Tesla has invited all Model 3 reservation holders in the U.S and Canada to place their orders.
Yesterday, I published an article titled “Why did Tesla make Model 3 Cheaper? and wrote about Tesla’s motivation to do so.
I wrote, “By slashing the price, Tesla is enticing its reservation holders to configure their cars. What this also means is – Tesla is assuming that it has the production capacity to meet the incremental orders caused by the price cut.”
Tesla is currently building three versions of Model 3
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Model 3 Performance version – starting at $64K (Previously $78K)
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Model 3 with Dual Motor – starting at $53K (Previously $54K)
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Model 3 Rear Wheel Drive – starting at $44k
These are higher priced – higher margin versions of Model 3; well above the $35,000 price point Tesla wants to bring it down to. Tesla had more than 450,000 net reservations on March 31,2018 and a good portion of those reservations must be from U.S and Canada.
By inviting all reservation holders in North America – knowing fully well that there will be customers waiting for the $35,000 Model 3, Tesla is trying to figure out how many of its reservation holders are ready to upgrade to higher priced Model 3, in exchange for a shorter delivery time.
Simply put, Tesla wants to estimate the demand for its high margin models.
If they can lure even a fraction of its current reservation holders in North America, its still well worth the effort. Customers who had already paid $1,000 at the time of reservation need to pay additional $2,500 at the time of configuring their Model 3.
The advantage of the price cut and the mass invitation
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Every 20,000 reservation that gets converted into orders will add at least $50 million in revenue for the company. $2,500 is the minimum you need to pay at the time of ordering your car; Tesla is not going to turn you down if you want to pay more.
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This will also allow Tesla to figure out how much more price cut will be necessary to increase the number of orders.
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If the number of orders for higher priced Model 3 versions are low, expect Tesla to soon announce the start of its overseas shipments. If there are enough orders to match production, Tesla will continue its focus on US and Canada.
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But for now, the $35,000 Model 3 needs to wait.
