On Thursday, Tesla announced some changes in its vehicle lineup. The company’s press release on the matter innocuously kicks off by mentioning how these changes will “simplify vehicle choices” and “make Autopilot more affordable.”
But the most interesting bit is buried a bit lower in the text: The Standard Range variant of the Model 3, the $35,000 version that Elon Musk promised four years ago, is no longer available on Tesla’s website.
The vehicle lineup change Tesla is referring to is the fact that all Tesla cars now come with Autopilot bundled as a standard feature. It’s a little cheaper than it was before, but it’s also something you can’t opt out of (except in the case of base-price Model 3). Previously, for example, the Model 3 Standard Plus cost $37,500, and Autopilot was available as an option for $3,000. Now, the Model 3 Standard Plus can only be had with Autopilot bundled, for the price of $39,500, saving you $1,000.
But this $39,500 model is now also the cheapest Model 3 you can order through Tesla’s website.
The Model 3 Standard is still available, but not online — you have to either call Tesla or visit a Tesla store to buy it. And it’s a worse car than it was before — its range is now limited by 10%, and several of its features will be software-disabled, including music streaming, navigation with live traffic visualization, and heated seats (buyers will be able to upgrade to the Standard Plus version at any time, and previous Standard Plus buyers will be able to downgrade to Standard and get a refund).
Tesla explains that the Standard Plus is more popular than the Standard model, so the company has “made the decision to simplify our production operations to better optimize cost, minimize complexity and streamline operations.”
But given all that we know about the Model 3, it’s far more likely that the company is simply unable to make money on the $35,000 model, and it’s doing everything it can to disincentivize customers from buying it. And by further reducing the price gap between this — now crippled — cheapest Model 3 and the Standard Plus variant, the company is essentially squeezing an additional $4,500 out of its customers with terms that leave a sour taste in the mouth.
Tesla alleviates all this a little by introducing leasing for the Model 3 (only in the U.S.). But leasing is quite a bit different than owning, and it’s notable that customers who lease the car will not be able to buy it at the end of the lease.
The $35,000 electric sedan that wasn’t
Let’s go a while back, to July 2014, when Elon Musk first mentioned the $35,000 base price for the Model 3. He repeated it, officially, in January 2015, promising the price would not include tax incentives. Musk promised the car would be delivered to customers in mid-2017 or perhaps late 2017. But Tesla only delivered 1,542 Model 3 cars in 2017. The production rate was ramped up significantly in 2018, but even then, only (far) more expensive variants of the car were available. In February 2019, the base-price Model 3 finally became available, but deliveries still haven’t started a month later. And in the press release Thursday, the company said the $35,000 Model 3 deliveries will start “this weekend.”
Being late is one thing. But in recent months, Tesla started being really creative in how it communicated prices and how it made tweaks to its lineup. In February, Musk said that the Model 3 actually already costs $35,000, if you count in tax incentives and fuel savings — even though that price was originally promised to be before incentives. Later that month, the company said it would close most of its stores to cut costs, before backtracking and saying it won’t close as many stores as it said it would, but would instead increase car prices (the price increase did not apply to the base price Model 3).
We’re doing everything we can to get there. It’s a super hard grind.
— Elon Musk (@elonmusk) February 6, 2019
Up to this point, with a fair bit of mental gymnastics and some rose-tinted glasses, one could still forgive Tesla for the constant delays of the base-price Model 3. Elon Musk openly said that getting the price down to $35,000 is “super hard” (see tweet above), and it appeared the company was really doing its best to make it happen.
A hidden car with less features
But this latest lineup change is a slap to the face of every potential customer that still hoped to get a $35,000 Model 3. That particular model is now hidden from Tesla’s website and its features were further reduced — while the next available model you can get is $2,000 more expensive than it was. Imagine pre-ordering an iPhone, then getting it two years later and being told that it either costs $50 more or Apple takes half the storage memory.
Let’s consider for a second how important the removal of the cheapest Model 3 from Tesla’s site is. We’re talking about a company that sells cars online first, with physical retail locations being a distant second. In fact, even if you go to a Tesla retail location and decide to make a purchase, you’ll normally be guided through ordering a Tesla on your phone (presumably, the process for ordering a base-price Model 3 will now be different). When it announced the availability of the base-price Model 3 in February, Tesla literally said it is “shifting sales worldwide to online only” — and now that particular model is no longer available online.
It’s also worth mentioning that Model 3 is a much better car with Autopilot. Even Tesla, in its latest PR, now argues that Autopilot is “very important,” and Musk itself said the same thing back in 2017, referring to the fact that the Model 3 only has a central screen and no heads up display. But the base-price Model 3 still doesn’t have Autopilot.
Tesla is free to price its cars as it wants. But let’s not forget that many potential customers have actually paid a $1,000 fee to reserve their place in line to buy a Model 3, many of them years ago. And these people were promised they’ll be able to buy a $35,000 Model 3. They can still get it — with a massive delay — but it’s probably not the car they wanted. For that, they’ll have to dish out (at least) $4,500 more.
Musk’s promise all those years ago — bringing a $35,000, mid-sized electric sedan to market — is something the company has worked very hard not to break. But with these latest changes, maybe we should all just accept the notion that the Model 3 is a $39,500 car.