MODEL 3/Y �POST-IRA ANALYSIS

Sharvary Joshi

RESEARCH OBJECTIVE

Investigate how federal tax policy changes impact consumer purchasing behavior and market dynamics in the electric vehicle sector, using Tesla Model 3 and Model Y as case studies.

Analytical Framework:

• Monte Carlo Simulation Modeling - Developed probabilistic forecasting model to capture market uncertainty
• Consumer Survey Research - Designed and prototyped customer research instrument to validate behavioral assumptions and inform post-incentive marketing strategies
• Behavioral Economics Analysis - Quantified consumer "pull-forward" behavior and price elasticity responses
• Policy Impact Assessment - Evaluated effects of $7,500 IRA tax credit expiration on quarterly demand patterns
• Model Mix Dynamics - Analyzed differential price sensitivity between premium (Model Y) and mainstream (Model 3) segment

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WHAT HAPPENS ONCE IRA EXPIRE ? 

• $7,500 credit expires
• Price of Model 3/Y goes up substantially
• So buyers are rushing to make purchases in Q3
• Q4 sales will crash due to price pressure + pull forward effect

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FORECASTS

• Baseline forecasts (per mock data) if IRA never expired

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• Monte-Carlo simulation to forecast Q4 data based on the following parameters/scenarios
• Pull forward rate – centered around 20-25%
• Price elasticity – M3 (1.4), MY (1.25)
• Mix in model Shift – Model Y gains 2-4% share

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FORECASTS (W/ PRICE CUTS)

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• Monte-Carlo simulation to forecast Q4 data based on the following parameters
• Pull forward rate – centered around 20-25%
• Price elasticity – M3 (1.4), MY (1.25)
• Mix in model Shift – Model Y gains 2-4% share
• Tesla Price Cuts – $0 to $7,500 (mode=$3,500)

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SURVEY (7 QUESTIONS, <5 MINUTES)

• Among your peers, being the first to own an EV is (very important/somewhat important/not important) [social identity theory]
• What price feels 'normal' for a Model 3/Y to you? ($ range slider) [anchoring]
• How much does seeing EVs in your neighborhood influence your interest? (Range 1-5) [social proof]
• When you imagine the tax credit disappearing, what's your immediate gut reaction? (fear, urgency, relief, indifference) [emotional journey]
• If you knew tax credits would end in 3 months vs. 3 weeks, how would your timeline change? (no rush, still place order, would shop around more) [loss aversion + temporal discounting]
• Would you rather save $7,500 on the car or get $10,000 worth of benefits ? (yes/no/not sure) [mental accounting to see what consumer values more price OR value ?]
• Complete this sentence: 'People who drive Tesla's are ____ : (tech savvy, show offs, environment conscious, just normal people) [Brand Association]

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Sample Survey - https://form.typeform.com/to/mIEZgekv

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DEPLOYMENT STRATEGY

Target Audience (Impact framing: "Shape the future of sustainable transport" ) [n ~ 3000]

• Primary: Tesla prospects who haven't purchased yet (most affected by tax credit removal)
• Secondary: Recent Tesla buyers (understand what drove their decision)
• Tertiary: Non-EV owners considering electric (competitive intelligence)

Deployment Channels (High-Impact, Low-Cost Intercepts)

• Supercharger stations: Survey EV-curious people during 20-30 min charging waits (at peak hours)
• Tesla service centers: Quick surveys while customers wait for appointments
• Auto shows/EV meetups: Guerrilla research at existing events
• Shopping mall charging stations: Capture broader EV consideration set
• Test drive follow-ups: QR codes on test drive paperwork for immediate feedback
• Delivery moment surveys: Capture fresh buyers at peak emotional state

Incentives

• Supercharger credit raffle: $500 in charging credits (10 winners)
• Tesla Referral Program boost: Extra referral credits toward rewards
• Tesla merchandise bundle raffle : Limited edition gear not sold publicly

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THANK YOU

APPENDIX

ELASTICITY ?

• Elasticity is the responsiveness of one variable to changes in another—typically the percent change in quantity demanded or supplied for a 1% change in price.
• Norwegian BEV coefficient (-1.27) provides the best empirical baseline
• Model 3: -1.3 to -1.5 (more elastic due to more direct competitors)
• Model Y: -1.2 to -1.3 (slightly less elastic due to SUV premium positioning)
• Ref - https://etrr.springeropen.com/articles/10.1186/s12544-020-00454-2

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QUARTERLY COEFFICIENTS AND BASE FORECAST?

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HOW SURVEY REFINES THE FORECAST MODEL?

• Price Anchoring Question → Elasticity Parameters : If people anchor at lower prices, elasticity might be higher (more sensitive)
• Timeline Psychology Questions → Pull-Forward Rate & Urgency Multiplier: If most people show "indifference," your decline scenarios might be too severe. If most show "fear/urgency," your pull-forward effects might be too conservative
• Mental Accounting Preferences → [NEW] Incentive Effectiveness Weights: Could inform alternative incentive scenarios beyond just price cuts, Some customers respond better to financing deals, others to direct discounts

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MONTEL CARLO SIMULATION W/O TESLA PRICE CUTS

MONTEL CARLO SIMULATION WITH TESLA PRICE CUTS

COMPETITOR ANALYSIS

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CONSUMERS DON’T BUY CARS, THEY BUY MONTHLY PAYMENYS

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Offer higher value (frontloaded for the initial year :

1. Free FSD (1 to 3yr)
2. Free Supercharging (1 to 2yr)
3. Special APR promos
4. Special price cuts
5. Increase financial attractiveness against competitors

INSIGHTS

• Tesla manufactures and sells the highest cars with highest margins compared to other EV brands
• Other EV companies are not the competition - to increase sales Tesla needs to compete with gasoline brands like –
• Mass market: Honda, Toyota, Nissan, Chevrolet, Kia
• Entry level premium market: Lexus, Acura, BMW, Mercedes
• Tesla competes on technology and brand

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