Sequence Omega

In December of 2025, the Clark County Department of Aviation presented their latest update on plans to redevelop Terminal 1 along with other various improvements to the Harry Reid airport. They are focused on maximizing the current airport facilities. The airport is landlocked, and at 2800 acres, can only be optimized, as there is no ability to build more runways or terminals.

The airport authority outlined a long list of improvements that would be tackled over the next 10+ years. The largest of which is the rebuilding of Terminal 1, currently set for the mid-2030s.

Terminal 1 Redevelopment

Terminal 1 has a new conceptual look, shown below. This is not the final design, but their first published conceptual plan. Rather than perpendicular piers as shown in the previous year’s presentation, they have changed up the design to feature a large X pier layout. This layout ups the gates from 65 shown last year to 68 this year. The footprint of the terminal overlaps what is now the A, B, and C Gates in Terminal 1.

Breaking down this new conceptual Terminal 1 layout, there are four piers connected by a large central terminal area. The terminal area above overlaps the current ticketing, baggage check, and security areas. The light gray baggage claim and parking areas appear to remain unchanged, with just a small addition to the baggage claim areas.

The redevelopment of the ticketing and security area will be a welcome, though I will certainly miss the architecture of the A/B Gates atrium area right after security. This area was built in the 1960s, and is reminiscent of the La Concha Motel that opened a little before the terminal building did.

The four piers of the new Terminal 1 overlap the A, B, and C Gates. Based on the building footprint above, it appears that they would need to stage construction to avoid the major disruptions for the airlines, with the first phase of construction likely being the most painful.

It appears to be possible that you could demolish and rebuild the north half of the terminal and only demolish the A Gates area. This would represent a loss of 16 gates during construction, though it would be replaced with approximately 30 gates when construction is completed. This would almost offset the loss of the B Gates (17 gates) during the construction of the third pier of the terminal (21 additional gates upon completion), and finally the last wing which sits in the current footprint of the C Gates (18 gates today, 17 gates upon completion).

Alternately, at the cost of a higher price tag, it may be possible to build only the Northeast pier (9 gates) along with some temporary ticketing and security areas prior to demolishing the A Gates and terminal building sections and rebuilding the the north section of the terminal building and Northwest pier. This would alleviate some of the concerns about losing 16 gates off the bat.

Current Terminal Area	Gates	Notes
A Gates	16	Opened in the early 1970s
B Gates	17	Opened in the early 1970s
C Gates	18	Opened in 1987
Total	51

New Terminal Area	Gates	Notes
Northeast Pier	9 NB	Currently land occupied by vehicle parking or landscape
Northwest Pier	18 NB	Located in the A Gates footprint
Central Terminal	8 NB or 4 WB	Current terminal ticketing building area
Southwest Pier	16 NB	Located in the B Gates footprint
Southeast Pier	17 NB	Located in the C Gates footprint
Total	68 NB or 60 NB + 4 WB

From an airline perspective, the major carrier at Terminal 1 is Southwest Airlines, who uses all of the C Gates, and a majority of the B Gates area, for a total of approximately 30 gates. If the north wing of the new terminal 1 were to open with 30 gates (both North piers and 3 Central Terminal NB gates), Southwest could move its entire operations into the new gates, while allowing other airlines like Spirit and Allegiant to move into the C Gates area while the Southwest Pier (not to be confused with Southwest Airlines) is construction. Allegiant and Spirit combined use the A Gates and the remainder of the B Gates, approximately 21 gates, the exact amount that would be opened when the Southwest Pier opens (Southwest Pier plus the remaining 5 NB gates from the Central Terminal).

Now of course, these are the gate counts and figures from early 2026 as I write this, not from the early 2030s when construction starts on this project. Airline gate usage may fluctuate, and airlines might end up going bankrupt and out of business (as I write this, Spirit Airlines might be shutting down as soon as this week due to high oil prices). But as of now, Southwest is the largest airline in Terminal 1, and would likely move into the large initial phase of the new Terminal building. And as they grow, they would expand south through the Central Terminal area into the Southwest pier.

The airport was a pioneer in the use of CUTE – or Common Use Terminal Equipment. This provides the airport flexibility to assign gates to airlines, and they will need to maximize their flexibility during the process of redevelopment.

Terminal 2 (Terminal 3) Improvements

The other terminal building at Harry Reid Airport would also receive improvements to increase its capacity to handle passengers prior to the Terminal 1 redevelopment project.

The changes are minor in scope compared to the work planned for Terminal 1 – it would expand the number of ticket counters from 135 to 165, and reconfigure the ticketing areas to keep queued passengers out of the circulation pathways (read: less people in your way as you’re walking around). This change will mean that Terminal 2 will have about the same number of ticket counters as Terminal 1, enabling shifting airlines over as needed.

They would also add express escalators from Level 2 (Departures level, Ticketing and Check-in) down to the lower TSA checkpoint. This would help balance the passenger loads between the two TSA checkpoints (Level 2 and Level 0).

The end goal appears to expand the capacity of Terminal 2 (formerly Terminal 3) to allow airlines to move over into Terminal 2 during the Terminal 1 redevelopment project. I could see airlines like American or Delta move over since they currently use the D Gates and are a short shuttle ride away. This would clear out a substantial amount of traffic out of the Terminal 1 ticketing area and security checkpoints, which would allow shutting down the A/B Security checkpoint in Terminal 1 and half of the checkin/Terminal building.

Aircraft Storage – Parking Gets Shuffled

Prior to the Terminal 1 or Terminal 2 makeovers, the first major change to the airfield that would happen would be the elimination of the current Cell Phone lot and old Long Term Economy parking lot (now an employee parking lot), with the employee parking relocated to a lot near the 215 and Las Vegas Blvd. This vehicle parking area would be replaced by a new aircraft overnight parking area (which the airport can charge for and generate additional revenue) along with some support facilities (discussed more below). This parking area will replace some of the current aircraft parking area that will be lost to the Terminal 1 redevelopment. This project is set for the late 2020s into the 2030s.

Not included in the Airport’s plan is a privately constructed 2,000 vehicle, six story parking garage on the current site of the SkyChefs facility just east of the fuel tanks that provide the aircraft departing the airport with fuel. A concept of that parking garage is below. Presumably, the SkyChefs facility would be relocated into some of the blue boxes in the diagram above.

This new private parking garage has been somewhat controversial in that it is located directly east of the airport’s fuel facility, and there is worry that someone could do something bad with a powerful weapon to the nearby fuel tanks. The garage did receive approval, assuming it can meet a long list of design and safety requirements that the airport outlines. However, as I can attest, Terminal 1 parking needs as much help as it can get, as it is often full in the summer and on holiday weekends, and the economy lot is also full during those times as well.

Roadway Improvements & Multimodal Centers

Another one of the early improvements slated is improved terminal-to-terminal roadways. Currently, to get from one terminal to another you need to navigate through a number of stoplights, stop signs, and other non-airport traffic. The goal of building direct terminal-to-terminal roadways would help with shuttling people between the two ground-side parts of the facilities. It is currently possible to get between Terminal 1 and Terminal 2 (Terminal 3) on the (secure) airside by transiting the automated people mover system through the D Gates. But on the roadways it is not easy, pleasant, or fast.

The greatest benefit appears to be for the long-term parking facilities, if they can be managed as one capacity instead of two, because the shuttle service between garages is quicker and easier, it would be a way to avoid building more parking for Terminal 1 with the increased gate count seen above. The roadway improvements are set for 2030.

Beyond this, the airport is looking to build multimodal transit centers. This would take the Taxis and Rideshare vehicle pick-ups out of the airport circulation roadways and keep them in the either on the north end or south end of the airport, and would give back a large number of parking spaces to the long-term parking areas in terminal 1 and some parking in Terminal 2. This project is set for the early 2030s, before the Terminal 1 redevelopment.

Harry Reid 2040

The airport has a long list of projects planned between now and 2040. However, before construction begins, Las Vegas has some major events coming up – the NCAA College Football Championship in 2027, the NCAA Mens Basketball Final Four in 2028, the new A’s stadium in 2028, and the NFL Super Bowl in 2029. It was somewhat embarrassing to have a major highway interchange near the stadium under construction the last time we hosted the Super Bowl in 2024. We don’t want to have that happen again.

The Clark County Department of Aviation (CCDOA) will unveil Modernization Plans for the Harry Reid International Airport (LAS) on October 1, 2024.

The presentation, linked above, covers two main topics – improving the Harry Reid Airport and the Southern Nevada Supplemental Airport (SNSA) plan, which isn’t expected to come online until 2039.

Improvements to Harry Reid International

This portion covered several parts, most notably the first publicly announced plan for the demolition and reconstruction of the A&B Gates, originally built in the early 1970s.

The presentation was light on details for the demolition and replacement of the A&B Gates, suggesting that it is probably more of a plan at this point rather than something closer to being shovel-ready.

The current layout of the A, B, and C Gates at the airport in Terminal 1 (T1) is somewhat disconnected. The A and B Gates are connected post-security, and a hallway was built to accommodate Southwest’s continued expansion in Las Vegas, where they outgrew the C Gates and needed to start using the B Gates as well.

Side Note: Before the hallway was completed, there was a tarmac-level shuttle that would take you from the B Gates to the C Gates if you had to connect between the two sets of gates. I would always use it because the TSAs were always shorter at the A&B Checkpoint compared to the C Checkpoint (before the large new C Checkpoint was built near ticketing).

The current layout of the A, B, and C Gates is shown above, comprising 39 aircraft gates. The A & B Gates used to have more gates. However, those were lost after 9/11 when supplemental baggage screening buildings were built to accommodate the new security precautions implemented.

The proposed layout is below, and most importantly, it utilizes the vacant space occupied by the old Terminal 2 (international and charter flights, opened in 1991, closed in 2012 when Terminal 3 opened, demolished in 2016), noted on the images as gates 55 through 65.

This project would add 26 gates to the Terminal 1 building and dramatically increase the number of aircraft and passengers using the facilities. There was no discussion of changes to the ground-side services (ticketing, baggage claim, TSA Checkpoints, terminal parking, etc.). Hopefully, this information will come in future updates to the plan since increasing the number of aircraft and passengers using the A, B, and C Gates by 67% is likely to cause a lot of strain on any part of Terminal 1 that doesn’t get an upgrade.

No information was provided on the timeline, cost, construction phasing, and other disruptions due to this complete replacement of the A&B Gates. Presumably, they would start with the northern pier (the right side of the image) and work southward since they could construct about 10-12 new gates without too much of an impact on the existing facilities. This would provide room to tear down the A Gates, build the next pier, and so on without negatively impacting the total number of gates available.

No information was provided on how the extra gates would impact taxiways or runway operations, which are considered the limiting factors in the airport’s growth. There is no room to construct additional runways—the airport is landlocked.

To help ease the strain on Terminal 1, Terminal 3 is getting a few minor changes that appear to be designed to take some of the burden away from the Terminal 1 ground-side facilities. These changes include a small expansion of the ticketing area and a set of two-story escalators that will take travelers from the new ticketing area down to the level 0 TSA Checkpoint, which is a short walk away from the automated people mover system to take travelers to the D Gates. This infrastructure, combined with operational changes to shift more of the airlines that use the D Gates over to Terminal 3, could ease the burden of the ground-side facilities in T1 as the number of aircraft gates grows.

Finally, Terminal 3 is going to be renamed to… Terminal 2. Which will likely confuse passengers and locals for many years to come.

In the meantime, improvements are planned for A Gates to provide more concession areas and retail space. The planned concessions are a sit-down Food & Beverage location, Starbucks, and retail space. Today, the A&B Gates do not have a lot of concession space, as the gate hold areas are already tight on seating, and there are few areas to expand. Whenever I end up in the B Gates for a Southwest flight, I usually make a pit stop at a concession in the C Gates to pick up some food before heading to the B Gates. Update July 2025: this area now appears to be under construction.

Given that they have plans (and based on the presentation, at least some CAD drawings) of the expansion, they are probably far enough along that it shouldn’t take too long to get this going. It also means that it isn’t terribly likely that the A&B Gates demolition and rebuild is coming soon.

The next is a minor but very well-received expansion to the C Gates. First, another set of bathrooms will be added to the concourse. The concourse is undersized for the number of passengers traversing the area daily. In the ’80s and early ’90s, I can remember flying American and Southwest out of these gates, and the volume of people was nowhere near where it is today—shoulder to shoulder everywhere you look. This expansion will also include the expansion of Pei Wei, plus three new Food & Beverage establishments and retail space. Plus, a new seating area. Update July 2025: this area now appears to be under construction.

The last improvements include additional roadways and two new transportation centers to accommodate travelers who use the public bus system or ride-sharing services like Uber or Lyft. While taking the ride-hailing services away from the airport parking areas is detrimental to passengers who want to get somewhere in a hurry, it is understandable from a roadway congestion standpoint. While airports like Las Vegas have long built taxi staging areas as part of their facilities, no such areas exist for ride-hailing services on airport grounds. LAX is building something similar but plans to connect its multi-modal transit centers with an automated people mover. It didn’t appear from the information in the presentation that any people mover system was being considered; instead, a system of shuttles or busses would be used to move people between locations, and the roadways being built would support a faster non-stop connection between the terminals and your Uber.

Southern Nevada Supplemental Airport

Comparatively speaking, the presentation did not provideation. It provided an overview of the new airport and an EIS update. The airport does appear to have both passenger and cargo areas. Notably absent from the diagram was any conspicuous connection to the Brightline West high-speed rail that will one day connect the Las Vegas metro area with the LA metro area (specifically, Rancho Cucamonga). Without a connection to Brightline, passengers may find out they’re out an expensive taxi or Lyft to get into town.

While things look terribly dark in the short term for the US COVID-19 outlook (pro tip: wear a mask, it works), it seems like there is hope soon to come. This is my forecast for what I expect to happen, and how I feel like we’re closer to the end that the beginning. I’m not a medical export or logistics expert but I’ll still give it my best shot.

Still though, wear a fucking mask. I’ve been to Target and Costco lately and there are a few assholes who wear them to get in the door and then put them away or under their chin once they’re far enough into the store and away from the front doors/cashiers.

December

In December, we should have FDA Emergency Use Approval (EUA) for the first vaccine (Pfizer), which means that the government/military, and front-line health care workers will start to receive the vaccine. By the end of January I’d expect most if not all front-line health care workers to have received the second dose shot, along with other Tier 1 people (government officials, all health care workers who work in hospitals or communal living situations). The interval between shots for this vaccine is 3 weeks, not 4, and the conferred immunity is “effective” 4 weeks from the first dose if everything is on schedule.

We may also have the second EUA from Moderna. Depends on whether the federal government stays open through all of December (there is currently a December 11 deadline to pass a budget resolution). There is significant de-mobilization and re-mobilzation effort within the federal government if a budget isn’t adopted in a timely manner (not December 12 at 1AM). This could impact EUA review at the FDA.

However, this is the darkest month for COVID in America, I expect we’ll likely hit at least 3,000 dead from COVID per day sometime in December (if not more, 5.000 is not unreasonable if people’s behaviors don’t change) and a lot of families will have a terribly sad holiday, missing the 300,000+ friends and family members who died from COVID since the beginning of 2020.

Cumulative population started vaccination: less than 5 million (<2%)

Cumulative population completed vaccination: ~50,000 (those who enrolled in phase 1/2/3 studies in the US in the vaccine arm, and those in the placebo arm who opted into getting the real vaccine at the end of the trial)

January

Second vaccine (Moderna) gets EAU after reporting out final results in late November, if they didn’t get it in December. By the end of January, most states will have their top tier of those prioritized for getting the vaccine to have their first dose (about 5% of the population, about 30M doses) with the health care workers having received their second doses.

And President Biden is inaugurated.

Cumulative population started vaccination: 30 million (10%)

Cumulative population completed vaccination: 7 million (2%)

February and March

Most states have their top tier groups fully vaccinated, and are working through their second tier (the next 15%, cumulative 20%) which includes teachers, medical staff outside of the first tier, people who work in supermarkets, meat packing plants, and other high-risk areas (Amazon warehouses, not gonna lie). This will require another 100M doses on top of the 30M doses from the end of 2020, which should be achievable by the end of March, especially if we have at least two vaccines going at this point, and probably more.

In February in March, Johnson & Johnson should receive their 1-dose vaccine emergency approval (assuming its effective) and will likely be able to start to vaccinate, and it might be a bit slower to rollout if they need to target various sub-groups if the data on the mRNA vaccines show that they are less effective on certain groups while this vaccine is more effective in those same groups (older, younger, etc.). J&J estimates they may have 100M doses ready by the end of March (worldwide) so I’d expect 30M or so doses for the US.

Also, the Oxford/AstraZeneca vaccine should receive EUA during this time as well as Novavax (again, assuming they are both effective). Each one of those could contribute tens of millions of doses by the end of March, however it will still be early in their logistical ramp.

Cumulative population started vaccination: 100 million (30%)

Cumulative population completed vaccination: 80 million (25%)

April through June

Where the rubber hits the road.

With at least three successful vaccines at this point, and possibly up to five, there is where the logistics and how we go about getting people vaccinated matters to ensure we don’t waste doses to get the bulk of the 80% of the unvaccinated portion of the country through the regimen. In the logistic curve, this is the steep middle part.

I expect once we get further down into the lower tiers, there will be some lottery system (based on birth date?) that will determine when you (or your household) gets vaccinated.

While not everyone will be able to get vaccinated (children under 12 and pregnant/breastfeeding women, for example) I would expect that most of the rest will be vaccinated during this period. By the end of June 2021, I’d expect somewhere in the neighborhood of 60% of the population of the country would be vaccinated. Combined with a weighted vaccine effectiveness somewhere around 85%, that puts us at an effective population immunity at 51%. Not great, so we’ll have to probably wear masks for the remainder of 2021 when we go out in public until the new cases per day is less than 50 per state. Ideally we’d want to have effective population immunity above 70% which reduces the “R number” of COVID-19 to less than 1 which means that each infected person, on average, infects less than 1 person, over time, reducing the infection rate down to close to zero. The higher the number (and the longer we keep wearing masks) the faster the number goes to zero.

Cumulative population started vaccination: 250 million (77%)

Cumulative population completed vaccination: 200 million (63%)

July Onward

Mass-vaccinations may drag on into July and maybe August based on logistical issues, but it won’t be much longer. From then on, it’ll be more about maintaining the current levels of population-level immunity, and trying to reach out to those refusing or just otherwise missed their opportunity be vaccinated. This means immunizing adults when they are eligible for the vaccine (done with pregnancy or breastfeeding) and kids as they turn 12. Children under 12 make up around 15% of the population, so until the vaccine can be proven safe for children, they’ll remain unvaccinated.

However, don’t expect things to be “normal” again for a while. Countries still may not allow foreign nationals to enter until a country has certified that most of its population is vaccinated and there is little to no community spread within the country.

Travel within the US will likely return to normal by late 2021. Expect crowded airports and very expensive flights for Thanksgiving and Christmas 2021 – a lot of older airplanes and older pilots are retiring during the pandemic which means that when travel tries to bounce back, it will run into capacity shortages of both planes and pilots. Travel by car will still be popular, but not by choice.

The Cold Chain

There is a lot of concern about the “cold chain”, that the first vaccines (mRNA-based) will need to be kept at very low temperatures (negative 70-80 degrees Celsius). While this does present some logistical issues, I don’t believe they’re out of hand or will pose major problems. At the cheapest level, dry ice and a very well insulated container can keep it cold (dry ice sublimates at -78.5C). Moderna said their mRNA vaccine doesn’t need to be kept as cold, standard medical freezers would work for 6 months. And Pfizer said they were are currently conducting studies at higher temperatures and will have more in December. But vaccines shouldn’t be stored for more than 6 months – shots belong in arms, not cold storage.

It really comes down to whether you have a can-do attitude or a can’t-do attitude about this whole project.

Communication and Managing Expectations

The final thing that experts and politicians need to start doing as we turn the corner and prepare for large-scale vaccinations is to set public expectations.

Encouraging Vaccination: sadly, this is first on the list. Do whatever you can to ensure individuals to get vaccinated. I worry about a lot of anti-vax pushback (a recent poll showed 12% of people were considering delaying or rejecting a COVID vaccine). Estimating that 15% of the population that can’t be vaccinated initially due to age or other issues, that is a total of 27%, which is pretty high even for a 90% effective vaccine if we want to force the virus out of circulation. The encouragement also needs to be bipartisan. We can’t make it through this if one party rejects the vaccine for political gain.

Masks: you will still need to wear your mask in public for a while after you are vaccinated, even beyond the 7-14 day window from your last dose. One of the underlying unknowns of these studies is that while we know the vaccines prevent symptomatic infections, we don’t know if they prevent asymptomatic infections, and if those individuals who have asymptomatic infections after being vaccinated shed enough virus to infect others. You will probably need to wear a mask until the number of new cases per day in you state drops below a certain threshold (~50 cases a day over a 7 day moving average, more or less depending on state population). The worst-case scenario is that vaccinated individuals have asymptomatic infections and then infect the unvaccinated population (who may or may not have a choice to be vaccinated).

Return to Normal: It will still take a while for the economy to return to normal. Specialized and targeted stimulus might help speed up the process (e.g. lets help all those families who used to run restaurants and went out of business start new ones). We shut everything down in a matter of weeks, but don’t expect things like packed stadiums and concert halls right away. By the end of 2021 and early 2022 I expect the economy to be close to where it was in fall 2019. However, areas that rely on international tourism or business meetings may continue to see economic impact since it will take much longer to open up international borders (CES 2022 will be smaller, but I expect CES 2023 will be back to close to normal).

Source for vaccine amount estimates:

NY Times – The Vaccines Will Probably Work, Making Them is the Hard Part

So Tesla has revamped their product lineup again. Just two months ago I was happy to greet the $35,000 model (and have since purchased the mid-range Model 3, which was then discontinued within 48 hours after my order).

I predicted that the “plus” edition of the standard range model would be the better option, and that model proved to be more popular – 6x more popular than the cloth-seats edition of the model 3 according to Tesla. So much so that they killed the base $35,000 model this week and promised existing buyers that they would get a software locked version of the model 3 SR+.

I also predicted the base model would go away and that was correct too. I just thought it would be 12 months, not 2. You’d think this would teach Elon not to pre-announce prices but he did it again for the Model Y in March so I’m not sure he learned this lesson in time.

Logistically, the original base model would have been hell to deal with. All the additional different parts – cloth seats, manual steering wheel, manual seats, etc. – would have been a supply chain pain in the ass considering the low volumes of SR purchases. It was cheaper for the company to just offer the same SR+ car and software lock it because of the reduction of unique parts for Tesla to stock and manage inventory at their factory as well as service centers around the world.

Beyond that margins would probably have been eaten up by those different low volume parts. By keeping the same interior and just decontenting the car they can keep their margins up.

The other change, including the base autopilot (which is traffic aware cruise and auto-steer), is probably a good idea and the take rate was probably near 100%. The value proposition for buying a Tesla is not nearly as good if the car doesn’t drive itself.

But it’s remarkable to me how much the product lineup has changed in the last two months. I wouldn’t call it “flailing” but having to try a lot of things to see what sticks. If I were to buy today, I don’t think I’d be as happy with my options than I was a month ago when I ordered my blue mid-range 3.

Today I have the choice of either getting a SR+ which is decontented below what I want in a car, or I can get the long range AWD which is too expensive for my budget. I can call for the LR RWD or go into a store but that means the option won’t be around for much longer (and the price isn’t listed on the website).

I understand and agree with dropping the 35,000 base model. The new cheapest model 3 is just under $40,000, but you do get autopilot included. Dropping the LR RWD model isn’t something that I think is good for Tesla. The price jumps from 40,000 to 50,000. A 45,000 option for the RWD model would be perfect in between and the margin should be adequate to keep up the overall profits.

Today, Tesla announced some very interesting moves. Some are incredibly risky, others have been expected but weren’t expected today.

First, Tesla has announced that the Model 3 Standard Range is now available for sale. For the promised-two-years-ago price of $35,000. The base model is a base model – cloth seats, no power seats, manual steering wheel adjustments, etc. The range is 220 miles per charge, which is fine for a commuter car or to run around town, but maybe not the best road trip machine (even if Tesla’s supercharger network is fairly robust around the US). The most interesting part is that the base trim has a cousin – the “plus” edition that has parts of the premium interior and a slightly longer range – 240 miles – for only an extra $2,000 (which I think is underpriced, I would have made it 3k, add another $1,000 to the mid-range too). I think in hindsight, this is what Tesla would have made the base trim if he didn’t put his foot in his mouth two years ago about the base trim being priced at $35,000. I would expect in a few years the standard range model at $35,000 will go away, and the “plus” model will become the new bottom of the line.

Ultimately, I’d say that for most people the “plus” trim is the Model 3 to get for those who want to get the “cheap” Model 3. You get a little bit better range (an extra 20 miles) but also much nicer interior – power heated front seats, vegan leather seats, better sound, and smartphone docking. For only $2,000 that seems like a steal (again, I think it should be more). If you’re going to spend this much on a car, make it a good experience.

Model	Base Price	Differentiating Features
Standard Range	$35,000	N/A
Standard “Plus”	$37,000	vegan leather seats, better audio, power heated front seats
Mid-Range	$40,000	264 miles of range, full premium interior (heaters for all seats, satellite view on maps, in-car internet and streaming media, etc.)
Long Range (RWD)	$43,000	Full premium interior, 325 miles of range
Long Range (AWD)	$47,000	AWD, 310 miles of range, full premium interior
Performance	$58,000	0-60 in 3.2 seconds. ’nuff said.

Option	Price
Paint colors: gray, blue	$1,500
Paint color: white	$2,000
Paint color: red	$2,500
Autopilot (traffic-aware cruise, auto-steer	$3,000
Full Self-driving (pending regulator approval)	$5,000
White interior (full premium interiors only)	$1,000

Second, they revamped the autopilot and full self-driving (FSD) option feature sets. What used to be called “Enhanced Autopilot” is now split across AP and FSD. And while EAP used to cost $5,000. AP+FSD now costs $8,000. Of course, the prices of the car as a whole didn’t change, which tells me its not about getting more money out of the consumer, rather its about figuring out what the right options mix, understanding your fixed and variable costs, and getting the ASP of the cars just right so they can meet their profit goals.

Next, and by far the most risky thing Tesla has ever done since the falcon wing doors is the shuttering of their retail stores. Tesla will become a pure online sales company, while they continue to expand their service network. Most stores and galleries will close. This is a radical turning point in the company’s history (whether it’s a good one or not, only time will tell). Tesla is now relying on buyer’s risk appetites (you can return the car within 7 days or 1,000 miles) and other owners selling people on the car, rather than on the ability for someone to go down and see them in person and take a test drive.

The stores closing give me mixed feelings. I recently brought my wife to the local Tesla store, and had her test drive a Model 3 (ostensibly to gain her approval, but also to test the fit of our kid’s car seat in the back). Being able to go see the cars in person and sit in them is a great asset to the company (the gallery approach), but I have to say I was disappointed with the sales rep and the test drive experience – the test drive was literally over within 7 minutes and the total route was less than 2 miles. I think we sat in the car explaining all the do-dads prior to the test drive longer than the actual drive.

I think the galleries would be a much better approach than dealership-style experiences. And Tesla knows that unless you get a lemon, you’re not going to go through the hassle of buying a car and then return it within 7 days (especially not a sexy Tesla). But ultimately people want to at least sit in the car before they buy one. It is very risky. I’d almost be tempted to tell Tesla to bring back a much much much more modest version of their referral program with the store closings to get owners out there and use the network effect to sell the car to new customers.

Finally, Tesla made a few other changes to their lineup – bringing back the Model 3 LR RWD, discontinuing the Model X “Standard Range”, and un-derating the Model 3 LR RWD range back up to 325 miles (it was always that, but Tesla voluntarily de-rated the range).

With all the crazy reasons the shorts have to short the stock and talk negatively about Tesla, let’s look at the actual risk factors that face Tesla over the next 12 months

1. Lack of demand. This would probably manifest itself and some form of economic recession. The good news for Tesla is that the wealthy tend to prosper no matter what, and that is their target market. 

The other possibility is if Tesla can’t get to the point where they can offer the $35,000 standard range model. A good chunk of the pent up demand will evaporate if those reservation holders can’t buy the $35,000 car. Given Tesla’s work in Q3 2018 to reduce the cost of the car, it is likely they’ll be able to continue that work 10-15% cost reductions per quarter) to allow them to offer the base price car. This has already manifested itself through the Medium Range vehicle now offered because of work done to reduce costs. 

The other ways that a lack of demand could be a problem don’t seem likely – specifically other car manufacturers figuring out how to build compelling electric cars in large enough volumes to meet demand, and choosing to sell them nationwide. Companies like GM and VW promise they’ll introduce a ton of EVs and plug-in cars, but will probably only sell them in CA and OR and anywhere else required by law. And the US is last to get the cars because Europe and China currently have stronger requirements for EV sales. Global manufacturers will design, build, and ship cars for those markets first and the US is an afterthought. 

2. Product mix. This quarter will be the highest average selling price the model 3 will ever have. Because they aren’t selling the cheaper models. The only models sold are the $75,000 performance, $55,000 LR AWD, and $50,000 LR RWD. The average sale price was north of $55,000, which won’t be the case probably ever again (I think it’ll eventually settle around $47,000 – lots of base models with modest option mix and many AWD/LR models and few performance units). 

This means that the free cash flow and the profit Tesla earned this quarter might be only about 15% less than what they will ultimately earn at a full run rate of 7,000+ Model 3 units a week at an average sales price of $47,000 and 25%+ gross margin. So expect somewhat flat free cash flow and profits for the next 6 quarters (which is fine if they bank it and pay off their debt and their stock price rises to above $360 so most of their outstanding convertible debt becomes shares rather than debt). 

3. Paying for future expansion while paying off debt. Specifically the factory for the Model Y vehicle – how much does it cost and where does it get built? Fremont/NUMMI is full and can’t accommodate another model line (if it could there wouldn’t be a tent), so it has to be assembled somewhere else. If the factory costs $3B most of that capex will come in the second half of 2019 and first half of 2020. While Elon wants it to be an alien dreadnought it is more reasonable to expect that there will be incremental improvements – things that have already been discussed are wiring harnesses and wiring bundles that are easy to manipulate by robots so allow more mechanization of the product line. 

4. Federal investigation. Apparently there may be a federal investigation of Tesla going on. Not quite sure what they’re investigating (the SEC has settled the civil charges over the “finding secured” debacle) so we’ll see but unless there is outright fraud going on I don’t think we’ll see charges. If no banking executives were charged criminally after the 2008 crash I find it hard to think that Elon or anyone else will he charged for being too optimistic on their projected growth or anticipated production rates. 

So this isn’t good – got a spam SMS at one in the morning. It’s a bad sign when the SMS is specific enough that it uses your name, your wife’s name and its sent to your phone number only. The action to take was a link hidden behind bit.ly URL shortening. It said “there is a new request from {wife’s name} 5 mins ago trying to connect right now” from a number 706-752-xxxx.

I’m trying to think who would have all those pieces of information (my name, my phone number, wife’s full name) and how they could be compromised. Was it a company like Amazon or some other online retailer? Could it be my employer or health care provider? Financial?

In some ways its kind of scary to think how many people have access to this information. I know better than to click on these kind of links, but it is incredibly annoying to sit and wait for the other shoe to drop (the company involved announcing they’ve been hacked) and then work on remediating whatever needs to be addressed. In the meantime, maybe I need to change my passwords again for my email and online shopping websites.