# Tesla will stop selling cars in the future [at current bargain-basement prices]



## $ Trillion Musk (Nov 5, 2016)

https://electrek.co/2019/07/08/tesla-will-stop-selling-cars-full-self-driving-elon-musk/

The only time I heard about this was from Zac & Jessie at Now You Know on YouTube about a month ago. This time, Elon Musk himself proved the hypothesis to be true!


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## Dr. J (Sep 1, 2017)

$ Trillion Musk said:


> https://electrek.co/2019/07/08/tesla-will-stop-selling-cars-full-self-driving-elon-musk/
> 
> The only time I heard about this was from Zac & Jessie at Now You Know on YouTube about a month ago. This time, Elon Musk himself proved the hypothesis to be true!


I think Electrek's interpretation is slightly off track. Musk clarified:

"To be clear, consumers will still be able to buy a Tesla, but the clearing price will rise significantly, as *a fully autonomous car* that can function as a robotaxi *is several times more valuable than a non-autonomous car* " [emphasis added]

I suspect Tesla will continue to sell competitively priced non-FSD cars, and will charge an arm and a leg for FSD. Regardless, the plan still requires self-driving to be solved, which isn't here yet (and may not be for quite some time). For believers, the arbitrage opportunity is to buy FSD at today's prices.


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## DanSz (Feb 1, 2019)

Fred’s article titles are basically total clickbait, misleading and meaningless.

Edit: ok. It’s not written by Fred.


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## FRC (Aug 4, 2018)

DanSz said:


> Fred's article titles are basically total clickbait, misleading and meaningless.


As is the titie of this thread!


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## Love (Sep 13, 2017)

FRC said:


> As is the titie of this thread!


80085


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## garsh (Apr 4, 2016)

FRC said:


> As is the titie of this thread!


Fixed.


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## msjulie (Feb 6, 2018)

I sure hope the interpretation that suggests 'regular old' Teslas that people love to drive will still be a thing.. given how hard the tech is and government approval processes, I think robo-taxes still aways away...


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## JasonF (Oct 26, 2018)

There is some misinterpretation here. What the article (and Elon) refer to is that the prices of cars keep increasing, and regular buyers' income isn't increasing to match.

If you notice, companies like Carmax and Carvana are popping up like weeds to sell pre-owned (used) cars. It used to be that used cars were sold by small lots that were barely profitable, and now it's a _huge_ business. There are even a couple like Copart that sell very used and totalled cars as well. The reason, in both cases, is that the monthly payments for new cars is increasing rapidly with price, and it's gradually going to become unaffordable for most people. Eventually used ones will be unaffordable as well.

So how do car companies solve that problem? They don't want to reduce the prices, because they don't want to cut their margins and upset the stockholders, or spend the money on R&D on how do build the cars much cheaper, and there are penalties for building them overseas in pre-industrial nations. There are far too many car companies and models to compete in a much smaller space of wealthy customers only (plus that would strangle the supply of used cars as well, increasing _those_ prices out of reach).

In short, if current trends continue, the automotive industry will eventually kill itself. And if people can't buy cars, they'll be forced to use ride sharing services instead, because they still have to get to work. So companies like Tesla, Ford, and GM are looking into becoming the owners of ride-sharing fleets instead, because if car prices increase until they're in the 6-figure range, and incomes don't increase to be able to make the payments, that's the only way they will be able to survive.

The same thing is going on in the housing industry. Builders who used to build mass neighborhoods and then sell and divest themselves of the properties are now continuing ownership because they can rent the homes much more easily than sell them now. The same forces are at work here - incomes aren't increasing enough to keep up with increasing housing prices. So if nothing changes, the future seems to be all in rentals.

Then again, all of that depends on "if nothing changes", so it could be some breakthrough in technology or incomes will change the model. That's the biggest fault with all of the articles like this - they all assume that the current trend will continue, and nothing will come along and change it.


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## MelindaV (Apr 2, 2016)

JasonF said:


> That's the biggest fault with all of the articles like this....


I would first go with the biggest fault of articles like this is it wrote over 1200 words based on a tweet that consisted of 3 letters.


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## M3OC Rules (Nov 18, 2016)

msjulie said:


> I sure hope the interpretation that suggests 'regular old' Teslas that people love to drive will still be a thing.. given how hard the tech is and government approval processes, I think robo-taxes still aways away...


I think banning driving will happen someday but there is no way it's happening anytime soon. Even if the technology was ready today it would take a long time to get enough cars out there to ban driving and you would have to have full level 5.(On a side note it is a problem for car manufacturers well before it hits the masses because the future will look dim for them if they don't have the technology.) I'm optimistic Tesla will get to FSD but in reality, no one knows if they actually will or when. I would not base my buying decision on lvl4 or lvl5 technology. If the existing FSD features aren't worth it to you I would wait and I would not assume I'm going to make any money from the car. I don't like using future features as a sales pitch. Investors yes, consumers no. I'm not sure if Elon sees it that way or if he's just trying to be honest.


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## JasonF (Oct 26, 2018)

M3OC Rules said:


> I think banning driving will happen someday but there is no way it's happening anytime soon.


I don't think that will happen. Think about all of the older vehicles that people like to restore and keep alive. If they are forced to either restrict them to "show only" or retrofitting it, that entire industry will die.

Instead, I believe there will eventually be stiff insurance penalties for driving yourself. That will happen as soon as self-drive is viable - if you buy a car without FSD, or insist on not using it, your insurance will cost a lot more.


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## garsh (Apr 4, 2016)

JasonF said:


> Instead, I believe there will eventually be stiff insurance penalties for driving yourself.


There's no need for insurance rates to rise when autonomy is viable. Current insurance rates cover the current level of human-caused accidents just fine.

I think (well... hope) what we'll see is that insurance rates for self-driving vehicles will eventually end up being much lower than current rates. It will be less expensive to own and operate an autonomous vehicle.


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## JasonF (Oct 26, 2018)

garsh said:


> I think (well... hope) what we'll see is that insurance rates for self-driving vehicles will eventually end up being much lower than current rates. It will be less expensive to own and operate an autonomous vehicle.


The good news there is the IIHS works from actual data (as opposed to fear of technology). So if the rate of crashes and/or damage drops really low because of autonomous driving, the rates will drop accordingly.


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## DocScott (Mar 6, 2019)

The idea that the price of the car will go up if it can be used for a robo-taxi misunderstands some basic economics. Outside of gouging or frivolous situations, it's not generally sustainable to have a produce with profit margins of hundreds of percent! And if the idea is that Tesla could produce a car for, say, $40k, and then make a net of $300k off of it as a robo-taxi, something's got to give.


First of all, the cost of taking a robo-taxi would likely drop compared to what we pay now for Uber and Lyft. Tesla will have competition, and even if Tesla has the lion's share of the market, that competition will gradually drive down the prices to more normal profit margins. So that $40k car might act more like a normal income-producing asset (e.g. a rental home), with more "normal" rates of return. Thinking that normal rates of return would be achieved by raising the cost of the car rather than dropping the cost of using a robo-taxi flies in the face of how prices usually work.

If, somehow, that didn't happen, it would presumably be because Tesla achieved a near-monopoly. In that case, governments will step in. Tesla would then be something like a utility, with rates that were capped, and/or governments would increase taxes on robo-taxis.

Either way, new Tesla car prices aren't going to skyrocket because there's a way to make money off of owning the car. Heck--there are ways to make money off your computer (e.g. bitcoin mining in the early days, or other kinds of distributed computing now), but it didn't cause the cost of a computer to skyrocket.

Elon has been good at delivering on tech promises, and on benchmarks like sales, even if it's sometimes on "Elon time." But his promises on future pricing have generally been worthless. I don't think he's dumb about this kind of thing, so instead I think he's being less than straightforward in order to sell cars or boost the stock price or whatever his goals for the company are at the time. Saying the car is "an appreciating asset" is a lure to cut down on the number of people who wait to purchase so that the prices drop and/or the technology to improve. But instead, like most technological products, newer models will tend to be better values than older ones, because either capabilities improve or prices drop, or both. Teslas may depreciate more slowly than other cars, but they're still going to depreciate!


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## JasonF (Oct 26, 2018)

DocScott said:


> The idea that the price of the car will go up if it can be used for a robo-taxi misunderstands some basic economics. Outside of gouging or frivolous situations, it's not generally sustainable to have a produce with profit margins of hundreds of percent! And if the idea is that Tesla could produce a car for, say, $40k, and then make a net of $300k off of it as a robo-taxi, something's got to give.


A severe price increase on new Teslas to shift to cars-for-hire is based on a few assumptions:

- It requires Tesla to obtain financing to buy it's own cars. No, I'm not being a smartass. If Tesla spends money building cars, the stockholders expects the company to sell them, not sit on them. Cars-for-hire make money far more slowly than simply selling the cars to customers, so they're essentially sitting on the money spent - unless they can finance them. Yes, that also means the company will be on the hook for interest payments, which lowers the profit margin of the for-hire service, and causes the prices to be higher. More on that in a moment.

- It assumes that after financing its own produced cars, the overhead costs don't cause it to price its for-hire service above their competition. This is where the "end to private ownership" part comes in - because if you can buy a Tesla at a reasonable price with FSD, then _you are Tesla's competition_. So they would have a lot of incentive not to sell those cars to themselves instead. UNLESS...and this is a big UNLESS...Ford, GM, Uber, Lyft, or Waymo manage to severely undercut the rates Tesla can afford to charge. It might even be that human-driven Uber cars would have a much lower rate, depending on the overhead Tesla has to deal with.

- It also assumes - and this is the biggie I was talking about above - that the trend continues of car prices heading out of reach of the average consumer, forcing those people to look only at _used_ cars. FSD cars-for-hire are going to be retired from service relatively quickly - they aren't going to drive them for 10 years and scrap them. Common business practice is to fully depreciate them at about the time the financing is paid off, and then sell them or dump them. That would flood the used market with 3 to 5 year old Tesla models, and the bottom would drop out on price. That's a _huge_ risk, because if those particular cars haven't made back the cost of building plus interest by then, it will be a drag on the whole company, and the stockholders will throw a gigantic fit.

That last part is really important, because if any of those predictions are off - and they probably will be - Tesla is better off turning the whole strategy around and _leasing_ new cars to customers first without a customer buyback provision - the stipulation being that Tesla will take the car back after the lease, and use it for car-for-hire service. In this strategy, lessees may be prohibited for using their cars for-hire or required to pay more if they do, in order to keep their own customers from competing with them. It would also keep the used market from being depressed as well.


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## slacker775 (May 30, 2018)

JasonF said:


> That last part is really important, because if any of those predictions are off - and they probably will be - Tesla is better off turning the whole strategy around and _leasing_ new cars to customers first without a customer buyback provision - the stipulation being that Tesla will take the car back after the lease, and use it for car-for-hire service. In this strategy, lessees may be prohibited for using their cars for-hire or required to pay more if they do, in order to keep their own customers from competing with them. It would also keep the used market from being depressed as well.


This is the part that is very intriguing to me. I'm very interested in the FSD-based robo-taxi concept, especially if (putting it extremely simply) my piece of it would be buying and maintaining a vehicle (or a fleet) but Tesla is providing all of the infrastructure - mobile app, payments, advertising, etc. The biggest sticking point would be that notion where I'd be their customer and competition at the same time. Granted, this happens in the business world all the time (Apple buys chips from Samsung while actively competing and suing them for example). One would hope that they wouldn't use their position to dominate in lucrative markets while leaving less profitable areas for owners to service.


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