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Elon Musk Employs Common Dealership Tactics with Model 3

August 9, 2017 0 Comments

While Tesla, Inc., tends to proclaim how innovative and set-apart its electric vehicles are from the competition, Elon Musk’s methods for promoting the new Model 3 echo how mainstream dealers have traditionally drawn showroom traffic.

In a July 31 report, Barclays analyst Brian Johnson wrote that Tesla’s marketing tactics for the Model 3 are “similar to how local car dealers advertise.”


“One of the oldest car dealer advertising ‘tricks’ is to advertise an irresistible price for a popular car – say a lease for under $150 per month – in order to generate showroom traffic, only for the car shopper to later realize that the price is for a base model with little appeal,” Johnson wrote. “The similarities to legacy car sales tactics might dim the enthusiasm of the faithful.”


Tesla, which has already garnered over 500,000 pre-orders for its new sedan, is marketing the Model 3 at $35,000 at its base price. On Friday, Tesla said that the “fully-optioned” Model 3 could reach $59,500 – a little out of reach for many mainstream buyers.


Musk revealed some of the Model 3’s specs at his handover party last Friday night: a 220-mile range, with a bigger-battery version hitting a 310-mile range for $44,000.


Choosing the higher-end model and adding the upgrades, which include larger wheels, color options besides black, the Enhanced Autopilot feature, and a tinted roof can add $25,000 to the base price.


Additionally, Musk is encouraging Tesla customers to upgrade the Model S rather than waiting for the Model 3, another tactic traditional car dealers use to push consumers towards more expensive options after luring them in with low-priced vehicles.


“The brand value and market cap of Tesla revolves so much around being not a car company but some sort of futuristic force to save the planet,” wrote Johnson. “We will be paying close attention to social media and Tesla owner/reservation holder forums to see if there is any weakening of the faith among the true believers.”


As of 12:06 p.m. in New York trading, Tesla dropped 2.6 percent and “traded down” 2.4 percent. Optimism surrounding the Model 3 helped shares rise 53 percent this year, overtaking General Motors Co. and Ford Motor Co. in market capitalization.

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