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Last week Elon Musk-led automaker Tesla announced a spate of new announcements in a company blog post.
The announcements include the following:
- Tesla will shift all sales online over the coming months and away from its physical franchises, a move that’ll make it the first automaker in the US to sell cars only online.
- It will cut the prices of all three of its cars. The firm has finally introduced the $35,000 version of its Model 3 sedan, its least expensive vehicle. The price of three versions of the Model S and Model X are also being cut by a few thousand dollars each.
- Tesla also announced an expansion of its ecosystem of services. Chief among them will be same-day car repair and services where workers go to Tesla owners for repairs. Meanwhile, the automaker will upgrade the firmware in the Model 3, allowing it to go faster and travel longer distances.
- Musk announced plans to eventually introduce a car that’s even cheaper than the Model 3. He declined to specify any further details on the car, only saying that it’d be introduced within "two to three years."
The price cuts and more affordable new model are part of Tesla’s years-long transition toward becoming a mass-market automaker. Musk has repeatedly emphasized his desire for Tesla to become a mass-market auto company. The cheaper Model 3 is at the center of this strategy, but the carmaker knows it must do more than introduce a single new model, especially as legacy automakers encroach further on its territory.
Though the company may never offer cars as inexpensive as brands like GM, Ford, or Honda, the price cuts and the forthcoming cheaper car are part of its gradual shift to broaden its appeal. Its eventual aim is likely to be on par with BMW, for example, a luxury automaker whose lower-end cars are affordable for middle-income consumers.
More broadly, the agreement also demonstrates that Tesla’s strategy has evolved toward operating an ecosystem of services. Cheaper cars are likely more a means to an end for Tesla — it wants to expand its potential customer base, ultimately bringing more consumers into its ecosystem that it can tap for recurring revenue by way of services.
One initiative is a newly restructured pair of services for Autopilot, its autonomous driving technology. Customers can purchase a basic Autopilot system on new Teslas for $3,000, and for an additional $5,000 get a system that can support full autonomy when the technology becomes available.
Meanwhile, the automaker hiked the price of its superchargers earlier in 2019, the second price hike for its US customers in the last year. The firm also appears intent on charging consumers for future upgrades to Autopilot and other software that powers its cars.
Last quarter marked the first time Tesla was ever profitable in back-to-back quarters, and a broader push toward offering a holistic ecosystem of products and services should help it to stay in the black over the long-run. Such a strategy isn’t unique to Tesla — it’s similar to Apple’s emphasis on its services segment, for instance — but is new to the auto industry.
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