Tesla is down to $285 on news that the long-anticipated $35,000 Model 3 is finally available. To make money at this price, Tesla will close its stores and sell only through its website. Some argue that online car sales are so small that this move will doom Tesla. However, I trust the company will make adjustments as circumstances warrant, so I&s;m putting another 2% of my bear market portfolio in Tesla.&l;/p&g;
&l;strong&g;Tesla&s;s Challenges&l;/strong&g;
Will a $35,000 Model 3 appeal to the mass-market? I think there is no question about it. When the $35,000 Model 3 was announced in March 2016 450,000 people stood in line to put down a $1,000 deposit sight unseen. I don&s;t think any other company has ever made a car that appealed to so many people willing to put down a deposit.
Now that the $35,000 Model 3 is available, does Tesla need to sell them the same way other car companies do?
If you make cars that don&s;t stand out, perhaps you need the typical new car sales rep to sell your cars. Personally, whenever I&s;ve bought a car the sales rep pretended to represent my interests with the sales manager who set the price. The fact that people are charged different prices for the same car makes me think the process is designed to take advantage of me and I dread it.
Charging everyone the same price for the same car is an improvement. If it means they can reduce the price I&s;m all for it as long as I can return the car within 7 days for any reason. I think this can work for Tesla, even though it hasn&s;t worked for other car companies. If it doesn&s;t work, I trust that Tesla&s;s management will make adjustments so this decision is not going to be the company&s;s downfall.
The big question I have is how will owners get their cars serviced? Cars that leave the plant in less than perfect condition and those that are involved in accidents will need servicing. Other car companies rely on their dealers to service their cars.
Since Tesla does not have dealers they need an alternative way for owners to get their cars serviced. As Lexus proved long ago, a lot of people care more about a car&s;s lifetime ownership experience than about horse-power, driving range, or even price. If every Model 3 owner who gets in a fender-bender has to rent a car for weeks while their car is repaired, Tesla&s;s lifetime ownership experience will fall far short of what today&s;s car buyers expect.
&l;strong&g;Why Buy Now?&l;/strong&g;
Everyone wants to buy low and sell high. But not a lot of people can bring themselves to do it because when stocks are cheap, there is usually something to be afraid of.
This time the fear is about how Tesla plans to sell their cars. Car industry analysts think the online car market is too small to support Tesla&s;s ambitious sales targets. They would have a point if the Model 3 was like other cars. The fact that 450,000 people made a $1000 deposit on a Model 3 sight unseen says the Model 3 is not like any other car.
I would like to hear more about how Tesla plans to service their cars. However, trading sales reps for a lower price is a good idea worth testing in my book. I have confidence that management will make adjustments if needed. This is not going to be the reason Tesla fails as so many journalists suggest. That&s;s why this is a good time to add to my position.
&l;strong&g;What Is A Bear Market Portfolio?&l;/strong&g;
A bear market portfolio is one that is comprised of companies whose management teams are executing business plans with so much upside that, if successful, their stocks can move up even in a down market. Such a portfolio should do even better in an up market.
&l;span&g;I &l;/span&g;&l;a href=&q;https://www.forbes.com/sites/kenkam/2019/01/20/adding-tesla-to-my-bear-market-portfolio/&q;&g;added Tesla&l;/a&g;&l;span&g; to my bear market portfolio on January 20 when the stock was at $302. I started it at 2% of the portfolio because of the volatility of the stock, and because of my respect for Jim Collins, a Forbes contributor, who disagrees with me on this one.&l;/span&g;
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