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Speculation: Software-locked 60 kWh M3 production

Discussion in 'Reserving, Ordering, Production, Delivery' started by Plantastic, Jun 23, 2017.

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  1. Plantastic

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    Sounds like production is going to start with the 75 kWh battery pack option only at first. I would like to discuss the possibility of M3 coming out of the gate with both options via a software lock.

    Why not only produce 75 kWh batteries with software locks?

    They have already done a software locked 60/75, so it shouldn't add significant complexity to hinder the production ramp? In the long run this would simplify production and generate additional revenue assuming enough people eventually unlocked them. I understand Tesla is super focused on the production ramp and keeping things simple at first, but they are also known for long term strategerizing.

    Also, this allows additional customization options for early reservation holders, while keeping production simple. Personally I would rather have a software locked 60 and spend that 5kish on other upgrades.

    I would probably end up unlocking the battery at a later date, but maybe not...most us of don't truly know if the base range will be sufficient or not. I would hate to forgo certain options/upgrades for the larger pack and come to find out later I would have been fine with the smaller pack 99% of the time.

    I apologize if this has already been discussed in detail, or confirmed/denied already.
     
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    • htrajan

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      This is a good point. My wild speculation is that on the more premium car (Model S), it wouldn't hurt their margins as much to sell a car with a 75 KWh battery where the user only pays for 60 KWh. However, on the mass market targeted Model 3, margins are everything - to the point that this tradeoff is probably the difference between making money and losing money on the car. Even if the user might upgrade later, maybe they do not want to take that gamble.

      Or, they might surprise us next month with both options available at launch. Not holding my breath, though.
       
    • Iaeen

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      Batteries cost money. Selling a 75KWh battery for the price of a 60 or 55KWh battery
      is throwing money away.

      Yes, they tried it with the Model S. They don't do it any more though because it probably didn't work out financially. If they could make a profit on a 75KWh battery at $35k, they should just sell it unlocked at 75KWh. That'd effectively crush anyone who tried to compete with them on range.
       
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      • Plantastic

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        Cost per kWh will stretch lower than ever before once production ramps on the m3.

        Benefits for Tesla
        -production efficiency
        -future revenue

        Benefits for owner
        -added customization and flexibility
        -used market value boost

        There has to be a point ($ per kWh) where the benefits outweigh the financial risk for Tesla. Like Rajan said, maybe this would kill any potential margin on the vehicle, but maybe not depending on cost per kWh.
         
      • Iaeen

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        Tesla's point of view: production efficiency is useless if it doesn't increase profits, and future revenue, which may never actualize, is irrelevant if it means throwing money away today. Tesla doesn't need the hope of money at some unspecified time in the future. They need money now. They have massive expansion projects going on, all of which have a higher ROI than a software locked battery scheme.

        My point of view as a (future) owner: I don't have much tolerance for software which locks me out of innate features of my car. If I buy the software locked version I'll wake up every day and think about how my car is being held back for no other reason than because I didn't fork over more money.

        If the $/kWh allows Tesla to make profit on a $35,000 75kWh car, the best thing they can do is sell a $35,000 75kWh car.

        Benefits for Tesla
        -Effectively destroy any competition who tries to compete
        -They would certainly get a lot of publicity for spectacularly overdelivering on their promised range

        Benefits for owner
        -More range is better than faux customization
        -Range that you can actually use is more valuable to secondhand buyers than range that is being held ransom by Tesla
         
      • SoFlaModel3

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        For all of the reasons stated above I say this never happens on the 3 and it failed on the S.

        We are talking less than 1% of buyers that are going to pay $5-7k ("cash") after taking delivery to add range.

        Further, this isthe breakthrough car for EVs. Once people realize that even 215 miles is more than enough there won't be a motivation to pay for the range.

        I think I drive a lot, certainly more than the average in the US. My daily commute is 70 miles round trip. Even on the base battery I have 2 days of range comfortably.

        Now I'll be getting the 75 because I don't want to delay getting the car, but it's clear that I don't need the range and would never pay for it after the fact.
         
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        • Plantastic

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          Maybe it is a long shot, and I am just thinking too optimistically here. Very valid points gentlemen. However, consider the following.

          No one minds the standard auto pilot hardware with the locked software.

          Tesla is closing in on $100 per kWh cost of battery production.

          $1500 cost for a $3-5k upgrade. This would require roughly 30 to 50 percent of the 60kWh owners to upgrade for Tesla to break even depending on the upgrade cost.

          30-50% upgrades over the life of the vehicle. Obviously as the vehicle depreciates, the likelihood of upgrading decreases.

          With the Model S, the 60kWh locked pack was introduced to lure model three buyers into buying an S. This was a short term gamble. At this point, their probably isn't enough data to determine how many of these owners actually upgraded or will upgrade. The purpose of this software lock would be both short term flexibility for early reservation holders, and lock term profits.
           
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          • MelindaV

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            difference is Tesla gets a benefit out of your car having the AP V2 hardware even if you do not buy EAP or FSD. So they have an interest in installing it in all cars to feed their database. (plus the emergency braking, collision avoidance, etc that everyone gets needs the hardware).
             
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            • SoFlaModel3

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              Think about it this way. That's $1,500 in cost added to say 100,000 vehicles annually. That's $150,000,000. That's a big hit. The cost for the AP2 hardware is less by far than the cost of the batteries and I agree with @MelindaV that it feeds their database which is something all other auto manufacturers wish they had right now. It also supports the active safety features.

              Let's say 10% of 100,000 upgrade (and I think that's generous), well they left $135,000,000 on the table.
               
            • Michael Russo

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              This idea has been discussed several times and I think most of us concur that this is very unlikely from a financial responsibility perspective.
              However as one of the potential <1% (SFM3, that estimate does feel a bit low ;)) who could have considered upgrading later, I just want to give @Plantastic a kudo for optimism. :)
               
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              • Iaeen

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                Exactly. Autopilot suffers from a bootstrapping problem because a large amount of data is required to train the neural network. Other companies who research autonomous driving are spending millions getting data-gathering cars on the road, but tesla has deployed the largest fleet of these cars with the smallest amount of capital investment by simply rolling it in to their production hardware. The ability to sell an aftermarket AP upgrade is just a perk.

                In addition, self driving isn't an innate feature of the car. It requires state of the art software for which I'm willing to pay for the privilege to use. There's nothing state of the art or valuable about a software lock. It's literally a piece of ransomware that makes the car worse. I'm not okay with ransomware on my car.

                Furthermore, being able to sell self driving aftermarket isn't necessarily a good thing from Tesla's perspective. I'm not planning on paying for FSD upfront because it currently isn't worth the cost. I'm going to wait and see if the FSD option turns out to be worth it before I sink the money into it. If I didn't have that option, I'd probably pay up and hope. The aftermarket option is therefore taking revenue away from Tesla right now.
                 
              • garsh

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                This is an interesting perspective, and one that I thought I'd hear from a lot more people when I first heard about Tesla offering paid software-unlocking of vehicle options.

                There's an argument to be made that I should be allowed to modify my car. It's codified as "right to self-repair" laws. It means that I should be able to repair my own car. It means I should be able to go to a non-manufacturer shop to have my car fixed. It means that I should be able to go to some shop to have my car modified and made better. But I think it also means that I should be able to change the software on my car however I see fit.

                Now we get into some interesting scenarios. What if somebody hacks their car to unlock that extra battery capacity. What if I determine how to turn on self-driving features for which I didn't pay. This is a big legal can of worms that both Tesla and Tesla car buyers have so far been avoiding, but I think it's inevitable that this part of the law is going to be tested at some point.
                 
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                • BobLoblaw

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                  I expect the bottleneck in pack construction to be the cells, not necessarily assembling the pack itself. With the Gigafactory pumping out cells, I don't really see any strategic advantage to building only one pack vs. two...but like most stuff on this car, that's just a guess...

                  BobLoblaw
                   
                • SoFlaModel3

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                  I disagree. I buy a lot of software that gets installed on my computer and has levels. Standard, Premium, of Pro as a for instance. Each move up the ladder unlocks features that were already realistically there in the program that I installed. It gives me the ability to use some of the platform and see if I want more.

                  I tie this into my above reply. If I can't "buy more later" and I make a hasty decision up front that I don't want it, that's really when Tesla loses revenue. This gives you the ability to say wow I really want that now and then now can be any time after purchase. How many manufacturers can say that their buyer will return to the tune of $4,000 later for them to literally change a 0 to a 1. I think this is a huge revenue play!

                  I was thinking the same thing. Where there is a will there is a way and people will be deceitful. The end result Tesla potentially loses revenue. I say potentially, because it's very likely these people weren't paying for it anyway and subsequently Tesla invested in the hardware. In the end, I think Tesla is ok. Look at how prominent stealing music was with the advent of Napster. Now look at Apple Music's monthly subscriber base and I think we find that given a sound and reasonable solution a lot of people opt to say on the positive side.
                   
                • garsh

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                  I see Tesla having a few options:
                  1. Warranty void with aftermarket modifications. That's pretty much a no-brainer. They can't offer a warranty for software they no longer control.
                  2. Tesla removes access to their servers. That means no more self-driving updates (or any other kind of software update) from what is already downloaded to the car, so no additional feature updates for your modified car. It would be difficult to update software that they no longer control anyhow - could brick the car.
                  3. Tesla decides to sue people who "steal" these features. I think this would cause a lot of very bad PR.
                  4. Tesla decides to sue people/companies who offer to "unlock" these features for others.
                   
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                  • Iaeen

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                    Again, you're talking about software, not hardware. Like AP, software that adds value is often worth paying for.

                    A software locked battery is a hardware feature that is disabled by software. When I buy hardware, I consider myself as having the right to use that hardware to the fullest. Intel would never get away with selling an 8 core processor that is software locked to 4 cores, and I'm not going to buy a 1TB hard drive that is restricted to 256GB unless I pay extra money to Western Digital.

                    Sure, the line between software and hardware is blurred with modern mobile devices that come pre-loaded with whichever operating system that is non-trivial to uninstall and change. Tesla certainly falls into this category. In this category, consumers expect that the software is there to make the hardware as good as it can be. There's often backlash when some feature is withheld for no perceived reason (why isn't Siri available on iPhone 5, so called "planned obsolescence" when the hardware doesn't support the latest update, etc...).

                    I'm not saying that everyone would be outraged over this, but I think the target segment for the Model 3 is going to be more sensitive to this.
                     
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                    • SoFlaModel3

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                      Well I was talking more autopilot than battery. I disagree with software locked batteries from a company perspective as it's a horrible business idea anyway.

                      That said, sure you buy hardware that is "dialed back" all the time. The very processors you're talking about ... dialed back. That's why you see chipping cars as a popular thing to do. Of course those are different constructs whereby they are dialed back for reliability more than anything. Yes it's a fine line on hardware/software, but I still don't see the problem. Even take the battery example ... I buy 60 kWh. The manufacturer sticks 75 in there and dials it back to 60. Did I not get what I paid for? I don't see the problem here...
                       
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                      • SoFlaModel3

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                        They can't outright void your warranty unless they can prove what you did caused whatever issue you bring your car in for.

                        Now assuming they know you've "hacked the car", sure they can do certain things ... then again what they would be best off doing is solving for the vulnerability, pushing out updates, and reversing whatever someone did. For instance they know in their database if the car should have autopilot or not. If it has it when it shouldn't, they could easily reverse it and again block the vulnerability.

                        I doubt they start suing people. It's not worth the time or money.
                         
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                        • MelindaV

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                          They are not Microsoft after all. ;)
                          You are essentially purchasing a computer and software with a vehicl attached. I would expect the purchase agreement states you will not perform unauthorized software updates (hack the computer). I would expect unlocking something on an individual car likely happens on Tesla's server side of things, not at the car level, so now you are into an entirely different type of software piracy.
                           
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                          • Iaeen

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                            Ah, that wasn't obvious. The point of my post was that AP software is a feature worth paying extra for and in contrast to the software lock which I classify as ransomware. It sounds like we actually agree ;)

                            They'd also probably lose. Apple tried to shut down the jailbreakers who were hacking iOS, but that didn't work out well for them.
                             
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