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The Demise of Model S & X(?)

Posted by Pete on 26th Jul 2019

Make no mistake, we love Tesla. We’ve had two Model S’s, a 3, and R & Y are on order. We have stock. We have solar and a PowerWall. We have this business which is entirely dependent on the success of Tesla.

The Looming Challenge

Model S (and later Model X, but for this I’ll use them interchangeably) was sold to early adopters. In 2012, it was revolutionary. It still is. It was an easy sell to early adopters, easily the most high-tech car on the road, with literally nothing like it. An iPad on wheels. It more than laid the foundation for the company today.

But the target demographic is changing fast; Tesla needs the S & X to appeal to luxury buyers who are looking at comparative models such as Mercedes, Audi and Porsche.. To the outside world, Model S is basically unchanged since 2012. That’s seven years ago. There was a minor facelift in mid 2016, and AutoPilot has had a couple of major upgrades while the ‘Raven’ upgrade in 2019 improved range and handling. Many in the Tesla community are aware there’s likely been hundreds, or even thousands of other changes that are less visible, but the new demographic doesn’t care about that. All the other brands are good at marketing. They’ve been doing it for decades, and they’re experts at making the interior of a car feel incredibly posh. Even if their EV tech is still years behind Tesla, they can market the hell of it, and win significant market share.

Tesla has two major advantages over every other car company; the global Supercharger network, and the massive amounts of data accumulated from the fleet. Together, they give Tesla tremendous first-mover advantage. But keeping this advantage does, by nature, become more difficult as market forces evolve.

Tesla, take my money

Many existing Model S owners are literally waiting to give money to Tesla. We’re the people that bought an S at $120-150k, even though the same/improved version now costs $100k or less. Many of us have been burned by upgrades appearing just after we purchased, but that’s ok, that’s the Tesla game, and since we more or less plan to upgrade every few years, we’re mostly OK with it.

Except there’s nothing to upgrade to currently. The current iteration of Model S just is not different enough for me to take a hit on selling my current S (substantially devalued thanks to Tesla reducing prices of the new models). Most people didn’t even notice when I traded up from our 2103 S to the 2016. I want a car that people notice is different.

So, all of this sounds like first-world problems right? A few thousand ‘rich’ people whining about their $100k+ car not being pretty enough. Maybe. But most of these people are loyal to Tesla. Between us we’ve likely sold 1000’s of Tesla’s (and we’re not all rich, by the way!).

Where’s the love, Elon?

During the July 24 2019 Q2 earnings webcast, Elon was borderline dismissive about Models S & X. Joking about how they help spell S3XY, and saying that “But the story for Tesla’s future is fundamentally Model 3 and Model Y”. More specifically that S & X will only account for less than 5% of sales once Model Y and the Truck are launched, finishing with “from a volume standpoint, they're not all that important in the long term.” Ouch.

There’s significance in that last statement. No talk of margin, it’s all about volume now. Tesla is rapidly evolving into a massive production engine, and there’s little room for niche products that are difficult to manufacture, even if the margin is 25%, it’s better to sell 2M cars with a 15% margin than 100k cars at 25%.

But Still…

There’s life in the old gal yet. All Tesla needs to do is throw a couple of bucks at Model S, and they’ll sell a bunch more. I’m not talking about much. Just this list would likely net them another 100k order, or $2.5Bn in revenue:

  • Ventilated seats
  • Door bins (!)
  • Improved audio
  • Bring back the sunroof
  • Auto-open doors (from the X)
  • Grab handles
  • Spotify (sure, it could be pushed to the entire fleet, but it could hit S & X first)
  • Colors exclusive to S & X
  • Chrome delete

None of the above required any re-certification. Sure, some design work and re-tooling, but Elon has previously waxed lyrical about the tech they had to develop for the Model X auto-open doors, so why not get more value from it by putting it in the S?

A broader refresh, of things like the dash, the weak headlights, the battery tech maybe too hopeful at this stage. They require significant retooling and certification. But the rest is relatively easy.

Blimey, that was a long read

Yeah, sorry. I can get a little verbose when I'm passionate. The conclusion to all of this is that there’s a bunch of us S & X owners patiently sitting on the fence, waiting for something that’ll just push us into buying a new one. We’re an impulsive bunch and easily influenced, in part because we’re huge fans of Tesla. So, c’mon Elon, show us just a little love. I didn’t even play the ‘Tesla wouldn’t be here now if it wasn’t for us early adopters’ card