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Tesla Model 3: How Tesla will fit $8,000 of Autopilot/self-driving features in a $35,000 car?

Tesla Model 3 silver prototype promo shot headlands

Just as industry analysts are coming around to the idea of achieving a ~$35,000 price tag on a long-range all-electric vehicle, Tesla announces that his own entry in the segment, the Model 3, will also be equipped with a hardware suite capable of self-driving.

The same hardware suite is already available on the Model S and X and it costs $8,000 to activate. 

It consists of 8 cameras, 1 radar, ultrasonic sensors and a new supercomputer. While all vehicles coming off the assembly line are equipped with the entire suite regardless of the customer ordering it or not, Tesla is betting that customers will order at least one of the two options: the ‘Enhanced Autopilot’ ($5,000) or ‘Full Self-Driving’ ($8,000).

That’s a safe bet with the Model S and X since they start at $66,000, but it’s another thing with the Model 3 starting at $35,000.

A lot of people are planning to buy the Model 3 with the bare minimum options and they are even counting on the federal tax credit or other incentives to be able to afford it. It’s difficult to imagine how Tesla could afford to install those sensors without customers paying for it and activating the features.

Of course, $8,000 is the price of the package, not the actual hardware, but that’s what Tesla customers are paying now.

The price might go down by the time the Model 3 gets to market in mid to late 2017. Tesla will have almost of a year of experience installing the hardware suite in vehicles at that point and the price of the computer powering the system will likely have gone down considering the impressive pace of improvement in the industry.

Economy of scale with the Model 3 and the amortization of the development of the software will likely have improved the cost by then.

Nonetheless, it’s still a leap to imagine people paying such a premium especially if self-driving is still not available by the time the Model 3 comes to market. Whether it’d be because the software is not ready or because Tesla doesn’t get regulatory approval in time.

But once self-driving is available, it is a completely different game and Tesla is definitely playing the long game here.

The feature could pay itself for Model 3 owners (as well as for Model S and X owners) by joining the ‘Tesla Network’ fleet of ride-sharing cars. You could pay for the feature by simply sending your car to give autonomous rides as part of a driverless Uber-like service, which is exactly what Elon Musk described in his ‘Master Plan Part Deux‘.

Depending on how often a Tesla owner would be willing to lend the car to the fleet, it could pay for the feature and even contribute to paying for the car itself. What do you think? Would you want to lend your car to the fleet or just participate as a user without owning one? Let us know in the comment section below.

We asked Tesla for more details on ‘Tesla Networks’ and we will update if we get more interesting information about the program.

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