Elon Musk hopes to lower vehicle costs when inflation slows down
Tesla CEO Elon Musk says that Tesla may start reducing the prices of its electric vehicles, which have increased 20-30% in the past two years.
When Musk was asked about when we can expect Tesla to lower its prices again, Elon said that Tesla could lower prices when "inflation calms down."
One of the main complaints about Tesla's electric cars is their cost. In late 2017 Tesla started with the Long Range RWD Model 3, and over the period of the next year or two, prices actually went down as Tesla reached volume production and manufacuring efficiencies.
However, as we hit 2020, the pandemic caused supply chain challenges and inflation that adversely impacted the auto industry along with the broader economy.
In early 2020, the Tesla Model Y started at $53,000. Today, the same vehicle starts at $66,000 representing a 25% increase in price in less than two years.
However these drastic price increases have not affected demand. In fact, recent inflation of gas prices has contributed to a significant backlog of orders. Some Tesla models having a 6 to 10 month delivery timeline on new orders.
Although Tesla has been increasing prices over the last two years, its gross margins have also increased. This means that Tesla's price increases have been greater than their cost increases.
This is because Tesla has to set prices based on the cost of vehicles produced in 6 to 10 months from now rather than the cost of vehicles produced today.
Put another way, vehicles being ordered today are priced based on the cost of vehicles produced (and delivered) in 6 to 10 months from now in order to account for future cost increases.
With so much uncertainty around the supply chain and inflation, it is hard for Tesla to predict those costs accurately.
If inflation calms down, we can lower prices for cars
Once these issues are resolved, Tesla hopes to reduce their prices. A big part of Tesla's mission is to reduce electric vehicle prices to make them accessible to everyone.
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Tesla recently showed off Giga Small Haus, an interesting new display project hosted at Giga Berlin. The small new house is located just outside the main entrance of Tesla’s Giga Berlin factory, with a Quicksilver Model Y parked inside.
Giga Small Haus is powered only by solar and Powerwall 3 - disconnected from the local grid and from Giga Berlin itself. It serves as a live demonstration of Tesla Solar and Tesla’s Powerwall battery backup.
Giga Small Haus
The centerpiece of the display is a Model Y in Quicksilver - a beautiful pick for a beautifully lit house. However, that’s not the real focus here - it's the Powerwall and Gateway on the wall.
The Powerwall is the focus of Giga Small Haus, and there’s a display with some additional information on the wall. Part of the display also includes a screen that displays the current output of the Powerwall itself versus the consumption of Giga Small Haus, as well as the input from solar.
The interior exhibit of Giga Small Haus
Not a Tesla App
The text on the exhibit is divided into several sections. Here’s a translated and edited version of what we can see from Tesla’s images. Some additional text is obscured. If someone visits Giga Small Haus, let us know.
Powerwall
Powerwall is a home battery system that stores energy from solar panels, the electrical grid, or during off-peak hours and powers your home during the day or during a power outage.
With Powerwall, you can use self-generated solar energy during the day and night, thus avoiding high electricity costs. You can also store excess energy produced during sunny periods for use during times of low production or power outages.
Key Features
Energy Storage: Powerwall stores excess energy from solar panels or the grid for later use or during power outages.
Backup Power: In the event of a power outage, Powerwall automatically switches to battery power to ensure continuous power supply.
Integration: Powerwall can be seamlessly integrated with existing solar systems and other power sources.
Scalability: Multiple Powerwalls can be installed to meet higher energy storage needs.
Smart Energy Management: Powerwall works with Tesla's software to optimize energy consumption and reduce costs.
How Powerwall Works
Storage: During the day, when solar panels produce more energy than needed, the excess is stored in Powerwall.
Usage: At night or during times of low solar production, the stored energy is used to power the home, reducing reliance on the grid.
Backup: During a power outage, Powerwall automatically provides power to critical circuits, ensuring continuous operation of essential appliances.
Benefits
Cost Savings: By storing and using solar energy, you can reduce your electricity bills.
Reliability: Provides backup power during outages, ensuring your home remains powered.
Sustainability: Promotes the use of renewable energy by storing excess solar production for later use.
Overall, Giga Small Haus is an interesting real-life demo of what Powerwall and Solar can accomplish. It would be neat if Tesla built more of these displays - perhaps near major Delivery and Service Centers and at Giga Texas, Fremont, Giga Shanghai, and other facilities. Many Tesla owners have yet to learn about and experience some of Tesla’s Energy products.
Tesla has added the Acceleration Boost option to the Tesla store for owners of the 2024 Model 3 Long Range - specifically owners in Australia and China. Acceleration Boost is an upgrade that provides a significant performance boost, drastically narrowing the performance gap between the Long Range and Performance versions of the same model.
This upgrade will likely become available in Europe, Canada, and the United States in the next few days as Tesla updates its shops globally.
Acceleration Boost
This new Acceleration Boost is retailing for $3,000 AUD, or approximately $2,000 USD. That’s the same price for current owners of older Model 3 or Model Y Long Range vehicles, which all have the option to purchase Acceleration Boost through the shop.
The boost provides improved 0-100km/h (0-60mph) performance, bumping the 2024 Model 3 LR from 4.4s to 3.8s. The 2024 Performance version comes in at a blazing fast 2.9 seconds, so while it isn’t equivalent to just buying a performance variant in the first place, it is still a noticeable and significant upgrade.
Performance variants also come with a different front fascia vent for cooling, performance drive units, sport seats, adaptive suspension, 20-inch wheels, and Track Mode V3. That’s a significant number of additional features in the $10,000 USD price difference between the Long Range and Performance versions.
Should You Buy It?
If you’ve purchased a Long Range model and are itching to go just that little bit faster at every red light, this is the upgrade for you. It previously came with the cost of slightly reducing vehicle range, but the Tesla store doesn’t make a note of reduced range this time around. The 2023 Model 3 and Model Y Long Range models had an efficiency loss of about 5% due to the additional always-available acceleration and cooling.
You could drive in Chill mode to mostly negate that efficiency loss, but what’s the fun in driving in Chill when you just got Acceleration Boost? Anyhow, the shop listing for the 2024 variant doesn’t include this detail, so it's possible Tesla may have worked some more engineering magic.
Overall, if you’ve got the $3,000 AUD burning a hole in your pocket, some Tesla referral credits sitting around, or just want to go faster, it's definitely an upgrade many users find valuable.
