Tesla previews a more affordable Tesla

Jed Kim Mar 31, 2016
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A look at Model 3 ordering day in Australia.  Elon Musk/Twitter

Tesla previews a more affordable Tesla

Jed Kim Mar 31, 2016
A look at Model 3 ordering day in Australia.  Elon Musk/Twitter
HTML EMBED:
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The long-awaited Model 3 is set to be unveiled Thursday night at Tesla’s Hawthorne facility near Los Angeles. The new car is expected to go 200 miles on a single charge and has a price tag starting at $35,000. That’s much more affordable than previous models, and Tesla hopes the more modest price will make it a real choice for regular car buyers. 

Elon Musk’s vision to shift the world to electric vehicles may take a back seat to making sure his company stays viable. 

“It’s in many ways more significant for Tesla than it is, of course, for the global industry. They really need this to work,” said Colin McKerracher, manager of advanced transport insight at Bloomberg New Energy Finance. “This is their big bet that they’re pushing forward with all their chips.” 

McKerracher said other car companies have stepped up their electric game and will push continued changeover in years to come, no matter what happens with sales of the new Tesla offering. His research found electric vehicles will likely make up 35 percent of global new car sales by 2040.

In the nearer future, Chevy’s Bolt will deliver similar mileage and cost as the Tesla Model 3, and it will come out sooner. However, McKerracher said Tesla’s ability to go beyond electric and deliver a vehicle that also looks good and is fun to drive has made it a strong brand. 

“It has a different level of sort of pedigree that it’s bringing to the battery electric vehicle side of the market,” McKerracher said. “The real challenge, though, is sure you can make what people want, but can you make any real money out of it?”

Morningstar senior equity analyst David Whiston said that will depend on Tesla actually delivering a car everyone can afford. He said the Model 3 compares more to something like a BMW 3 Series, a vehicle not many can afford.  

“Model 3 is not a mass-market vehicle,” Whiston said. “In Elon’s own words, it’s a BMW Series 3, Audi 4 competitor. What we haven’t seen yet from Tesla, but will probably in the next decade — something to go rivaling a Toyota Camry, a Toyota Corolla, a Ford Fusion type competitor. Then, you’re talking about a real mass-market automaker, and they’re not there yet.” 

Whiston said he thinks sales of the Model 3 will go well, but it’s hard to make projections since the first cars won’t be delivered for at least another year and a half.

“To me, it’s not that big of a deal, because I just can’t get that excited about a vehicle that won’t go on sale in any meaningful quantity for the company until 2018,” he said.

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