Cybercatch22: Demand vs Delay

[Deleted member 3316]

Overall, without any useful metric to define the extent of the scalping problem

Scalping prevalence = (Price - Cost) x Demand / Supply

Where:

• Price: the market price of the goods being scalped
• Cost: the cost of acquiring the goods being scalped
• Demand: the level of demand for the goods
• Supply: the level of supply of the goods

This formula assumes that scalpers are motivated by the potential profit they can make from reselling the goods at a higher price than their cost of acquisition. The formula also takes into account the level of demand for the goods, as higher demand indicates high value and therefore more incentive for scalping. Conversely, a low supply of goods may also contribute to higher prices to mitigate incentive for scalping.

But to reiterate, scalping isn’t the functional problem. The primary problem is affordability.

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[JBee]

Scalping prevalence = (Price - Cost) x Demand / Supply

Where:

• Price: the market price of the goods being scalped
• Cost: the cost of acquiring the goods being scalped
• Demand: the level of demand for the goods
• Supply: the level of supply of the goods

This formula assumes that scalpers are motivated by the potential profit they can make from reselling the goods at a higher price than their cost of acquisition. The formula also takes into account the level of demand for the goods, as higher demand indicates high value and therefore more incentive for scalping. Conversely, a low supply of goods may also contribute to higher prices to mitigate incentive for scalping.

But to reiterate, scalping isn’t the functional problem. The primary problem is affordability.

Scalping can only increase the price in the second hand market, not the primary market from the manufacturer. So people who can't afford it simply don't get it a choice to get it early, but it doesn't increase their cost from the manufacturer, just how long they wait for it.

So unless the scalpers can force Tesla to increase the price of the orders somehow, against Teslas will, I can't see how they make it less affordable for customers buying directly from Tesla.

 

[Deleted member 3316]

Scalping can only increase the price in the second hand market, not the primary market from the manufacturer. So people who can't afford it simply don't get it a choice to get it early, but it doesn't increase their cost from the manufacturer, just how long they wait for it.

So unless the scalpers can force Tesla to increase the price of the orders somehow, against Teslas will, I can't see how they make it less affordable for customers buying directly from Tesla.

This discussion of scalping is an extraneous strawman.

Scalpers can’t force Tesla to do anything, scalpers are not a cohesive group. Tesla responds to the consequences of its pricing by adjusting its pricing.

Why doesn’t Tesla charge $35k for Model 3?
It’s profitable at that level.
What happens in the secondhand market when the waitlist extends past 6 Months?

 

[JBee]

This discussion of scalping is an extraneous strawman.

Ok, maybe I missing something then, so what are you actually proposing then to improve affordability for customers, if scalping isn't a problem and decreasing affordability?

 

[Deleted member 3316]

Ok, maybe I missing something then, so what are you actually proposing then to improve affordability for customers, if scalping isn't a problem and decreasing affordability?

And……Right back around to the start

Two tiered market structure.

• Reservation holders can buy at low MSRP with a covenant preventing on selling for a predetermined time. (18-36months)
• Reservation holders can also purchase at multi-lot auction with no resale restrictions.
• As production ramps and interest heightens regular weekly/monthly multi-lot auctions could be open to all, (for a small percentage <10% of the production) matched to the rate of cancellations of reservations.
• The end of quarter deliveries would be simpler as there would be a few people ready to collect the same vehicle.

(Edited for clarity)

Properly articulated where is the damage to brand?

What is the net negative impact?

 

[JBee]

And……Right back around to the start




Properly articulated where is the damage to brand?

What is the net negative impact?

What does it do though? What is the intention?

 

[Deleted member 3316]

What does it do though? What is the intention?

The intent is to drive the Tesla mission.

1. It enables a (mostly) static pricing structure for the entire reservation list,(Primary, mission driven goal)
2. Provides a mechanism to capitalise on the non reservation demand at market clearing prices, (secondary shareholder driven goal)
3. Provides an indication of the market value of the vehicle if initial static price needs an upwards adjustment for force majeure events, (Market assessment goals)
4. A demand indicator to lower prices. (See 3)
5. An internal incentive for Tesla to quickly ramp within the initial restriction period so as not to be competing with the 2nd hand market. (Mission driver)
   
   

Properly articulated, where is the damage to brand?

What is the net negative impact?

 

[JBee]

The intent is to drive the Tesla mission.

1. It enables a (mostly) static pricing structure for the entire reservation list,(Primary, mission driven goal)
2. Provides a mechanism to capitalise on the non reservation demand at market clearing prices, (secondary shareholder driven goal)
3. Provides an indication of the market value of the vehicle if initial static price needs an upwards adjustment for force majeure events, (Market assessment goals)
4. A demand indicator to lower prices. (See 3)
5. An internal incentive for Tesla to quickly ramp within the initial restriction period so as not to be competing with the 2nd hand market. (Mission driver)

Properly articulated, where is the damage to brand?

What is the net negative impact?

Ok this seems to be getting more hypothetical as we go along, but let's have a look for argument's sake.

1. it doesn't add to a static pricing structure it makes it more dynamic, by introducing a secondary Tesla market richer people can take advantage of, creating a "tiered" pricing which excludes the primary market from participating, and causes them to believe Tesla is accommodating the rich as a priority.

2. vehicles you sell at "market clearing rates" have to come from "somewhere". You can't sell the same vehicle from the same owner twice. So you are reducing the pool of vehicles available to those in the queue and are making it Teslas problem to deal with resellers, which they can then also capitalise on? As a customer my position would be why is Tesla manipulating my position in line to scalp us, the customers, themselves?

3. this comment is ignoring the reality that Tesla has a known main fixed costs over the lifetime cycle of the vehicle that come from capex, and that the only variable in that equation is the supply costs, that they are also vertically integrating and long term contracting to reduce variability.

Especially in the beginning costs are higher from various factors, including low productivity, but over time costs reduce. These costs nonetheless have fairly high confidence levels with small, diminishing variables over time. This means that Tesla can afford to set prices close to break even and at no profit at all, in fact even at below cost if they so choose, because they can compensate for that later on when productivity goes up and costs per vehicle go down. Importantly they can do this without changing the price to the customer at all. In fact many ICE vehicles are sold below cost in order to recover them from part sales instead over the lifetime of the vehicle.

Another factor to consider here is that the marketing of any vehicle is not done after the vehicle is designed and already in manufacturing. All this occurs prior to the design phase and forms a cost constraint on the design and manufacturing. Doing this afterwards as suggested here is pointless, because it is no longer possible to change the manufacturing line or design. If Tesla relied on a "post-budgeting" method it would be in big trouble very fast. Likewise the importance of post budget price adjustments is marginal at best, and would only lead to disgruntled customers that are annoyed at Tesla letting the rich jump the queue.

4. As above, the indicator is the market analysis prior to production. There is no value in a post production indicator, especially if you can go by orders instead. (which in the case of the CT is sold out for the next 2-3years anyway, so even more pointless)

5. I don't think Tesla needs any more incentives to increase productivity. This is by necessity, and inherently incorporated into the whole reason for it's existence. Simply it would if it could, but can't, because external factors limit it's output, which is the real constraint of affordability, and can't be improved upon with a very short term auction process to allow rich people to jump the queue.

__


It is not only damaging to the brand as described in various parts above, but is also just very poor business management and foresight if they would ever consider doing so post development. Further it in no way helps to increase the production of vehicles and increase supply to customers, therefore also does not contribute to achieve the mission. Even if it could temporarily increase profits for a short time it does not offer a solution to the real problem that dictates price, being the supply constraint.

 

[cvalue13]

So unless the scalpers can force Tesla to increase the price of the orders somehow, against Teslas will, I can't see how they make it less affordable for customers buying directly from Tesla.

I’ve got an idea for accomplishing that:

what if Tesla ditched all the existing reservation holders and their MSRP, and instead held auctions for units until demand reduced to equilibrium with MSRP?

Now at first glance you might not think that would be “against Tesla’s will,” but wait until @***** gets ahold of them

 

[Deleted member 3316]

Firstly JBee thank you for interacting in a genuine manner, your input is insightful and thought provoking.

1. it doesn't add to a static pricing structure it makes it more dynamic, by introducing a secondary Tesla market richer people can take advantage of, creating a "tiered" pricing which excludes the primary market from participating, and causes them to believe Tesla is accommodating the rich as a priority.

Ummm….no… The reservation system is already excluding a majority of the market.

The first part of this is to address the reservation list and keep price low and static. That is the purpose of the resale restriction. The auction price would be extremely volatile completely dictated by the market, with supply being Tesla’s only involvement. Rather than increase prices to control demand they would allocate slightly more supply that would normally have been scalped. See below.

on? As a customer my position would be why is Tesla manipulating my position in line to scalp us, the customers, themselves?

Your position isn’t manipulated, it’s just that the places scalped are made visible. Those people were going to jump the queue anyway whether Tesla involved themselves or not. Places aren’t “lost in line because those paying a premium would have paid extra to a scalper rather than Tesla.

3. this comment is ignoring the reality that Tesla has a known main fixed costs over the lifetime cycle of the vehicle that come from capex, and that the only variable in that equation is the supply costs, that they are also vertically integrating and long term contracting to reduce variability.

Teslas costs are irrelevant to market value. Just as Fords -40% margins are irrelevant to the market value of the F-150 lightning

4. As above, the indicator is the market analysis prior to production. There is no value in a post production indicator, especially if you can go by orders instead. (which in the case of the CT is sold out for the next 2-3years anyway, so even more pointless)

Indicates a high point of the market clearing price. To help manage % of margin acceptable to maintain demand/supply matching. I think you’ve misunderstood this. Once auction prices close in on the MSRP it’s will be apparent it’s reaching a market clearing price and possibly should be lowered.

5. I don't think Tesla needs any more incentives to increase productivity. This is by necessity, and inherently incorporated into the whole reason for it's existence. Simply it would if it could, but can't, because external factors limit it's output, which is the real constraint of affordability, and can't be improved upon with a very short term auction process to allow rich people to jump the queue.

Tesla doesn’t require any more incentive to increase supply it is a sideeffect providing yet another data point for encouragement.

I think the difficult thing to parse is the two different prices for the exact same product.

If we take a different approach;

What disadvantage to you personally, as a reservation holder, would you experience?

Or maybe;
What do you think I’m trying to solve?

Because it’s the question that’s the difficult thing.

 

[Deleted member 3316]

Late to this particular forum, and I won't get too involved here except to say that if someone has preconceived intentions to 'flip' a Cybertruck they aren't appreciating it's revolutionary tech and substance anyway (and no doubt some people like that are out there).

I’d be interested in your opinion of the additions this market strategy would provide over just a resale covenant.

 

[Throwcomputer]

Did an article get posted to this forum which had as its primary source... An argument on this forum?

?‍?

-Crissa

At least these articles are finally coming straight out and admitting they are getting their information directly from this forum. Normally they all just post what they read on here as fact gleaned from some secret insider. Haha!

 

[cvalue13]

CAN WE ALL JUST REPETITIVELY POST “@***** IS RIGHT” ON ALL THESE THREADS?

@***** ’s original thread was locked down.

He made 3-4 more threads all on ~same topic.

He’s taken over 2-4 more threads, for being close to “his” topic.

He’s used fabricated ChatGPT responses as support for his topic.

He’s posted website “articles” as support, not mentioning that he wrote the article.

In those articles, he’s cited his own forum posts here as support, not citing himself as author of the posts.

He’ll stop at nothing.

CAN WE ALL JUST POST “@***** IS RIGHT” REPETITIVELY ON ALL THESE THREADS?

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