Summary
*Model 3 promises to deliver seemingly close to 99% of the Model S, but at half the price.
*So why would anyone want to order a Model S now, unless they “need” a Tesla before the end of 2017?
*More fundamentally, why would Tesla be able to deliver all of this content at a lower price than equivalent 2017 EVs from other automakers?
*If Tesla loses almost $20,000 per car today, why wouldn’t those losses balloon if the price is cut in half for almost the same content?
*Is there any surprise that there is hot demand for a product that essentially offers to sell a dollar for fifty cents? Who will fund these losses?
The Tesla Model 3 unveil turned out to look pretty much just as anticipated: A slightly shrunken Model S that's optimized more for cost. It promises to do close to 99% of what you get in the current Model S, utility-wise, but for half the price - $35,000 instead of $70,000.
With the Model 3 still fitting five people and a healthy amount of luggage, as well as maintaining essentially the Model S design language with a Model X nose, what's the argument for buying a Model S anymore? Clearly if you need the car before 2017, maybe you would consider one.
But otherwise?
The Model 3 will be easier to park, surely lighter and probably have better build quality than the first-generation Model S. You would have to spring for the more expensive versions of the Model S with the highest performance to have a motivation to buy a Model S anymore. And those Model S versions are closer to $130,000.
Oh yeah, one more thing: The Model 3 will have "only" 215 or slightly more miles of range on the US EPA cycle, a bit less than the Model S. That should put it in direct head-to-head competition with the Chevrolet Bolt and perhaps also the Nissan LEAF 2.0.
To be clear, the
Chevrolet Bolt will have a 60 kWh battery and enter volume production by the fourth quarter of this year. We know very little about the
Nissan LEAF 2.0, except that most speculation suggests it will also have similar specs but arrive six months after the Chevy Bolt.
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Think about that logic for a moment: GM says the Bolt will cost no more than $37,500 (base price). Tesla says the Model 3 will cost $35,000 (base price). But if the Bolt inherently costs less to produce, how do you square this circle?
There are only three possibilities:
1. The Bolt price will end up being much lower than $35,000. That's possible, but is it likely?
2. Tesla will lose a ton of money at $35,000.
3. GM will make a lot of money selling the Bolt at anywhere near $35,000.
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