Tesla’s strategy for the launch of the Model 3 slowly emerges

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Since Tesla was founded over a decade ago, the company’s long term goal has been to bring a low cost, long-range electric car to market for the masses at a price of around $35,000. Today, that car, now named Model 3, is still at the heart of everything that Tesla does — it’s why Tesla is building its massive battery factory, and it’s one of the reasons why Tesla CEO Elon Musk thinks Tesla could be worth as much as Apple in a decade.

But launching the Model 3, which is supposed to come out first in 2017 and have its first full year of sales in 2018, will no doubt be risky. It will be Tesla’s riskiest move to date, following the launch of its initial car, the Roadster. While the subsequent Model S was by all accounts a success, a low cost, long range vehicle with a brand new platform design is a new beast entirely, and one which will be affected by thousands of difficult decisions Tesla makes, not to mention a variety of external factors like what are competitors launching and the cost of oil that year.

Inside Tesla Motors Inc.'s Flagship Showroom

And it’s now clear that Tesla has decided to try to minimize some of the risks with the Model 3 car by taking lessons learned from some of the choices it’s made on its other cars in the past, and looking to apply them to the design, engineering and launch of the Model 3.

A couple years ago, Tesla’s Chief Designer Franz Von Holzhausen told me that the Model 3 could potentially have a much more provocative and expressive look than the pretty standard Model S sedan. But during Tesla’s earnings call last week, Musk indicated that Tesla might launch a more conservative and basic initial Model 3, but follow-on versions of the car that could be more avant garde.

Moderated by: Katie Fehrenbacher — Senior Writer, Gigaom Speaker: Franz von Holzhausen — Chief Designer, Tesla Motors

Moderated by:
Katie Fehrenbacher — Senior Writer, Gigaom
Speaker:
Franz von Holzhausen — Chief Designer, Tesla Motors

Why? Tesla’s Model X car — which is an SUV/minivan cross vehicle based on the Model S platform — has been much delayed and most of that delay has seemed to come from getting the unusual “falcon wing” door and the second row of seats operating properly. The Model X door is the world’s first double actuating gull wing door, and Musk said it’s been “extremely difficult,” noting “there’s a reason others haven’t done this before.”

Musk said:

The Model X debut.

The Model X debut.

Elon Musk is known for having a massive appetite for risk. He runs a rocket ship company, chairs a solar panel installer firm, leads Tesla, and also has investments in all of his companies. But even he feels the need to move slightly more conservatively here. The battery factory itself has enough risk to make anyone a bit nervous.

Some analysts have expected the Model 3 car to deliver 40,000 in sales in its first year, with a potential ramp up to 150,000 in 2020, and 400,000 by 2028. That’s a lot cars to ship, particularly on an initial more conservative platform and more provocative cars there after. In comparison, Tesla has shipped around 60,000 Model S and Roadster cars in total between 2008 and today.

Tesla owners take a ride in the new Tesla "D" model electric sedan after Elon Musk, CEO of Tesla, unveiled the dual engine chassis of the new Tesla 'D' model, a faster and all-wheel-drive version of the Model S electric sedan, at the Hawthorne Airport October 09, 2014 in Hawthorne, California. (Photo by Kevork Djansezian/Getty Images)

Tesla owners take a ride in the new Tesla “D” model electric sedan after Elon Musk, CEO of Tesla, unveiled the dual engine chassis of the new Tesla ‘D’ model, a faster and all-wheel-drive version of the Model S electric sedan, at the Hawthorne Airport October 09, 2014 in Hawthorne, California. (Photo by Kevork Djansezian/Getty Images)

At the end of the day, the original vision of the Model 3 as ‘the people’s’ electric car might have to be altered slightly. The expected price of the car — which for a long time was projected to be $30,000 or less — has creeped up to $35,000 and some analysts predict it will land somewhere between $35,000 and $40,000. But beyond that, analysts expect the average transaction price (with the added features) to be closer to $60,000, and in that way, it wouldn’t necessarily be a mass market car; more of a luxury mid-range car.

On the earnings call last week, an analyst asked Musk why if Tesla was taking so many cues from Apple on execution and product, it wouldn’t continue to focus on higher end luxury products like its new Model D? Apple wasn’t focused on launching a $30 iPhone, noted the analyst. To that Musk replied:

“The goal of Tesla has always been to accelerate the advent of sustainable transport, and make electric cars happen faster. We need to make a lot of electric cars [for that to happen] and make them more affordable.” And in that way, he’s not like Apple’s former CEO Steve Jobs at all.

11 Comments

hfsahfs

Tesla is going to do with batteries what space x did with rockets. A huge factory with raw material going in one end and finished product exiting. They will be doing things at the largest scale and the most efficiently. This is also just the first of many battery factories if things go to plan. The article says 400k cars by 2028 but several million per year could be possible by then if the demand is there.

With the cheaper batteries they will be able to offer a better car for the money. Does anyone think the bolt will be anywhere near as nice as the Tesla model 3? I think most people believe Tesla has already won the electric car market. Thats why its worth 25 – 30 billion even though it has yet to make a profit or have high revenue.

Also keep in mind Tesla has already designed and will soon be selling “plug and play” battery packs to power your home. As solar and battery prices continue to drop battery demand is going to skyrocket. If Tesla plays this right they will more then earn the market cap they have from battery sales alone.

lohbs

The gullwing doors for the Model X may look good but seem totally impractical. How are you meant to carry skis or a surfboard on the roof? Are we supposed to climb in through the windows??

Gueste

Blah Blah Blah! The Model 3 was NEVER projected under 35 000 $ . And never over this price neither. Only ONE analyst projected 50 000 $ and more, only one.
What a crappy misinformant article!

sxt173

Plus he was talking about the gross price, not even the price after tax credits. Elon hinted at that when GM announced their Spark at (I think) $35K. He pointed out they were saying $35K post tax incentives vs. Tesla hitting that price point pre-credits.

kidseyemd

Musk has indicated he doesn’t view the Model 3 as the end-all, but only a major step in the drive toward affordable electric cars.

At a recent interview he specifically commented that he doesn’t consider the $35K price cheap. He realizes a lot of the population are looking for a $20K base price car.

His comments in the distant past re: a lower priced car were before the Model 3 was even named as such, and arguably were not made regarding the Model 3, but perhaps a Model 4 or 5 when the prices do get down to $20K base for a 200+ mile family sedan.

Michael

The Model 3 is supposed to be able to travel at least 200 miles on one charge. Now extra features will cost more, just like he model S minimum costs $60,000, while the p85d fully loaded costs upwards of $130,000. Supercharging will no doubt cost more, as will dual chargers and autopilot. His is no different than the*Model S people…

Jeo

If they Tesla is unable to build and deliver a Model 3 for under $40K with 300 mile range, then it’s not a next generation vehicle. Its a fancy Nissan Leaf. If they push the $50K + price for a Model 3, then what’s the point? Musk is not stupid, and better be on point with this vehicle.

Douglas

yes I to am depressed cos I hate buying Gasoline,changing oil ect ect,,, im retired and watch every penny. Price of model 3 was spose to be$ 27,500 after rebate. now I have to sell everything and live in the CAR!!!!!!!!!!!!!!!??60K??? NO WAY!!!!

Fizzy

Yes most americans are poor, but what about rest of the world? What about Europe where BMW, Audi and Mercedes dominate the market. What if they could compete with those cars? So 60$ for a 3-400 mile on a charge car is not a lot. Tesla will never be ford or chevy.

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