Earlier today Tesla froze online orders for its entire lineup and teased that a major announcement was imminent. Turns out it was basically three big reveals. The cheapest Model 3 is now a reality. Unfortunately, a whole bunch of layoffs are too, as Tesla will shutter a significant number of its stores and transition the remaining ones to showrooms. The automaker is also going to transition to an online-only retail system. A Model 3 based crossover, the Y, will also be available in the future.
Is the Model 3 really priced at $35,000 now? Yes and no, depending on your outlook. Base price stands at $36,200 when including destination and a doc fee. Both of those charges have always been a bit arbitrary, but every other automaker currently prices their vehicles the same way. And since Tesla doesn’t currently offer franchised dealerships, they’ll be happy to charge you a doc fee themselves. And of course the final price is affected by the incentives offered by your home state.
What does an entry level Model 3 get you? A 220 mile range battery pack with a 5.6 second 0-60 time. Not too shabby at all. An extra $2,000 gets you 240 miles, a 5.3 second 0-60 time, and some more interior amenities. The mid range battery back will get you 264 miles on one charge but you have to step up to the premium interior to get it. The longest range Model 3 comes in at 325 miles while an all wheel drive variant shaves fifteen miles off that number.
Aside from the battery pack, it seems the company was able to shave the price off the 3 by cutting the interior options down to more basic configurations. Fewer speakers, cloth seating with manual adjustment, and overall trim adjustments are the name of the game here. Although a lot of this stuff is vague, so you may want to see one in person before you buy.
The basic Model 3 requires some sacrifices, but the no frills aesthetic of every Tesla interior will minimize the major differences between the basic and fully loaded trims. Having nearly the same infotainment system on board helps too.
The exterior is largely the same minus a pair of LED fog lights. Tesla charges for any color other than black, and they seemed to have purposely made the base wheels a bit homely in order to encourage customers to spend $1500 on the upgraded 19 inch “Sport” wheels, but those two things have been baked into the car since the beginning.
A more complete self driving Model 3 (and presumably the Model S and X too) will also be available later in 2019. This obviously isn’t included on the base model, but all of its enhancements are noteworthy. By 2020 you’ll apparently be able to order a fully autonomous Tesla that can drive on the highway and in stop and go traffic and park itself when you’re done driving. That same car will apparently also be able to be summoned, provided you’re actually in the parking lot.
This means we’re one step closer to owning a car with similar capabilities to Bond’s enhanced BMW in Tomorrow Never Dies. Although the real paradigm shift won’t happen until we can drive a Tesla via remote control from the back seat. I’ll keep dreaming.
Unfortunately these new developments will result in employee layoffs. The company is radically shifting their footprint to an online only sales strategy and they’re going to close a substantial number of brick and mortar stores to accomplish that goal. Tesla’s brand is strong enough to survive the change, and its impossible to deny that their prohibition from selling in most states and in limited capacity in others is what prompted them to ditch a more traditional showroom setup.
Tesla continues to face a number of challenges as they seek to expand. The company anticipates a loss in Q1, but said that a profit in Q2 was “likely”. Tesla needs to spend money to launch the Model 3 in China and Europe as well as continue development on the Model Y, Semi and Roadster. It just broke ground on a new Gigafactory in China.
Quality control has not been the highest priority at the company and there are reports of their customer service not being able to meet the growing number of customers that the Model 3 has brought in. Elon Musk continues to be a bit of a dick and may be facing additional repercussions from the Securities and Exchange Commission because he cannot suppress the desire to tweet. Competitors like Rivian and industry stalwarts will begin to steal the spotlight with electric vehicles of their own.
But the company has beaten the odds before. And they’ve introduced a 7 day, 1,000 mile return policy for all future purchases. Companies like Carvana have similar policies that have resulted in success for their respective businesses.
More importantly, Tesla remains a desirable brand on the merits. And while hiccups may continue to dent its operations, as long as people want to buy one, they’ll be around in one form or another.
Sources:
“Tesla finally launches base Model 3 for $35,000 with shorter range and new interior” – Fred Lambert, electrek
“Tesla changes entire sales strategy, makes sales online-only, closes stores w/layoffs” – Jameson Dow, electrek
“Elon Musk say Tesla unlikely to be profitable this quarter, TSLA stock falls” – Seth Weintraub, electrek
“Carvana, known for its car vending machines, is expanding into N.J.” – South Jersey Times
“When Elon Musk Tweets, the SEC Chastens” – The Motley Fool
I’d love to test drive one of these (how will that work with the new sales strategy?) but still can’t get used to the styling. It looks stunted.
You order and buy one, and if not satisfied, you have seven days and 1,000 miles to return it for a full refund. It’s the Amazon model.
Or rent one from Turo.
They keep the $1200 delivery and destination fee, which should curb abuse of that policy.
It looks a little weird in pictures, but much better in person. The giant laptop glued to the dashboard also comes across much smoother when you’re physically in the car, and it has lots and lots of cool features, like being able to watch the backup camera while going forward. Any of us who grew up in the era of rear-facing “wayback seats” will remember how fun it is to see things disappearing into the distance behind you.
Compared to the S, the 3’s interior is what you expect in a nice car. And Tesla has put a lot of investment into charging stations and their app that directs you to them. My friend who owns a 3 was able to visit his parents in Milwaukee (coming from Washington, DC) last fall, traveling through and charging up in a lot of places along the way that are not techie/hipster hot spots.
I’ve been a big electric car skeptic, but I am becoming converted. We’re in kind of a sweet spot right now where there is enough infrastructure that if you live in an urban area you don’t have to build your life around charging intervals, but where there are still opportunities to be a hobbyist and do things like build your own “range extender”, retrofit your garage to fast-charge at home, etc.
Actually you don’t have to upgrade to 19″ wheels if the Aero wheels are not your thing. It’s really just a cover that can be removed, and it looks like this underneath. Many M3 owners remove them.
Oh wow, those might be even better than the 19 inch wheels.
Absolutely. Had no idea. That’d be the first thing I did.
Well I’ll be damned, Tesla took a page from the 82 Firebird!
Or the E34 BMW M5!
The ” face ” of this model 3 looks off to me like it’s missing something like a mouth .the model s has a grill why not this?
The Model S lost its fake “grill” several years back. Why have a grill when there’s no need for one? Has a Porsche 911 ever had a grill?
Cars without grilles is a topic I’ve always found fascinating, so much so that I wrote a CC history about them. For me the Model 3 does a better job than most.
What exactly is that black bit flanking the T emblem? The Model S lost its original gaping vestigial grille, yes, but it still has one. It looks better than the Model 3 with nothing at all.
Any modern ICE car’s grille is mostly vestigial too, the bulk of radiator intake comes in from lower ducting, which both the S and 3 also have for other systems
What are the odds of Tesla slowly opening up/selling dealership franchises in The near future? Seems like it could solve many of the problems that it is facing.
Zero. Over Elon Musk’s dead body.
How would it solve their problems? By giving a chunk of the profits to dealers? They just decided to cut their own stores and are going Amazon. That saves them the money to bring out the $35k Model 3 as well as lower prices (again) on all the other models.
Tesla is ruthlessly driving out all unnecessary costs in order to lower prices and stay ahead of the competition. This is another shot over the bow of the established competition. And look to other new EV startups like Rivian to go the same route. Dealers = Sears.
The manufacturers have for decades contemplated ways to lower their cost of sales. Tesla just showed them how. And zero advertising.
Of course the question is how will it work in the longer term, if/when demand droops. But then Tesla is never shy about trying something new and unproven.
I like it.
It’s about time someone killed off the dealership system. Now someone needs to destroy the distribution cartels for adult beverages.
Once Tesla has the self driving thing perfected these cars will deliver themselves.
The EV rebate is the big variable now I guess. It looks like you in NY are eligible for $2000 from your state (which shows in your screenshot), here in CO it’s $5000 so the same vehicle is $3000 less out here in effect. And the feds still have $3750 if eligible…
I like the idea of cloth better than vinyl or leather assuming it’s not a total penalty cloth to entice you to trade up. Shame it’s not heated but for an extra $2k I guess you can get the midrange interior…
This is compelling!
For your interest, Toyota in New Zealand has no dealers, only agents. All stock is held by Toyota and agents have a number of demonstrators. A car is sold by the agent who gets a fee and supplied at a set price by Toyota. I like this because it stops folk ( me being nice ) wasting your time for three hours and going down the road to another dealer to save $5.
It has been successful for Toyota too. This is to be the arrangement in the UK for sales of the new Supra.
That’s of interest to me, as I have never heard that before. That’s an excellent mid-point between Tesla and the usual.
For someone like me, bored rigid by electronic tech (except what result it might deliver me with minimal input), and not young but yet old, I wouldn’t touch a hugely expensive piece of electronic kit merely through online. Ever had an online purchase go awry? Can you imagine the joy of dealing online with a company run by someone of Musk’s cold mentality? Or even just the sheer love you’d feel asking some online employee how some part of the car works?
I want to touch it, feel it, see it in a few colours, have it explained as I drive it. I want rid of my trade-in. May want finance. Companies like Tesla assume people like me are irrelevant to their future market: yet on averages alone, I can expect another 30 or so years on the road, with some money. They are mistaken.
Of great interest to me, as I didn’t know. Sounds an excellent mid-point between Tesla and the usual.
I am bored rigid by anything to do with electronic equipment, except for how it can do something for me with minimal input. What they can do, in current times, is often rather remarkable, but I care not one whit the “why” but only that it DOES, and does every time.
I’m not buying a hugely expensive piece of electronic kit merely by button clicking. Ever had an online purchase go awry? Imagine the joy of dealing with a company headed by a Musk, with Musk-ish appointments all the way down, trying to explain that not everyone understands what they might? Or that their fetish object is actually faulty?
I’m not young or old yet, but I need to touch, feel, see, smell, and have explained what it is I’m getting. I need to trade my petrol car. Might need finance. Want a human I can physically interact with to return to.
Tesla must think folk like me are irrelevant to their future, but on averages alone, I can expect 30 more years of motoring. With a bit of money not available to the short-contracted millenial. A mistake.
C’mon Justy, a mistake? If you really wanted to, you could find ways of sampling the product with your five senses as Paul mentioned to MT above. You are predisposed against this type of car, and that is influencing your scepticism. There are already plenty of moneyed types our age who have taken up the Tesla product, and for many the repeat purchase might actually be more appealing as an online transaction without the nuisance of dealing with those at a lower station in life than one’s self.
As for the younger skewed demo to whom a Tesla might appeal, there is plenty of evidence to suggest a preparedness to purchase all of their technology online – a 3 being just another, albeit at a higher price point than the iPhone.
Let me add that buying cars online is not unique to Tesla. Others are doing it too, it’s just that the cars are picked up at a dealer. Surveys show that younger folks much prefer it to going to an actual dealer, and frankly, I couldn’t agree more. Why do I want to go to a dealer, when I’ve already made up my mind ahead of time. I hate physical shopping, and I love Amazon.
And in case it wasn’t clear, many/most Tesla buyers have been buying their cars online since all along. Many Tesla buyers have never set foot in a Tesla store. They just buy them online and pick them up at the designated delivery center.
But maybe a Tesla is not in your future, You won’t be the only one. 🙂
That’s all true and fair enough, but you’re underestimating what I believe is called a reluctance to “churn”, which in turn I understand to be the absolute laziness of consumers in changing a product or company (or method of purchase). And folks, because of the disinterest in the product beyond functionality I mentioned, I’m afraid I’m one of the worst.
And Don, as to those with whom I might have to deal that I might like to think are not my people, they are, in truth, and for various unexpected reasons of life, my people after all! (And yes, I know you were being wry). And Paul, I too detest actual shopping, and as I said here on some post the other day, the company who masters autonomous driving will get my money: and as Tesla is actually advertising that, it will quite possibly be them. Hate city driving now, 80% of my miles.
One thing is true. I am predisposed against the car, and not because of unthinking bias. I admire it, it is actually quite a marvel. It is clearly the future., and so is the business model. But I find myself amazed to be saying that electrification is the end point of my lifelong interest in cars, because I am not interested in the tech, at all. Beyond range extensions in the future, it is a fully matured tech – and one entirely free of emotional response from memory, from sight sound and even smell.
Still reckon there are heaps more of mine and older ages who’ll be most reluctant to have to do any bloody THOUGHT to get our autonomous electric from Tesla!
I can’t stand shopping too, except I love browsing for second-hand records and automotive books so I’m where you’re at Justy.
And I’m not entirely enamoured of all Tesla S owners either. Living in the inner-inner eastern suburbs I see many of these ‘conscientious’ types pulling into their enormous energy-sucking mock-Regency homes with their multiple banks of air-conditioning generators and other energy-sucking whatnot.
I’m glad you caught my wryness.
Turns out that 80% of Teslas were sold online in 2018. This is just a reflection of the reality. Why keep stores for the 20%?
“Why keep stores for the 20%?”
This is pure speculation for discussion’s sake, but I’d assume that’s where a good chunk of their future growth could have come from. They already captured the market for buyers like you. What they have not done is make themselves attractive to buyers like me who want to touch and see and drive what they are buying. Not hardly having cars in stock could have a lot to do with that 80/20 ratio.
They are attempting to change the industry rather than adapting to how most people prefer to buy cars today. It’s a bold move. And risky.
“Why keep stores for the 20%?”
Because they are potential customers. Why would you want to drive off 20% of your potential customers?
Wanting to look at a car physically is not just a personal preference for some people. I am 6’4″ and weigh well over 300 lbs. I have very broad shoulders and quite long legs. You would be surprised at how many new cars I simply do not fit in, either because my left shoulder is painfully jammed into the B-pillar when the seat is all the way back (which in some cars is the only place I can put it and safely operate the car), or because the steering wheel is mounted so low that I have to splay my legs out and around the wheel in an uncomfortable position to reach the pedals.
Last summer, I had the opportunity to drive a Tesla Model S, and I assure you, I jumped at the chance. I wanted to see what all the excitement was about. Guess what. I didn’t fit. The seat bottoms were awkwardly shaped and way too short and small, the wheel was too low, and there was simply no way I could adjust things to where I could safely drive the car. I wound up turning down the opportunity to drive it because I just didn’t fit.
That’s not a criticism of the Model S, by the way, I don’t fit in a lot of cars. I didn’t fit in previous generations of Honda Accords either (haven’t tried the newest one). I don’t fit in a Chevy Malibu, a Kia Soul, the first generation Ford Fusion, and I’ve yet to find a Subaru of any variety that fits me. Ironically, I fit comfortably in my daughter’s 2007 Mazda 3, but could barely squeeze into her first car, a second generation Toyota Solara.
My point is that if I can’t drive a car before buying it, I’m not going to buy it. I am not handing over $35,000+ to some guy under investigation by the Securities and Exchange Commission for a car that I may not even be able to drive. I make pretty good money, and once my daughter graduates college in a couple more years, I hope to have the available income to buy a nice new car. But it won’t be a Tesla. Not because I have some predisposition against them, because I don’t. I think they’re amazing. But by eliminating my opportunity to look at the car firsthand,Tesla has made it clear to me that they simply have no interest in selling me a car. That’s their prerogative, of course, and I’ll just go buy something else.
But I just do not understand why any company would simply write off 20% of their potential customers. I know I don’t do that in my business.
Eric, I think Tesla may be very well aware that many of their buyers are VERY outgoing towards others that express an interest in their vehicle (and who wouldn’t, it IS interesting whether one is a fan or not). The couple of owners I know with them are more than happy (way more than with any other vehicle, it’s almost over the top but it’s definitely a thing) to show everyone everything about it as well as often offer sample rides or even drives.
Since you had the opportunity to try a Model S and realized it wasn’t for you, there is in theory an even greater chance (due to volume sold) of someone you know having a Model 3 eventually. If you expressed interest, likely you’d get the opportunity to check it out. Is this weird? Yeah, kinda, but a lot of people’s first time in a Tesla was not in a showroom, but in a neighbor or coworker’s or even sometimes a random stranger’s car.
If you ended up deciding it works for you, then the showroom not being there may end up not being an impediment after all. Note that I don’t personally think getting rid of them (showrooms) is a great idea, but it will save money (in the short term), time will tell if it was a good decision on their part or not.
If you want those things, you can always visit your Nissan dealer and look at a Leaf. They’re not as sexy as the Tesla, but you do get the trade-in jazz and a genuine hu-mon (albeit one who makes the Ferengi look like over-eager philantrophists) to interact with.
That brings up an interesting question. Where do you trade or get your Tesla fixed without a brick and motar site? What about trading it for a new 2030 Tesla?
I’m sure trading in will be quite readily handled by the service/delivery centers.
Fixed? At the service centers, which are different than the Tesla stores. And increasingly service is being handled by “Tesla Rangers”, mobile service vans that come to you. No oil changes needed.
LOLs on the Ferengi philantrophist.
Rules of Acquisition 19, 87 & 141 apply.
Service centers just need 4-10k sq/ft of light industrial space and room to park 20-40 cars in process.
Sounds like a much better system that what we have in the US with centralized inventory.
I just want the batteries, a motor adapter for a Power glide, and a reasonably priced electronic controller. I want an electric drag weapon, Preferably a Camaro.
Odd how there’s not a Tesla to be seen in my neighborhood of more than a thousand homes, even though many driveways sport new high end Beemers, MBs and Rovers. Home prices are in the mid 400’s (not what I paid 22 years ago when I bought it or could afford now!). Seems very odd.
One detail omitted from the article: for $35k it only comes in black, like a Model T. Any other color is….wait for it….$1,500 extra!
On the one hand, I love the Model T reference.
On the other, it reeks of desperation to achieve profits.
So just how does selling a car at essentially no (or very little) profit become an act “of desperation to achieve profits”? Could you explain that to me please? Sounds intriguing. Or magical, even.
I was referring to your comment about colors other than black being optional. They aren’t cutting $1500 out of the cost of the car by offering only black at that price. They are making close to $1500 in pure profit off anybody who “upgrades” their color. Which by itself is more than Ford’s average profit per car. I don’t believe these kind of tactics are sustainable at this price level.
I dunno, young buyers never remember a time when they had a wide choice of colors. When my daughter was shopping for a phone recently, the one she wanted was extra cost for other than the standard color. I think some people will be OK with this, especially since black is so popular now.
What I find perplexing is the absence of more color options in general. I have read about the difficulty in changing colors in the paint booth and understand from an efficiency/cost standpoint why one would want to “batch” process colors together but for a premium product there should be more choice, perhaps even at greater cost.
An example is the VW Golf R. There are about five standard colors and then there is literally a palette of about 30 different colors in all kinds of hues, each available for an additional $2500. That’s on a $38-$40k car. The take rate appears to be low which I think is more a factor of people not wanting to wait for an order but I’d certainly be interested in driving a color beyond the one or six standard ones, especially on a pricier model. I believe the one on the stand at the Chicago Auto Show this year was neon green for example.
Perhaps an even better example is the Ram pickup, certain models of which (Tradesman for one), can be optioned up in a couple of dozen different colors for less than $1000 each. That would totally have my interest, my understanding in that case is that an order would take a bit longer than normal as FCA aggregates them and runs them through as their own “batch” when a certain qty in the same color is accumulated, which makes perfect sense. We did the same thing back when I was in the printing industry in regard to ink colors used on a job.
Ah yes, Tesla. A never ending source of entertainment and speculation. Are they geniuses or hucksters?
My take is that Tesla is frantically trying to cut costs, which is not a great sign for a company that reputedly is still in hyper-growth mode. If demand was as robust as Tesla asserts, then why lower prices? Especially if turning a quarterly profit is already a challenge? Also, keep in mind that a good chunk of Tesla’s profitability was derived from the sale of ZEV credits (44% of Q3 profit was attributed to that source for example). Oh yeah, and today Tesla has to make a cash payment of $920 million due on some of its convertible bonds, which represents about 1/4 of the company’s available cash.
I’m frankly puzzled by the emphasis on the $35K product. Margins will be razor thin, and Tesla’s reputation as a luxury product gets diminished (one color, austere trim). You can add options (pay extra for any other paint color besides black!!!), but there goes that $35K car. And let’s face it, Tesla is seen as a high-end specialty brand, and most of their success has come from poaching high-end German customers, as well as exiting people from their Priuses. It would make more sense to keep the Model 3 base prices in line with the BMW 3 Series ($40K) and keep some of the premium attributes intact.
As for online sales, that’s not entirely new for Tesla or others. Plus, with fewer showrooms, they lose the opportunity for people to familiarize themselves with the novel cars in person–which had been a key component of marketing the Tesla products (they benchmarked Apple Stores in developing the retail locations). I can see not opening more stores, but I’m not sure I’d eliminate the ones already there, unless cash flow was a severe problem. Which, of course, it is.
I also have to think that Tesla will continue to discover the challenges and costs of becoming a route-based logistics company, which is what an “on-demand” sales and service model will require. The effectiveness of Amazon’s business model did not happen overnight, and cars are more complicated and expensive than anything Amazon currently retails (plus Amazon isn’t on the hook for product warranty or servicing costs on the goods it sells). So while as a short-term pitch, “closing stores and selling online” makes a good soundbite, the long-term impact on Tesla’s success is not as clear-cut. Carvana is not profitable (-1.43 Earnings Per Share for FY 2018, down from -1.31 EPS in FY2017), so it’s interesting to use their business model as an example to benchmark in the quest for stronger earnings (versus just higher revenue). Tesla already generates plenty of revenue, it’s those pesky profits from ongoing operations that remain elusive.
Another long-term perspective to consider in Tesla’s push to produce nondescript, autonomous EVs is that over time there won’t be any reason to own one at all. Just summon an Uber or Lyft, and get in whatever appliance shows up to take you where you want to go. That is arguably the real game changer in urban environments, and the only question is who will own and manage the vehicular inventory? If selling basic fleet units on a low cost-per-mile basis (including fully-loaded service and software update costs) becomes the name of the game, there will be very few winners and they won’t likely be luxury niche brands. Tesla’s future vision of world dominance and “Tulip Craze” share prices have been driven in part from the notion that 1) everyone will want to own a Tesla and 2) that Tesla owners can lower their ownership costs (or make money) by “renting it out” as an autonomous ride share vehicle when they aren’t using it, and then have it just “drive home” when done. Somehow, I don’t see why a lot of people would want to bother with that.
And for another long-term headwind, think about taxes. Look at how Tesla calculates savings on fuel costs, which of course includes fuel taxes. And then there are the EV tax credits at the state level. How long will fiscally struggling states like NY continue to allow tax revenue to slip away? Will these states continue to subsidize EV drivers by raising taxes (and/or add tax to utility bills) for everyone else? That won’t likely be popular–look to France’s Yellow Jacket protests as the extreme example of the resentment that can cause. For residents of U.S. states, of course you can move rather than riot, but that simply exacerbates the fiscal drain for states like NY all the more. Companies that are reliant on government largesse to help drive their fundamental business are obviously prone to these shifts.
So, as with all things Tesla, I think it is important to view the issues from all sides, and then, as always, enjoy watching the wild show unfold.
Of course they’re trying to cut costs. You make that sound like a bad thing, yet that’s what everyone has been saying they need to do to become profitable.
The $35k M3 was a key promise that had to be fulfilled. Anyway, it’s really not that much cheaper than the next version. There were a lot of folks who put down a deposit expecting it. Not making it would have hurt their reputation.
And clearly demand for the M3 has drooped, so this is a stimulus to keep demand up and the factory running 100% while overseas sales start to have an effect.
As to global domination, I have no idea what you’re talking about. Realistically, Tesla is trying hard to carve out a niche in a very competitive market, and become financially self-sustaining (profitable). With EVs, that’s a tall order.
True autonomous cars a lot further off than you might think.
Even if states impose an EV road tax, it’s not likely to be more than the effective amount on the portion of the current gas taxes that go to the road funds. Not exactly big bucks, in the US anyway.
Your analysis of Tesla’s share prices does not reflect the common one. Nobody expects everyone to want a Tesla. Their share price is based on continued growth, but not exponential.
I have no basis to judge Tesla’s share price; the market sets it, not Tesla.
I’d hardly say that Tesla’s fundamental business case is reliant on government largesse. You’re sounding a lot like the “Tesla is a crony capitalist” faction.
I hesitated to make my comment for exactly this reason. Clearly Tesla is too volatile a topic to ever wade in on here. I won’t bother to rebut, other than to say I’m pretty well versed in business fundamentals, consumer behavior and the basis for market valuations including Tesla’s, and so I don’t make my comments flippantly. Also, please note that I said “Companies that are reliant on government largesse to HELP drive their fundamental business are obviously prone to these shifts” which is hardly a “crony capitalist” rant.
And see Mike Hagerty’s comment below regarding the cost of a Model 3 in California with subsidies as Exhibit A for why I said that government largesse HELPS drive Tesla’s business.
I’m quite happy to debate the issues around Tesla. As I’ve said repeatedly, I’m neutral/objective; my problem is that very few others are. The tone of your comment and statements such as “Tesla’s future vision of world dominance” suggest you’re lacking objectivity. I do tend to get turned off when folks throw out stuff that’s irrelevant to the actual issues facing Tesla. World dominance? I’d say Elon Musk is quite worried about the competition from Europe and elsewhere, drooping demand, and is battening down the hatches for a protracted fight. I think world domination is hardly i his mind when his back is against the wall. As it rather is.
Didn’t you leave a comment here about a year or so ago expressing severe doubt about Tesla’s ability to ramp up M3 production? And that you and I were going to check back in on that issue? I need to find that interchange.
As to ZEV credits, you’re throwing out stale info. In Q4, ZEV credits were all of $1M. And going forward, Tesla made it clear that they expect them to be very low and/or irrelevant.
And as to government largesse, let’s just remind ourselves that the EV tax credits are available to consumers of any EV. GM, Nissan, Ford, FCA and every other manufacturer has gotten just as much benefit from them Tesla. We could say even more so in their case, as their EVs all have negative profit margins, and are more dependent on them to sell their EVs. And that it represent a higher percentage of their sales price on their EVs. The federal tax credit for Tesla is phasing out, and Tesla has lowered prices to make up for that, and even more so in this latest round. The “Help” from that is clearly increasingly minimal to their business fundamentals.
Are you suggesting that government should not have incentives for various C02 reduction efforts, such as renewable energy and EVs, among others? If companies don’t take advantage of these incentives, then their whole intent becomes meaningless. What’s the point then? That’s what they’re there for. Why castigate Tesla for that?
Anyway, the Big 3 get plenty of government help with policies that subsidize the price of fossil fuels. That’s been proven repeatedly.
No offense, but I don’t think you come across as neutral on the topic of Tesla. My perception is that anyone who makes a statement that questions Tesla’s business, products or the topic of EVs runs the risk of being eviscerated. I’ve deliberately tiptoed around responses on the topic as a result, including my perceptions of driving a Model 3, which I personally found underwhelming (I know, blasphemy!).
You say I am biased, so tell me, how am I allowed to make a comment on Tesla? I was trying to be objective and based my comments on publicly available data and comments from Musk himself. By nature (and I think you are this way too) I tend to question company statements and promises. It’s the nature of business to challenge assumptions, and that’s a key part of what makes it so interesting.
The Bull’s case for Tesla is based on enormous marketshare and profit projections and the company controlling a large part of the global EV market and battery market, as well as being a pioneer in autonomy and new business models derived from that. That was the basis for my tongue-in-cheek comment about “world domination” (sorry, in the future I’ll be as dry as Death Valley in July). I didn’t make these notions up either, nor are they from some crazy “conspiracy” blog: These analyst positions are to be found in places like the WSJ and Bloomberg.
Musk himself makes grandiose claims about Tesla’s future, and has repeatedly made and broken many promises regarding Model 3 pricing and production. He is noted for being fast and loose with conventional rules regarding CEO behavior and statements, so inevitably some people might take Tesla’s statements with a grain of salt (I would be one of those people, so I guess I’m “biased”). I’m also skeptical of GM and their future EV/autonomy projections as well, and I don’t buy everything Mary Barra says either. So sue me.
Feel free to look up any of my past statements on Tesla–they were accurate relative to the disparity between the company’s statements and the company’s delivery at that point in time.
As for EV adoption, my point is that the transformation to an entirely new “recharging/refueling” infrastructure is complicated on many levels (including tax rebates and/or revenue), and therefore I don’t buy into the most bullish hype surrounding how fast EVs will replace ICE vehicles or how quickly EVs will become consistently profitable at high volumes. The migration point from early adopters to broader consumer market acceptance is one of the most challenging ones in business. Is it possible that Tesla is running into that ceiling now? Could VW also be headed for trouble in that regard? Am I allowed to ask those questions?
Nor do I buy into the hype regarding the speed of arrival for fully autonomous vehicles. Once again, Tesla has been very aggressive at arguably (need to be very careful with my wording here) “overpromising” on the benefits and timeline of its AutoPilot capabilities. But I suppose that’s off limits too….
I am not trying to generate controversy, but cc is a forum where people can express informed positions regarding automotive topics. I tried to lay out my positions that way, and I’m sorry that you perceive them to be so biased and unfair. As today’s market rout on Tesla stock will attest, Musk and his company are in for some rocky sailing, so I’m not the only one who questions the company’s announcements yesterday. Bears suck, I suppose.
On the topic of EV adoption, as enthusiastic as I have always been about EVs, I know it takes many years for major technological changes to run their course. Typically a human generation, sometimes two. It’s usually in the shape of an “S” curve, with exponential tails at each end.
It’s been 15 years since Tesla was founded and only 11 years since the first Tesla Roadster, an exotic sports car, hit the market. Sales started very slowly, and have grown exponentially to substantial numbers today. Nissan Leaf and other pioneering EVs have shown similar, if smaller, growth curves.
Today’s US market share for EVs is about 1.75% as of 2018, growing from 0.90% in 2016 and 1.18% in 2017, according to the chart below and other sources. Still a tiny fraction. But it’s growing at about 30% per year. That compounds up to EVs having about 50% US market share in another 11 years, about 2030. So we’re about halfway from zero to 50% share over 22 years, around a generation.
Naturally that assumes costs continue to drop as they have been, charging infrastructure and charging speeds continue to improve as they have been. There’s no reason to think that will change. Tesla for example still has the highest owner satisfaction of any brand, according to CR, beating Porsche by 3 points.
The thing about technological change is those pesky exponentials. They start very small and stay small for a long time, but all that compounding creeps up on you. EVs will be mainstream in about ten years.
That’s how I see it too GN. A couple of weeks ago on the Rivian story Paul essentially baited me into giving him an outlet while refusing to allow continued discussion. Yet another poster faced no rebuke for claiming nay-saying was right wing propaganda from old men yearning to procreate with sheep.
I hate to complain like this because I really have enjoyed this site over the years, but I think it’s fair to point out. I’ll leave it at that.
No offense, but I don’t think you come across as neutral on the topic of Tesla. My perception is that anyone who makes a statement that questions Tesla’s business, products or the topic of EVs runs the risk of being eviscerated
It all depends on the statement 🙂
Here’s my problem: I’ve been hearing essentially the same bear/shorts/FUD/doomsday comments/debate/”journalism” since 2009, when TTAC started the Tesla Death Watch (to my great dismay).
It’s been like a broken record for ten years! “they’ll never build the Model S/X/3….” “They’ll never build them at a profit…” “Their whole business model is based on government handouts…” “Musk is a huckster/liar/fraud….” “They’ll fail! by….2010/2011/2012/2013/2014/2015/2016/2017/2018/2019….”
“The stock is way too high because of the Musk cult” (some 80% of TSLA is held by large institutional investors).
I could go on and on, but here’s the simple reality: NONE of the bear/shorts/Tesla hater predictions of imminent doom and collapse have ever been right. Right?
So the problem I have is that the credibility/intelligence/good judgement of all these arguments lost their impact on me a long time ago. I’m desperate to hear some good intelligent analysis on Tesla. It’s absolutely obvious that they have very serious challenges now, but then they have had that since day one. And so far, despite the odds and all the naysayers, they’re still here, and paying their debts and showing the ability to be profitable some of the time.
I actually agree with quite a bit of what you say. But where you lose me is when you ring up a few of the broken arguments, most of all the government help issue. As I said earlier, the government created these incentives with the specific goal that individuals/corporations would invest capital in order to take advantage of them, as they are seen/presumed to be for the social good.
As soon as these kind of worn anti-Tesla tropes are trotted out, I become cynical to the comments. I’m just way too burned out on them.
As to how quickly EV adoption will happen, that’s the $64 billion question. One thing is clear so far: just about every competitive EV is sold out, before they are even available. Porsche, Audi, Mercedes, Jaguar, Hyundai, Kia, etc.. So far, the market appears quite eager to slurp up what’s available. And in the case of Tesla, that’s a significant number.
I think I made it very clear in earlier comments on this article that I do not see yesterday’s announcements as positive. It clearly suggests that Model 3 demand is drooping, and needs to be stimulated.
And I suspect that closing the retail stores is being done mostly out of necessity, to lower costs. A bit like burning the furniture…
One thing is extremely obvious: Tesla has been juggling with prices almost monthly now in the past year or so. That alone shows that they’re struggling to find the right balance between demand and sales revenue.
As to VW and others jumping in with huge investments, I certainly don’t have a crystal ball. There’s undoubtedly some risk involved! But there might be even greater risk to those that get left behind. Which explains why in recent days/weeks every major manufacturer has announced new EV investments.
It’s quite clear that the industry is more concerned about being left behind than being out front.
Enron was a Wall Street darling for years too, until it spectacularly collapsed. As legal disclaimers on investment ads note: “past performance is not indicative of future results.” Witness the ongoing churn in Tesla’s leadership, especially treasury, legal, HR and CFO positions. And Musk exacerbates the company’s credibility gaps (and SEC troubles) with his tweets and behavior. You can look the other way all you want, but many would logically consider these issues to be an indication of potential problems ahead. Wall Street will go along with the ruse, since trading is often about speculation and momentum (up or down) rather than intrinsic value–depends on the category and how the players think they can make the most money. But that doesn’t mean a company is automatically worth the valuation or even represents a fundamentally sound or sustainable business. I don’t think that is an unreasonable observation, though Tesla bulls will vehemently challenge such dissent. And the bears will continue to make their points. Such is the dynamism of the markets.
My point about taxes was not a value judgement on government incentives, it was regarding a business headwind for Tesla and all other EV makers. Ed had posted a pricing example from his home state of New York which included a generous state tax incentive for the EV purchase. New York’s own Governor Cuomo recently and very publicly lamented that the state was suffering from a significant tax revenue shortfall and noted that taxpayers can and do depart for other states if/when tax rates rise too high. His words, not mine. But I think it raises a legitimate question about how states will handle EV incentives, especially as EV sales rise. Will the tax abatements remain as sales increase? Will gas taxes be raised for non-EV drivers instead? And if EVs come to represent say 20% or 30% of the total market versus 2% today, that will have a material impact on gas tax revenue. How governments choose to address the tax revenue situation (subsidies and collections) will vary by state, but all will have an impact on EV market potential and profitability. Tesla, being a pure EV player, is especially susceptible. That’s not Tesla hating, that is economic reality.
My comment regarding ride shares versus car ownership was deliberately provocative, but also something that could become reality. What’s greener than an EV? Owning no car at all and only consuming the transportation you need when you need it. That will impact all car makers of all vehicle types, and there are plenty of articles currently circulating that imply we have passed the “peak car” era. My point about Tesla pushing toward one standard color, online buying sight unseen and minimal driver engagement was that these moves could conspire to remove the engagement points that help bond people to their cars. Without that emotional and tactile/physical connection, fewer people will strongly desire their own personal car at all, especially when there are other options for getting around, including ones that can be considered more environmentally sound and more cost effective. The revolution can devour its own…
So I realize all of this is not Tesla cheerleader content, but I don’t think that I’m making unreasonable observations. I don’t read TTAC and I am not a serial Tesla basher (I admire their battery technology, engineering elegance and tenacity), though I don’t guzzle the company’s Kool Aid without question, and I’m not personally interested in owning one of their products. I’m also not some nut job extremist because I think EV adoption will be fraught with societal disruption and business peril, and that such fundamental behavioral change won’t necessarily arrive in a linear or predictable manner.
GN, I also admire the cars Tesla makes and their battery technology, but the quality issues (a solid 80% of Model X I see have misaligned doors), fanboys and CEO have ruined every aspiration I had of liking the brand. If I ever own an EV (which I’d like to) it’ll have an Audi/VW/Volvo/Polestar badge in it.
Oh, and I would love to say to some people that FWD means Front Wheel Drive, not Falcon Wing Doors for God’s sake.
GN said: I’m frankly puzzled by the emphasis on the $35K product. Margins will be razor thin, and Tesla’s reputation as a luxury product gets diminished (one color, austere trim). You can add options (pay extra for any other paint color besides black!!!), but there goes that $35K car. And let’s face it, Tesla is seen as a high-end specialty brand, and most of their success has come from poaching high-end German customers, as well as exiting people from their Priuses. It would make more sense to keep the Model 3 base prices in line with the BMW 3 Series ($40K) and keep some of the premium attributes intact.
GN: I think the $35K Model 3 is equivalent to the 1964 Ford Custom featured here yesterday. No one’s expecting it to be their best-seller. They just need to be able to say they can make one. Most people will order them somewhere between a bit and a lot nicer. Which means the cars most people will be exposed to won’t hurt the company’s premium image.
Let’s say I’d rather have mine in Blue. That makes it $36,500. I’d probably pop for the partial premium interior for the upgraded seats, audio and smartphone docking, but I’m still under $40,000 at $38,500.
That’s what my neighbors would see and that’s the price they’d hear. They’d also hear about the $3,750 federal tax credit and the $2,500 check from the State of California, which makes my real cost $32,250.
It’s probably about the nicest $32,250 car out there.
As an aside, the black only color may end up being a scarlet letter for the Model3 in general. Who wants to be perceived as buying the lowest rung on the ladder, perhaps not those purchasing the most loaded up version. Or on the other hand the opposite may come true, with something uncool or cheap becoming the most popular thing. It’ll be fun to watch.
Wall Street is agreeing with you GN. Not the reaction Tesla was hoping for. Tesla’s stock price is based on Tesla’s per-car profit margin target, which is 5X that of Ford last I saw, and something that is looking increasingly unrealistic. If it was ever realistic to begin with.
As a two-car family, I have genuine interest in a $35K EV as a commuter sometime in the next 5 years. But not without a test drive, and not without local service facilities.
It’s definitely an uncertain future for Tesla. But I never would’ve guessed in a hundred years Tesla would ever have gotten as far as they have already. So my bet is on Musk beating the odds, simply because he’s already been doing it and it’s now a habit for him. Before the model three I was literally one of those guys who said electric cars are stupid. They aren’t so stupid anymore.
Today’s print NY Times had this picture over the headline “At Last, Tesla’s $35,000 Model 3”. Makes you think the doors and wheels are extras! 😉
Seems with the closing of showrooms, Tesla should look into hiring demonstration model 3’s with drivers having a certain area they cover, meeting up with potential buyers for test drives. A reasonable refundable fee could be charged, enough to cover expenses. I wouldn’t buy any car without seeing and driving what I’m getting first. Certainly less expensive than maintaining showrooms.
Another consideration is, states will eventually start charging a per mile road tax to cover the loss of gas tax. So eventually this will be an added expense to ownership.
This actually holds some real potential. Tesla could offer a program with nearby current owners where they’re paid to offer up their Tesla for demo rides. Prospective owners get a hands-on experience, current owners get a few bucks and a chance to talk about their experience, and for a low investment, Tesla gets the ability to let potential buyers check out their wares. Seems like a win-win all the way around.
In effect, Tesla would be hiring current owners as ad-hoc sales people.
I took delivery of a new Model 3 a week ago Thursday.
It is my first car purchase, new or used, in 23 years.
I looked into the EV Kia Niro and Hyundai Kona – both get very good reviews, but neither Kia nor Hyundai seem to be putting a priority on U.S. deliveries; they are unobtainable in my market for at least a year. It’s a pity, because the full $7500 fed subsidy will be in place for both manufacturers for at least a few years to come. Not so for the Tesla ($3750 until ~July, then $1875 until December, then zero), and the Bolt ($7500 until April, then similarly downhill after that).
I then took in a lot of reviews online and shopped price/features/layout/build in the Model 3 vs. the Bolt – shopped it just like an ICE car. Different cars, different features, different pluses and minuses. You make a choice, you pay the tab, and you live with it.
We also tend to hold onto cars for non-typical duration (see 23 years), and I was not willing to drop $~40K (or more) for a long-term purchase of a car my spouse had not yet driven, especially something as unconventional as an electric vehicle, so two weeks ago on a Saturday morning we visited a Chevy showroom and drove a Bolt, and then went to a Tesla showroom and drove a Model 3. (For the record, this was the first time I had been in a car showroom since 1988, when a buddy was buying a new Ford Ranger.) A comparison of the shopping experience, the cars themselves, and an assessment of the Tesla electric car experience are lengthy epistles for future posts, maybe.
We went to lunch, made a decision, walked back to the Tesla showroom, and ordered the car. Tesla keeps a few in stock, and they had exactly the car we wanted. Ordered on Saturday, took delivery five days later. To be clear: we did not shop available inventory; we instead decided on what we wanted, and they had it. Had our choices been different, delivery was projected to take a few more weeks. I’d also point out: there aren’t that many options to choose from, so the odds of having the exact vehicle we wanted were higher than if there were more variables available.
Technically, one could say we “ordered the car online.” I stood next to a sales rep in the showroom while I clicked on the very same buttons I could have clicked on in my living room. It’s not clear to me whether my transaction counted as an “online” or “showroom” sale.
And because Tesla seems to be a polarizing subject, I’ll include the following preemptive caveats:
No, there haven’t been any quality-control issues; the car is flawless.
No, I do not own any Tesla stock and have no dog in the fight re Tesla vs. the rest of the car industry.
No, I am not screaming, “AAAAAHH!! A big price cut two weeks after I bought it!!” The price cut is essentially for a decontented car. Were I to buy another identical car now with the features we wanted, the price would be the same.
No, I do not resemble the archetypical eco-justice warrior, hipster, or social climber stereotype. The 3 is my wife’s car, because she likes comfort and reliability; my DD’s are dented and scratched 23- and 28-year old semi-comfortable, semi-reliable vehicles with Blue Book value in the sub-$2K range. I dine at McDonald’s. I buy meat at COSTCO, cook it, and eat it. My haircuts cost $12.50 plus tip. We bought the car because it made a lot of sense in view of how and where we live, and intend to live in the near future. And no, I do not consider it a carbon-footprint virtue signal – if anything, the feel-good element of the purchase (for me) is that I am (finally) able to buy a new car I really like that was Made In The U.S.A.
Interesting, thank you for your insights, I certainly appreciate the viewpoint. What would you have done had the forthcoming plan of closing the showrooms been executed already, i.e. if you were searching two months from now instead of last month.
Would you have ordered it online without seeing, driving, and checking it out in person? Or would you have tried to seek out someone else with one to do so? Or just picked one of the other available options (Bolt, Kona, etc) or just not done anything at all?
I’m genuinely curious and realize that whatever your answer is, it is just an anecdote and not representative of anything really, but you strike me as someone that methodically researches the choices and not one to just do something impulsively.
I would almost bet that Tesla will ask for existing owners to volunteer to make their cars available for a closer look and test drive. They asked for and got volunteers to help with the pre-delivery process when they were trying to deliver that huge number of M3s right before the end of the year.
I would agree with that, many of them including the ones I know are quite the evangelist as regards their car, but am curious if everybody would be comfortable with that (from a buyer perspective). I mean, I probably would, and people generally hate car dealerships, but then again, a higher end dealership/showroom is usually MUCH more palatable (or expected?) than a lower end one.
The Tesla showrooms I have visited surely had the high-tech vibe with friendly, informative, and non-pushy staff there to explain the cars and the process. Which is generally the same as I have experienced at Cadillac, MB, BMW, Audi, Lexus, Jaguar etc as opposed to more “regular” nameplates, i.e. not objectionable and the staffer generally knowing as much as I did or at the very least not being as blatantly uninformed.
I guess I, as a car guy, would probably be willing to go to some random owner’s house to check out his car with an eye to ordering my own, I don’t know if my wife would be as down with it though, I think that’s the main focus of my question. Would it be perceived as “weird”? I don’t know. At some point the car has to appeal to the mainstream buyer and not just those predisposed towards it anyway. That’s where I think it may be turning off some people, even if it’s 20%, that 20% can still easily be the difference between success and failure. It’s a huge leap of faith with a significant amount of money for something with a somewhat mixed track record, i.e. not exactly like ordering something from Amazon where if worst comes to worst I can simply refute the charge on my credit card and let them deal with it. I don’t see that happening as easily here if there ends up being an issue especially once a loan or lease is involved. Some people just feel more comfortable having the ability to discuss/resolve an issue with the opposite side in person, face to face.
Jim, your question is a tough one. Had there not been a test drive available, I probably could have squeezed the trigger anyway, with the hitch that it would have been much more difficult to convince my wife to spend the sum we did. She is not a car person, and I tried to pitch her on the Tesla’s virtues over the cheaper Bolt, but she wasn’t sure until she had the opportunity to drive and compare them, and that sealed it for her. OBTW – she loves the car.
Two other factors/pieces of evidence: 1) a close relative bought a Model 3 about six months ago, and when I had the chance to visit him a month ago, well, suffice it to say he was eager to extol the car’s virtues. At length. So he was selling me also, even though his car was not present.
2) For what it is worth, my previous car purchase (23 years ago) was via Tourist and Diplomat Sales. I bought two brand new cars having never test driven them, or even having seen them in the metal. I ticked the boxes, sent the huge check, and two cars arrived much later, thousands of miles away. That worked out pretty well in the long run. In some circumstances it seems I’m a little more impulsive than I think. But I wasn’t married then (yet) either.
Bottom line: I’m pretty sure I would have bought the Tesla even without a test drive, but it would have been a much tougher, more agonizing slog to the finish line. A skilled car business person could (and no doubt has) evaluated ROI on Tesla showrooms – my take is that the reduction in access to the vehicles will certainly be detrimental to sales. Not confident it will be fatal. And like Paul says, given Tesla’s track record for non-convention and innovation, I won’t be surprised if Elon Musk comes up with a workaround.
Very interesting, thank you for your insight, I was interested in your own personal viewpoint based on your original comment, obviously everyone is different. Thanks and I hope the car continues to be as good as it has been so far!
I’m wondering when we will see the Semi in revenue service for UPS, Wal-Mart, Frito-Lay, JB Hunt etc. Freightliner, Volvo and Paccar all have alpha builds in the field and much more in the pipeline.
I could see myself leasing a austere AWD 3 in a few years. I’m still a bit skeptical on the long term quality of the 3.
I really haven’t paid much attention to Tesla, as they really have nothing that would suit my use case. I’m not necessarily against EVs, and have gone as far as to ‘build and price’ a hybrid Chrysler Pacifica just to get an idea of the cost/benefit for when it’s eventually time to replace my wife’s ’12 Routan.
After finally deciding to skim through this post and its comments, I decided to run the same exercise for a Model 3. While the standard range car would meet my daily commuting use case (~70 miles round trip), it would simply be a non-starter (so to speak) for our long road trips – we’ve been putting around 50-55K annually on our vehicles (between wife and myself).
The closest supercharger stations to us are over an hour away, and even if they were strategically located along our typical road trip routes (they are not), it would add 1.5-2.5 hours (long vs. standard range) to our drive time depending on where we were going due to the need for 3-5 recharge stops. That’s simply not acceptable.
Price-wise, I came out to $45,500 with these options:
> Model 3 Long Range Rear-Wheel Drive
> Midnight Silver Metallic Paint
> 18’’ Aero Wheels (which I would probably replace with aftermarket, so add another $1500+)
> Black and White Premium Interior
I have yet to drive any EV, and would not consider buying one until I had that opportunity. I’m not sure I’m ready to give up the snarl of an LS-3 and working my way through six manually-shifted gears, anyway.
The Rivian truck looks interesting, but again, it really doesn’t overlap my use case (for a truck) well, given I use mine for hauling and towing big, heavy farm stuff.
I suspect it will be another decade before EV offerings have enough overlap with my use case that I’d consider one. Or maybe my use case will move closer to what’s available by then, who knows?