Industry Pioneer: Tesla transforms automotive business model with in-app purchases [Video]
Last week, the big news from Tesla Motors [NASDAQ: TSLA] was its decision to reintroduce a lower-priced 60kWh option for the Model S. It's conceivable that this new option will help absorb some percentage of the Tesla Model 3 pre-order individuals who were considering a higher-end version of the car. To that end, they might be unwilling to wait too long for the Model 3 and consider the Model S 60 a perfect reason to buy a Tesla now. However, it's also possible that this move heralds an exciting new strategy from Tesla Motors.
Wired* explains that the, "Tesla Model S with a 60 kilowatt-hour battery, a 200-mile range, and a lower price didn’t require redeveloping the [battery] pack, revamping the assembly line, or reconfiguring the supply chain. All it took was a few lines of code. That’s because the Model S 60 and its all-wheel-drive sibling, the 60D, carry the same 75 kilowatt-hour battery Tesla Motors already puts in the Model S 75. Engineers simply tweaked the software to limit its capacity by 20 percent. This lets Tesla quickly and easily offer a model at a lower price—thereby goosing sales—and gives customers the option of upgrading down the line as their needs and budgets change."
Wait... why would Tesla make this decision? "It sounds crazy: Tesla is building overly capable cars, limiting their use, and selling them at a discount—then charging $9,000 for an upgrade. Tell the dealer you want more range, hand over your money, and Tesla presses a button. Zap. Software update. Gamers, of course, recognize this for what it is: an in-app purchase, in a car." Outside of the auto industry, this is a common occurrence, "From Battle Camp to Candy Crush to Angry Birds, you’ve accepted that a 'lite' version is free and the really cool features cost money. Developers hope to hook you on the free stuff so you’re willing to pay for more. Tesla does the same thing."
And this isn't the first time Tesla tried this approach, "Customers who pay $2,500 for Autopilot are simply paying to have the software activated. Tesla already installs the cameras and radars—the stuff that actually costs money—in every car. Early adopters who didn’t get automatic access to Tesla’s network of Supercharger stations can add it for $2,500. The hardware needed to quickly suck down electrons is already on the cars, they just needed the software... [therefore] if you skimp on Autopilot but decide you want it a year later, you don’t need a new car. If a new job brings a longer commute and a raise, paying $9,000 for 20 percent more range becomes a great option."
Wired concludes that its likely we'll see other automakers following Tesla's lead, "Want satellite radio? Tap in your credit card details to enable it. Your phone died and you absolutely need the navi system you skipped at the dealer? No problem. It’s one quick purchase away. Didn’t pay for heated seats because you bought the car in Miami, but now live in Minneapolis? You get the point. In the past, automotive dashboards had black plastic blanks where the features you didn’t pay for would have been. These days, filling them is a simple matter of updating software."