Here is a small list of reasons why Tesla will launch an All-Wheel-Drive version of the $35,000 Standard battery Model 3.

It’s because Tesla said so

On August 9th, responding to a customer inquiry, Tesla’s official account tweeted that customers who are waiting for the standard battery Model 3 will have All-Wheel-Drive as an option.

 

If they have already said that there will be an All-Wheel-Drive version of the cheapest Tesla Model 3, why bother writing an article about it.

That’s because of this

Elon Musk literally spelled out when Tesla will start shipping $35,000 Model 3 and also explained why Tesla is not building them now.

He tweeted, “With production, 1st you need achieve target rate & then smooth out flow to achieve target cost. Shipping min cost Model 3 right away wd cause Tesla to lose money & die. Need 3 to 6 months after 5k/wk to ship $35k Tesla & live.” (May.21.2018)

Simply put, Musk is saying that we need hit economies of scale first, allow the per unit cost of production to fall and then transfer the cost benefits to build the cheapest Tesla Model 3.

Even if you look at Elon Musk’s Master plan for Tesla, written in 2006, he gave a sneak peak into his strategy.

He wrote,

  1. Create a low volume car, which would necessarily be expensive

  2. Use that money to develop a medium volume car at a lower price

  3. Use that money to create an affordable, high volume car

    And…

  4. Provide solar power. No kidding, this has literally been on our website for 10 years.

Forget how musk climbed down the price ladder from 2008 Tesla Roadster to Model S&X and then to Tesla Model 3, he repeated the same with Model 3 as well.

Tesla is now selling three versions of Model 3, the Performance, AWD and RWD, all priced well above $45,000.

  1. Create a low volume car, which would necessarily be expensive (Model 3 Performance Version)

  2. Use that money to stay profitable and launch medium volume cars at a lower price (Model 3 AWD and RWD)

  3. Use that production volume to drive unit costs down and build a an affordable , high volume Model 3 ($35,000)

Anyone can see what he is doing, because he clearly said this is my Modus Operandi nearly a decade ago.But did that stop us, the media and people who have a financial incentive to see Tesla fail from claiming that Tesla will never launch a Model 3 with a starting price of $35,000?

Nope, Tesla has been mercilessly attacked for not bringing the cheapest version of Model 3.

Customers said in 2017 that they prefer All-Wheel-Drive over Rear-Wheel-Drive

The customer preference of higher priced AWD Tesla Model 3 over the RWD may come as a surprise to many, but consumers have been very clear from the start about their preference.

Bloomberg’s Model 3 Tracker manager, Paul Carter wrote, “As it stands now, 29% are wanting Rear Wheel Drive. From the year end report, it stood at approximately 25%. The large majority of Model 3 reservation holders want the dual motor configuration and willing to wait for it.”

He wrote this in Teslarati forums in April 2017, long before Tesla’s first Model 3 was delivered. Customer preference has always been skewed towards AWD.

Customers are buying All-Wheel-Drive Model 3: 70%

Surveys are surveys after all. There is always a margin for error. But if you look at Tesla’s Model 3 VIN registrations in the last couple of months you will realize that Bloomberg nailed it’s survey. Nearly 70% of VIN registrations has been for Dual Motor AWD Model 3  since Tesla started registering them in the last week of June.

 

Better Margins. Dah!

The Long Range All-Wheel-Drive version costs $5,000 more than the Rear-Wheel-Drive version.

Between the two models, which one will offer better margins for Tesla. It has to be the AWD version?  It will be same for the $35,000 Standard Battery Model 3 as well.

Price it at $40,000 and launch the AWD version, because that’s what customers prefer and why not make some extra profits from it?