Rollout of Model 3 Is a Make-or-Break Moment for Tesla
The electric carmaker’s first mass-market sedan arrives with high hopes and lingering concerns.
All of that sexiness comes at a price, though. The Tesla Model S, the company’s flagship sedan, starts at $80,000 and tops off at more than $150,000, which is well beyond most carbuyers’ budgets. The result is that Tesla has only sold 23,550 total vehicles in 2017, compared with nearly 150,000 for BMW or 346,000 for Hyundai. On top of that, sales have been flat for both the Model S and the Tesla Model X SUV since the 3rd quarter of 2016. The company hasn’t turned a profit since going public in 2010.
Tesla hopes to right its financial ship starting today, when it delivers the first round of its long-awaited, far more affordable sedan, the $35,000 Tesla Model 3. The Model 3 represents Tesla’s first bid for the mainstream car market, and if successful, could not only lead Tesla to profitability, but kickstart the entire American electric vehicle market.
“The Model 3 is pretty much everything for this company right now,” said Jessica Caldwell, executive director of industry analysis for Edmunds. “[Tesla CEO] Elon Musk is trying to do a lot of things, he’s very ambitious, but to do that you need capital, which hasn’t been their strong point since launch. This is finally something that can generate revenue.”
The sleek, five-seater Model 3, which can travel 215 miles on one charge and accelerate from zero to 60 in six seconds, is designed and priced to appeal to everyday commuters, not niche enthusiasts. When Tesla announced the release of the Model 3 back in 2016, it received nearly 400,000 pre-order reservations for $1,000 each. Considering that only 60,000 plug-in cars were sold in all of 2016 — that includes both plug-in hybrids and plug-in electric vehicles — the demand for Model 3 is staggering.
Caldwell said that the Tesla brand is wholly unique in the car world, matching emotional design with a climate-saving mission. Now that the price of entry has been cut by more than half, consumers are scrambling to be part of the Tesla movement.
“We’ve never seen a car have reservations the year before it came out,” Caldwell said. “Maybe for a special model supercar, but not for a mass-market sedan. It’s all uncharted territory. No one really has a model for how this is going to shake out.”
If Tesla hits its production goals, it could deliver 300,000 Model 3s by the end of 2018. Unfortunately, Tesla has a rocky history of meeting production forecasts, and previous debuts have been marred by technical glitches. There are many questions remaining about whether the Model 3 will be the cash cow that Tesla so desperately needs.
“Will it be reliable? Will people who get the early models have issues with it?” wondered Caldwell. With long wait times — reserving a Model 3 today will get you a car in a year or more — there’s plenty of time for consumers to lose interest. You can get a full refund for your $1,000 reservation if you cancel before signing the final purchase order. “Things have a moment,” added Caldwell, “but the moment doesn’t last forever.”
If the Model 3 is a hit, though, it could provide the momentum that the entire EV market has been waiting for.
“[Electric vehicle makers] really need something like this, a mass-market car that people are excited about,” said Caldwell. “The Chevy Bolt is, from all accounts, a great product, but it doesn’t get people overly passionate. This car can be a linchpin for the movement.”
Tesla offers competitive financing for all of its cars, plus options to lease. The company has also worked hard to ease “range anxiety” associated with electric vehicles by building 909 Supercharging stations in the United States, not only clustered in large cities, but along major interstates nationwide.