
-Various levels of self-driving upgradable over time
-Free OTA updates with new features over time
-Supercharger network
-No third party dealers

I’d love to know a comparable car of any type for $35k! Most of these things don’t even exist for other manufacturers at any price.


What are you on about – the article just said that Musk himself has said the 3 will not have the tech the S or X has – what makes you think it will have anything like automatous driving, or even need over the air updates?


Autonomous driving will be an option on the Model 3, I have no doubt. Sure it won’t be included in the base price, but why wouldn’t they make it an option? And I’d also expect OTA updates – why not?


“…what makes you think it will have anything like automatous driving, or even need over the air updates?”

Elon Musk specifically said the Model 3 is designed for autonomous driving, which itself will absolutely require the same sort of OTA updates that Tesla’s other cars get.

This isn’t a matter of opinion, but fact.


Thinking ahead to when a normal peeps will be able to walk into a dealership and walk out an hour later with a car… yeah. Basic.


needa said:

“Extremely basic car.”

Hmmm, no. Elon said the Model 3 is was aimed to compete with the BMW 3 Series… not with a Honda Civic or Accord.

An “extremely basic” car would not be designed for autonomous driving, would have analog dials instead of a virtual display, would have everything controlled by knobs and buttons instead of a touch screen, and certainly wouldn’t get OTA updates!


Don’t forget that for a “new” car company it is likely that it would be more exspencive to put knobs and dials in, instead of just a disply that can be configured via software.
So I am pretty confident that Tesla is making money even from the basic car.


Agree,I doubt they said $35k if they didn’t make some profit on it. Certainly higher spec cars will make more profit for them, but have no doubt $35k car will make a profit, possibly even 25% that has been mentioned. Tesla is a very smart company.


Please show me a quote from Elon where he specifically says they are competing with the BMW 3 series. And while you are at,show me where he says they are not trying to compete with an accord. It for sure isn’t in that link you provided. And it isn’t in the link they refer to on that page either.


Screen. Steering wheel. Seats. Metal box surrounding it. That’s basic. Ota means nothing as it will be commonplace soon enough. Same goes with ap. Like I said above. Thinking ahead to when anyone can walk in and buy a 3… Everybody will have mod 3 clones on the road, or coming for the next model year.


Accord has over 100 cubic feet passenger space. Model S and X – 94. 2017 4 door Civic – 98. So I think your imagination has inflated M3 size way too much if you agree with Musk that it will be smaller than Model S 😉

Scott Franco

Strip all of the useless autopilot stuff out and it would be a lot cheaper still.


+ ∞


Maybe the Top of the Line Civic.


You are basically in baby 3 series BMW and Audi A4 territory. Probably quicker off the line acceleration but similar overall speed numbers or somewhat better. A4 price but S series performance. I think many of the purchasers will make that calculus rather than the EV or at a minimum the status/performance calculus puts it over the top. I don’t think it competes directly with the Nissan Leaf for instance.


Ridiculous. Tesla will do what it has done all along. Sell a few stripped down cars for $35,000 to prove Elon right in his claims and then swiftly cancel that base model and make everybody pay more once the buzz is on. Tesla has always raised the price after the launch and I see no reason why they wouldn’t this time as well. Most Tesla fans are affluent and so paying more is what they want to do anyhow. Those that get disappointed will keep buying Nissans.


Typical Tesla-hater post. 100% wrong.

The Model 3 is aimed at a significantly lower market segment than the Models S & X. Tesla knows perfectly well this segment is much more sensitive to a few thousand dollars’ difference in price.

The $35,000 price has been repeated much too often for Tesla to renege on that. If they did, the backlash would be terrific, and endanger the entire market for the car.

Not gonna happen.


And Pu-pu personally will pay the difference and compensate Tesla all the loss for selling under cost to reach positive net margin. Sure he has a dozen or few spare billions in his bank account 😉


I wonder just how much weight they will be able to shave off vs. say an early Model S 60 (with an actual 60 kwh pack – yeah, I know it was a tad larger) at 4323 lbs.

The Chevy Bolt EV is probably a best case scenario at 3569 lbs. This all assumes no exotic construction techniques.

As a point of comparison a P85D is around 5K lbs


And 3500 is reasonable. That’s just 100 pounds more than my 2009 Audi A3 which was amazing to drive. 4500 is bit chubby for the road. There’s a feedback loop on weight of course. I believe the doors and hood on the Bolt are aluminum. The Bolt probably could come in an eco version where they used a somewhat smaller motor. Right now it has BMW class level acceleration. Not necessary. Shave 50 lbs off in the propulsion system. Then knock back the battery to 45KWH which shaves more weight which would mean net performance not hit that much. With those slight adjustments they could knock $2000 off the cost and probably still maintain 200 miles of range.


The Model 3 is a bigger car than the Bolt. I’d expect the 3’s weight to come in at least 300 lbs over the Bolt’s.


Does the Bolt EV use any aluminum or CFRP in its body, or is it all steel?

If the Model 3 uses some aluminum but the Bolt EV doesn’t, then it may come in at roughly the same weight even though it will be larger. Contrariwise, if the Bolt EV uses some aluminum or CFRP, then we should expect the Model 3 to be hundreds of pounds heavier.

The M3 will have significantly better streamlining (coefficient of drag) than the Bolt EV. That’s more important to range and capacity required for the battery pack than weight is.


It will not come in at $35K. There’s just no way, and if it does, it will have zero options. I think fully-optioned, with FSD, bigger battery, you are probably looking at $65K. I would imagine the average car will cost around $50K. The only way it comes in at $35K is because the average buyer will be subsidizing those very few ppl who get a stripped down model. Think about how no one bought a 40kW Model S. It didn’t have supercharging, and no one bought it.

I think most people will be so enamored that they won’t care that it ended up being more expensive.


It’s been promised to come in at $35K. Zero options? Fine with me. My base-model LEAF is more than adequate with its heated seats and heated steering wheel.

Elon expects the average price to be $45K.

There were people who purchased the 40kWh Model S. My 24kWh LEAF is more than adequate for my commute, so the 40kWh Model S would have been too.




The thing is, many people are already in this position: for them, 35k is already too expensive, but they like the car enough to be willing to buy it anyway. Going above 35k, though, might very well be a step too far.


This is how it will play out:

– Tesla will give priority to people who order 3’s with options. Base Model 3’s will be at the back of the line.
– Tesla will entice those who want to order barebones Model 3s with various teasers (if you upgrade to the bigger battery/full autonomous driving suite/whatever pricey options, you’ll move up the priority ladder!
– those who still cling to their $35k naked Model 3 orders will be given some far off date when their 3’s will “probably” enter production
– Tesla will send out another “Hey, are you sure you don’t want to upgrade? You will receive your Model 3 quicker!” offer
– the few people who actually wait for their barebones Model 3 will take delivery a year or more after the first loaded versions
– Tesla will kill off the $35k Model 3 due to “lack of demand”, cite the low sales numbers as the reason (artificially deflated by pushing off deliveries as much as possible), then make the base price of a base Model 3 with a few options for $40k or more

philip d

I could see them in 2019 making some features like activated basic autopilot standard on the new base level $35,000 version since the federal tax incentive will have expired.

I could be wrong but I don’t see them trying to sell a base model now for $27,500 after incentives and then getting rid of that model after the tax incentive expires at the same time raising the pre-incentive price even if it did come with a few extra options.

At a starting price of $40,000 it would be an effective price increase of $12,500 for the base model.

But if they start selling faster than they can ramp up and produce them over something like 4 years then I guess it wouldn’t matter from their perspective.


60% of Model S deliveries in April were the goofy base model 60kwh software crippled version before they killed it. The Tesla is punching above its weight in its price class but also the people buying it are reaching one class higher in price than they probably would normally. I think you are going to have some people that would ordinarily get a $23,000 Honda Civic, stretch it out and reach up to the 3 because after tax credit and savings on fuel they are in the ballpark price wise…those people are going to be price sensitive. But certainly every manufacturer intends on selling very few entry level models and in fact entry level models are hard to find. Dealers don’t stock them. I think that dynamic changes at least somewhat when the only thing that exists are custom orders.


Elon said he expected the average transaction price to be $42k


Yes. He also expected sub $30k car in “4 years at the most.”. The count started in 2008.
It certainly has materialized, as everything that the prophet EM says is absolute truth!


“The only way it comes in at $35K is because the average buyer will be subsidizing those very few ppl who get a stripped down model.”

Very probably true, but then I’ve seen it said, by people who apparently know what they’re talking about, that the same is true of pretty much every model of mass produced car.

I find it odd that Tesla keeps getting “called out” for perfectly normal business practices, as though somehow it’s “strange” or “bad” just because Tesla is doing it.

Almost like there are lots of people who want Tesla to fail… 🙁


“Elon expects the average price to be $45K…”

Elon promised and promises many things.

I highly doubt we ever see volume sales at $35k, theren’s just no margin left.


The Chevy Bolt EV LT is $37,500 with a 60kWh battery pack. So, $35,000 with a (slightly) smaller capacity battery sounds plausible.

Oscar L Teran

But doesn’t Chevrolet lose 9k per vehicle? According to several reports.


LOL! You really ought to put a sarc tag on that comment!
If you are seriously believing about the isolated comment from an unnamed “industry insider” who floated that idiocy…

“But doesn’t Chevrolet lose 9k per vehicle? According to several reports.” LOL! Yeah, the “reports” being from either GM bashers or else self-appointed “analysts” who are probably not actually stupid enough to believe the B.S. they write for public consumption. And that’s the very same B.S. that EV bashers spouted about the Volt. Even at a very basic level of financial analysis, we should distinguish between sunk costs and unit costs. Anyone who believes that GM has lost control of costs to such a great extent on the Bolt EV that the unit cost is higher than the unit price… well, anyone that clueless should keep quiet and not display their ignorance of the subject. Reality check: On average, it takes about a year of production for the average mass produced car to make back the investment (sunk costs) in development and tooling up on making the car. That’s why auto makers like to keep a model in production for several years. Generally speaking, it’s only in the second year of production that a new car model starts making an overall profit for the auto maker. (This is one example of why mass producing automobiles is a high capital investment,… Read more »

The only business in the business of losing money is the government, and that’s only because they are not accountable for their losses (generally speaking). Every single private business is there to make a profit, even Not For Profit will be looking to make a profit that they sink back into their business.

So yes, Tesla and every other Auto maker is running a profit on every car. Unless the car is a flop, then they lose money (which is propped up by the other models).


But Chevy uses a huge parts bin to reduce the cost for the Bolt. It is based on an existing platform, uses a B-Class platform (vs. Tesla compact sedan), and all the systems shared with existing models.

Chris O

Bolt is actually a bespoke platform that’s unlikely to share all that many components with its ICE siblings considering the wildly different technology.


The Bolt is based on the Gamma G2SC platform (Sonic, Trax, etc.), but uses a different floor pan stamping. It is assembled on the same line with Sonic etc. It doesn’t make sense to develop a new platform for such a low production numbers, and it is not necessary. Most of the platform can be shared between an ICE and BEV vehicle, as you can see in VW Golf EV.


Nope. The Bolt EV is built using the “skateboard” design, with a flat battery pack in the floor, just like all of Tesla’s cars after the Roadster, just like the BMW i3… just like all well-designed BEVs.

The Bolt EV of course shares some components with GM gasmobiles, but it certainly doesn’t share any “platform” with them, at least not in the traditional sense of “platform”. There seems to be some attempt by GM to redefine the term “platform” to the point that it’s meaningless, but we should firmly ignore that and maintain precision of language.


Just the floor pan is different. It is a variant of the Gamma platform that is called G2SC. This will be used for next generation Opel Corsa, Sonic etc.

They can use a skateboard platform by raising the chassis, as is done in Bolt.


+1 And where this is true, Tesla is using a 15 inch touch screen. In the Model S tear-down (by IHS, I think), the 17″ was identified as very expensive. Yet, Model 3 is “spartan, minimalist” and without Model S “bells and whistles”.

There are willful places where cost exists in the Model 3. I sat in the Bolt and still wonder, “Man, what if they went with 58, instead of 60KWh, and put the savings into the interior?” If Musk dumped his version of Cadillac Cue, he could have had a dash board, easily.

I like dashboards, eyes on road. That stuff. Model 3 customers, if Musk is right, enthuse more over pixel counts, refresh rates and the day the car drives them. Less and less my crowd.


As much as the LCD screen is touted here and there really how expensive can it be!?!?

Whey I can buy a 55″ 4k display for under a grand I don’t think that piddly 15-17″ LCD screen really costs all that much. To put it another way there are laptops with better 15-17″ touch screens that can be had for not a lot of $.


Yeah, a high quality 17″ touchscreen was a bit of a high cost item back in 2012, but that’s changed a lot by now. A 15″ touchscreen in the Model 3 is obviously more expensive than an 8 or 10″ one, but it’s not going to break the bank. Couple hundred bucks maybe.


But when you think of all the buttons and needed cabeling for a conventional interior, I think the software controlled screen is a bargain.


“Elon expects the average price to be $45K…”

Actually it was $42k, not $45k.

“I highly doubt we ever see volume sales at $35k, theren’s just no margin left.”

Yeah, just like every other mass produced car. Auto makers make very few of the base model with no options at all.

Yet another Tesla-hater post suggesting that it’s somehow “strange” or “bad” for Tesla to do what every other auto maker does. 🙁

Chris O

This article doesn’t go a long way in explaining Model 3’s 50% cost drop vs Model S to me.

-Smaller: some savings in material cost I suppose, but I don’t think 20% smaller equals 20% less cost.
-Less aluminum: should help some
-Less features: I don’t think Model S has many features people wouldn’t also expect on a $35K car. Some nickel and dime gains to be made.
-Less performance: do those motors really get much cheaper with lower maximum output? I can see some savings overall in a lower output powertrain though.
-Lower battery cost: that’s going to be an important part of the equation, of course it will affect Model s production cost as well.

Not mentioned but probably most important of all: economies of scale. That’s the name of the game in this industry and building 500k/year rather than 50k/year should unlock those big time.

Now lets hope that all of this adds up to $30-35K in cost savings.


Performance limitation isn’t a limitation of motors – to get more powerful motors just make them a bit bigger & stronger. Performance limitation is a limit of how much electric current the battery system can deliver. In battery systems, total current is the total current of 1 batter x number of batteries (or number of cells). Fewer batteries = lower max current = lower performance. You see this on the model S. To get the fastest car you need the larger battery pack – because it has more cells. (Right?)

Chris O

To the extend lower performance automatically comes with fitting a smaller battery it doesn’t offer any savings in itself. Of course other parts of the powertrain can be down engineered because they have less stress to deal with.

Someone out there

As I understand it a significant cost saving comes from the car being easier and quicker to manufacture. Therefore the meager interior that supposedly looks like a spaceship. I’ve never been in a spaceship so I can’t compare but I would imagine they have more than just a single big touch screen in the middle of a room.

Chris O

Early adopters will accept the minimalist interior. Maybe extra displays won’t be missed as levels of autonomy increase. Once competition shapes up more refinement may be called for but for now simplicity certainly helps speeding things up.

Someone out there

Tesla wants to sell 500k cars/year by 2018 and a million cars/year by 2020, that’s a bit past early adopters I think. Although I don’t believe for a second that they can ramp up that quickly.


“This article doesn’t go a long way in explaining Model 3’s 50% cost drop vs Model S to me.”

That’s because you’re committing the fallacy of assuming Tesla’s designers took the Model S and trimmed bits away here and there until they reached a 50% (or more) reduction in cost.

Nope. What every auto maker does when designing a truly new model, is to take the budget for the car, and make a list of things they want which will fit within that budget.

Asserting that Tesla can’t make a car for $35K because the base price of the Model S is (or was) $68k is like saying BMW can’t possibly make a 3 Series with a MSRP of $33,450 because BMW also makes the 6 Series, which starts at $77,600.

David Murray

If the battery truly costs $5,000 for a base model, I don’t see any reason why they can’t build the rest of the car for $25,000 and still make $5,000 in profit….


$5k battery? No. Tesla is close to $200/kWh at the pack level. This is a $10k battery.

At high volumes they “should” be able to manufacture the rest of the base model car for to ~$15k. But despite all their claims, Tesla is not known for being cost-efficient. They have lots of employees per unit of production.


Doggy, As far as I know, we only have 2 official data points on battery cost from Tesla.

1) In early 2016 Tesla’s Vice-President of Investor Relations Jeff Evanson stated in a Model S/X “battery pack cost is already below $190/kWh”.

2) A year later in 2017, Tesla announced in a video, a 35% cost reduction going to 2170 Gigafactory cells.

Based upon those two data points from Tesla, it looks like the actual number for the Model 3 will be about in the middle of your $10K number and his $5K number for the base battery. The one that has been announced will be less than 60 kWh.


+1 David.

I have been saying this for a long time now. As the battery costs drop significantly, EVs are going to be way cheaper to build than ICE cars in the future. There are just way fewer parts in an EV to design, produce and assemble. With the Model 3, they have even ditched the very complex and expensive dash board for an LED screen and I’m a big fan of this approach.

The same thing happened with digital copiers vs. analog copiers and flat-screens vs. CRTs. New technology that was initially more expensive, became much cheaper after mass production kicked in, due to the simplicity.


I don’t know if the 1000$ saving from going to steel instead of aluminum is really worth it. Even more so by considering the battery increase needed to compensate the range decrease due to higher weight.

On the other hand having autopilot hardware in all cars including the ones without the option is likely costing more than an extra 1000 $ per car. So not all choices are optimum or set for extra low price. Tesla obviously also decided based on some other considerations.

Chris O

Using steel rather than aluminum unlocks a new can of worms: corrosion. Quite the conundrum for the industry. Let’s hope Tesla gets corrosion prevention right from the start but it will eat further into the gains from switching to steel.

Consumer upside: steel is cheaper to fix than aluminum.


That would have been a bigger problem if this were still the 1970’s or 1980’s. But with modern steel anti-rust steps (zinc and other dips), anti-galvanic isolators, and anti-galvanic fasteners and modern adhesives, that really isn’t as big a problem anymore.

That’s how Ford has been able to switch to so much Aluminum in the F-Series trucks.


“I don’t know if the 1000$ saving from going to steel instead of aluminum is really worth it. Even more so by considering the battery increase needed to compensate the range decrease due to higher weight.”

Keep in mind that steel isn’t merely cheaper to buy. It’s also easier/faster to stamp into shape (stamping large or complex aluminum pieces may require multiple passes), and easier to weld. There may be more cost savings there than you realize.

Logically, we can assume Tesla will use aluminum where it will save significant amounts of weight without increasing cost overmuch, and use steel elsewhere. (And there likely will be at least some exceptions to that.)

Mark C

Two things come to mind when I look at the difference in pricing between and S or X and the upcoming 3. First, Elon Musk has always made it known that part of the cost of the Models S & X are the funding of the lower priced car they want to bring to market. The Second has to do with amortization. They are planning to build far more of the 3 than the upmarket vehicles.

Quantity brings down pricing, whether you are building a new car or a solar array. If you build with 2 300w solar panels or with 48 300w solar panels. Per panel, the person who buys 48 will get a better price than the person who buys 2. Why should the car be different. I would estimate that the increase in purchasing power the Model 3 created for Tesla also lowered the price of goods for the Model S & X.


Replacing Brembo brakes with a cheaper alternative will shave a few thousand for a start.

Joshua Burstyn

Will it though? I am pretty sure Tesla must be getting their brakes at a v good cost now. Sourcing second tier parts at an initial low volume… are costs actually cut?


They will save 30% just leaving the Brembo name off the brakes, and getting essentially the exact same parts from the same Chinese factory where the Brembo’s are made.


Elon has always over promised on pricing, so why this time it would be different? I expect pricing closer to $45k. The $35k model will be cancelled and the $45k model will have 240 miles of range.


Because all Tesla cars to date have been aimed at a market segment where a few thousand dollars has very little impact on sales, and the lower-priced Model 3 isn’t.

Tesla knows very well how much impact just a few thousand dollars in price will make on Model 3 sales. Tesla has also repeated the $35,000 claim so often that it’s engraved in stone. Any change would create a severe backlash against sales, and Tesla knows that too.

We can expect Tesla has made its plans accordingly.


They will do what they’ve always done: lose money on every one.


They make 22% margin per unit. Or are suggesting they’ve been lying to the SEC through their public filings? 😉


They make negative net margin on everything.
They show inflated gross margin due to specific creative accounting that is not used by any other automaker I heard of. Like calculating margin on retail price and having huge sales costs in SG&A as result, and so on.
Coincidentally CEO stock option compensation depends on gross margin. Sure, it is just a coincidence 😉


Last quarter Tesla net margin: -9.64%

Get Real

Isn’t it amazing, on every Tesla thread now we keep getting these brand new usernames popping in so spout their anti-Tesla FUD (with no facts to back them up of course)!

It is so obvious that one (or more) of the existing usernames’ here who is a desperate shorter/shill/hater and trying to lamely help their anti-Tesla agenda.


I just read an article today that said Tesla short sellers have lost $3.7 billion in 2017 alone. That makes me very happy 🙂


“They will do what they’ve always done: lose money on every one.”

Yet another Tesla basher who pretends not to understand the difference between losing money and investing money in future growth.

Something tells me that some of the $3.7 billion which Tesla stock shorters have lost this year alone, is yours, Soakee! If not, then you wouldn’t be here posting the same ol’ same ol’ tired anti-Tesla B.S.

See: “Tesla’s Stock Success Has Cost Short Traders $3.7 Billion This Year”


I have no idea how people think, less option means bigger margin.

Car OEMs, each and every ripp their customers on options.

More options more cash.

Also as some commenters already pointed out, 25%gross margin will be average from all sales, and Musk wants $42k of it. $35k will have significantly smaller margin.


That is correct about most ICE cars, because the dealerships actually have higher markups (profit margins) for options than for the base car itself.

We don’t know if this is also true with Tesla, because they don’t actually have dealerships. But it most likely is also true with Tesla.


Remember, Musk said all Tesla’s will go to the 2170 cells and stated they are the best which just so happens to be the CHEAPEST…

Some speculation that the recent S/X price drops were because those cells are now being used but many stated they do not believe that’s happening now…


Believe me, we’ll know when Tesla switches the Models S & X over to 2170 Gigafactory cells. They follow this type of thing very closely indeed over on the Tesla Motors Club forum, and it will be reported here.

Hasn’t happened yet, and almost certainly won’t until after the Model 3 actually enters production.

Latest reports/rumors suggest Tesla plans on making the switch before end of 2017:

There are signs a $35,000 3 Will exist. Note the 17″ wheels on the black test mule seen and videotaped recently in Cincinnati, for instance. Steel roof vs. glass roof is another factor not heard mentioned here yet. As is the fact that Tesla offers those hidden options on each car that can be unlocked at any time over the airwaves. Added range, possible Supercharging packages And all sorts of options I’m certain Tesla has baked in to provide added revenue streams that other carmakers just don’t offer. This has always been a big plus in buying a Tesla – those freebie upgrades surely will come also, adding value to your purchase over time. I wonder if we may also see Panasonic batteries sourced from China as well (?). As you know, they just opened a new auto battery plant in China. They could supply cylindrical cells from there, on top of the pouch cells they also make at the New location. Elon has lots of tricks up his sleeve, besides his dream of assembly lines without human contact. Unprecedented automation on the M3 line seems part of the equation. All in, it’s strange seeing so many EV guys comparing… Read more »

The counterpoint is for $35K, you’re probably not getting a software limited battery…In fact, Tesla killed the software limited 60kWh battery and is going to different 2170, we may not see software limited battery for a while…

With supercharging, Tesla is now selling “blocks” of kWh and claims the SCers will never be a profit center…However, Musk also said that 350KW+ charging is “childs play”…One can speculate that current-ish speed chargers and 350KW+ chargers would sit side by side at SC sites and the faster chargers would command a premium price…

AP is the one thing they could be enabled with OTA and make lots of money…Tesla at one time offered S’s with a 30 day trial of auto pilot…They should deliver every Tesla (M3 & even the X and S) with a 30 day trial of autopilot to get people hooked…


James said:

“I wonder if we may also see Panasonic batteries sourced from China as well (?).”

Certainly not in the Model 3, which is designed to use the new 2170 Gigafactory battery cells… and only those batteries.

A lot of people also think there will be substantial cost savings from using the 2170 cells. I don’t know if there will actually be much savings over Panasonic’s current supply, but if so, then that’s another reason why Tesla would never use another source of battery cells for the Model 3.


We don’t know yet if Panasonic will produce the New 2170 cells in its new Chinese facility.

Could be cheaper to make and export them here than to build them In Nevada. Chinese labor is dirt cheap.

Could also be a source of M3 batteries should demand outstrip supply. The Gigafactory is not even 30% complete
And Elon seems rece fly obsessed with tunnel boring.

Bolt EVs are not flying off the shelf. Why? Go sit in one and it occurs to you that they are asking $40,000 for a FWD subcompact that feels cheap to sit in. I agree with most if you that it is a great little EV, there is no doubt. But to EV fan and average Joe carbuyer alike, you think hard before you spend $40,000 and The car looks and feels like an $18,000 car. Now imagine a brand-new silver Model 3 sitting side-by-side a new silver Bolt EV. The M3 has the steel roof, 17″ wheels and it’s battery pack is limited to 50kwh with The option to upgrade over the air to 60kwh at any time You wish. It is the “stripper model” 2WD – rear wheel drive vs. the pedestrian-looking FWD Bolt without ACC . The Volt’s interior feels like a Sparks. Both MSRP for $40K before whatever tax credit is available. A man holds out 2 keys. You can have either one. Which one are you going to take? Heck, it would be stupid to take the Bolt. The resale value of the 3 is a huge deciding factor right off the top. Add the… Read more »

True enough. But what we’ll see is the Bolt’s price dropping to keep sales moving. GM can charge a premium right now as the only “affordable” long range EV, but when the Model 3 and Leaf 2 are for sale that price will have to come down.


All those die-hard GM lifers will snap up the Bolt every time. Oh wait, they already bought a Volt.


Paragraph 4, I meant “Bolt’s interior”, not Volt – but you knew that already.

Someday, will have an edit button, I hope.

Get Real

Despite the desperate haters who post here saying it can’t be done, I think its obvious how Tesla will be able to make 25% margin on Model 3s and on all their electric cars by having by far the lowest battery prices.

The battery packs are the single largest expense on these compelling EVs and Tesla through their Gigfactories will have the largest supply of batteries at the lowest cost and this is their magic ticket towards beating the laggard OEMs in this space.

Of course Tesla also aims to more highly automize vehicle production at a much higher rate of speed and if they pull this off it will also increase their competitive advantage vis avis the competition.

Lou Grinzo

Agreed, but I would toss in one more detail: Car companies really hate to reduce the price of their cars, especially on mass production models like the T3. It angers people who just bought the car at the higher price, and it sets up the expectation that if would-be buyers wait just a little bit longer they can get a better deal.

I would expect that Tesla’s plan goes something like this:

1. Day one, sell the T3 at a break-even price, knowing that it will grow into profitability via lower battery costs and economies of scale.

2. Once battery prices drop enough, bump the battery size in the T3 but keep the price more or less constant. This assumes Tesla had the foresight to design in enough expansion room for the bigger pack, but I think that’s a very safe guess.


Lou, I completely agree. Although keep in mind that due to inflation, keeping the price the same is actually lowering the price each year by the rate of inflation.


@ Lou Grizno:

Now here is someone who has been paying attention!

The plan you outline is, I think, exactly what Tesla has been doing with the Model S, so it will be surprising if they don’t do the same with the Model 3.


Yeah the Base Model 3 will cost $35k for everyone who puts down $1k before about the second day of production. Elon will have kept his word if he offers the 3 for sale at $35k for at least one day. All those folks who are STILL sitting on the fence will be sorely disappointed — base price jumps significantly at about the same time the $7,500 tax credit goes away. Ouch!

I bet the intelligent folks at Tesla have been calculating how much we are willing to pay for… metallic paint, hi-def screen, premium wheels, intelligent cruise control, premium interior, leather, upgraded roof, bigger battery, heated seats, illuminated kick plates, premium sound, car alarm, floor mats, fancy key chain, etc.

The “fully loaded” 3 will cost plenty, but it comes in at less than the S it will still be less desirable than a bare bones S.

Let’s not forget all those new to Tesla will be splurging for the fancy home charging system.

Hey shorties, I hate seeing you lose your shirt month after month. It might be time go long on TSLA.


It will be offered at $35K. Then since nobody who orders it at $35K will confirm it until much later date, the lowest price version will be cancelled due to low volume sales.

Then Tesla will add few options and adjust a new starting price of $40K with more “standard options”.

Bill Howland

I too agree that not many $35,000 “3’s” will be sold. $42,000 or a bit higher – (depending on options pricing) seems to be more like it.

I will suffer in a car with zero options, but when offered the chance between a zero options BOlt EV, and one with heated seats, I took the heated seat model to reduce heater usage on long winter trips, as well as $395 for a nice paint job.

Most people are different – they would want an ‘upscale’ 3 provided it isn’t too much more expensive.


Heated seats should be standard on all EVs. They are crucial for real world range in the winter.