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With Tesla's recent price cuts, there has been a surge in orders. This makes sense because the price of Tesla's vehicles went down by as much as 20%. It's total addressable market is about triple what it used to be.
Now that the U.S. IRA tax credit is in affect and Tesla has drastically lowered its prices, the total addressable market for Tesla's vehicles has massively increased. Here's what it is now:
* The Tesla Model 3 RWD has increased by 2.5x from about 10% at $47,000 to about 25% at $37,000. 25% of consumers can now afford this vehicle.
* The Tesla Model Y Long Range has increased by 4x from about 4% at $66,000 to about 16% at $45,000. 16% of consumers can now afford this vehicle.
This is a huge deal. In fact, there is an inflection point that seems to get hit as a vehicle gets to the $37,000 mark. An exponential increase in consumers that can afford the vehicle start to appear and once it gets to $20,000, most consumers can buy the car.
This bodes well for the Model 2 - the compact car, which will be Tesla's generation 3 vehicle. 100% of the market will be able to afford this car at a $20,000 price point and that will be even crazier with the IRA tax credit. Tesla's compact car won't be $30,000 or even $25,000. The U.S. government is going to have to rethink this when Tesla releases their generation 3 vehicle.
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Supply and Demand of Tesla Vehicles
Supply and demand is an important part of Tesla's success. Because Tesla's EV's have lower maintenance, incredible software with Autopilot, FSD, and over the air updates, and the best charging network with its Supercharger network, it is no wonder that consumers want a Tesla. The only barrier is price.
Elon Musk has stated that he will produce as many Tesla vehicles as he can in order to help transition the world to sustainable Energy. This makes sense and if you believe that FSD and autonomy are going to happen, then Tesla must do whatever it takes to get as many of its vehicles on the road as it can.
There is definitely a sweet spot at the $37,000 and $45,000 price points. It's at the top of a curve of available consumers who can afford a vehicle at that price.
Other companies who aren't able to reduce their prices and make a profit like Tesla are going to have a very difficult time surviving the transition to electric vehicles.
What do you think of Tesla's addressable market? Are these price points for available consumers accurate?
In Related News: Tesla Model Y to Lead European Car Market
Tesla— Mathias Fons (@FonsDK) January 18, 2023
Tesla's Addressable Market
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Jeremy Johnson is a Tesla investor and supporter. He first invested in Tesla in 2017 after years of following Elon Musk and admiring his work ethic and intelligence. Since then, he's become a Tesla bull, covering anything about Tesla he can find, while also dabbling in other electric vehicle companies. Jeremy covers Tesla developments at Torque News. You can follow him on Twitter or LinkedIn to stay in touch and follow his Tesla news coverage on Torque News.
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