Will Tesla ever make a cheap version of the Model 3?
Building cars is hard. Building an affordable electric car is exceedingly hard.
Tesla CEO Elon Musk said recently the company will honor its “obligation” to deliver a $35,000 version of the Model 3 sedan sometime in the next 10 months. But the difficult road to getting there – and the skepticism by some experts that it’s even feasible – only underscores the main obstacle to widespread EV adoption: the price point.
Only two companies have managed to mass-produce an all-electric vehicle with any kind of battery range for under $40,000, and that’s Chevy with the Bolt (starting at $36,620, 238 miles) and Nissan with the LEAF ($29,990, 151 miles).
But of course, those cars are not coveted Teslas. For three years we’ve been hearing about plans for the Model 3, a sedan billed as the first “mass market” car in the Silicon Valley luxury EV maker’s product line. It was envisioned as a barrier-smashing disruptor that would prove high-tech electric vehicles could be priced within reach for most American working families.
Hundreds of stories were written about the Model 3 while it was still on the drawing board, and the coverage usually played up that intended $35,000 price tag.
The first cars to roll out of Tesla’s factory in Fremont, California, in July 2017 did indeed carry the $35,000 base price. But an extended battery, capable of propelling the car 310 miles on a charge, cost another $9,000. And a package of “premium upgrades” cost an extra $5,000. Both options were required for delivery. That’s a total of $49,000. Other options, like colors, wheel size and enhanced Autopilot, could push the tally to $59,500.
There’s no evidence that a single variant of Model 3 for sale to the public at $35,000 has been built.
In fact, lately Tesla has been going in the opposite direction of affordability: Last month, Musk took to Twitter to announce that a new high-performance version of the Model 3 would be available for order at $78,000.
How many among the 450,000 people who put down a $1,000 deposit on the Model 3 assumed they’d see their $35,000 variant by now? Presumably quite a few. Tesla was plagued by initial production delays but is now cranking out 2,677 Model 3s a week, with 37,531 delivered so far, according to Bloomberg’s tracker.
Musk took the opportunity of his announcement about the $78,000 Model 3 to assure buyers about the $35,000 version. He responded to a Twitter user about it:
With production, 1st you need achieve target rate & then smooth out flow to achieve target cost. Shipping min cost Model 3 right away wd cause Tesla to lose money & die. Need 3 to 6 months after 5k/wk to ship $35k Tesla & live.
— Elon Musk (@elonmusk) May 21, 2018
A couple days later, during a conference call with shareholders, Musk set a more firm timeline. According to Quartz:
Musk assured them that a $35,000 Model 3 would be delivered by the first quarter of 2019. “We will honor that obligation” to deliver at that price, he said, “and we would do so now if it was physically possible.”
The approach of “make the profitable car now and the stripped-down one later” affirms the views of Business Insider transportation writer Matthew DeBord, who argued way back in February 2017 that Tesla shouldn’t even bother with the Model 3. Even after Musk vowed to stick with it, DeBord suggested that the car might never get made:
I’ve always struggled to figure out why Tesla wanted to sell a $35,000 vehicle anyway. Unless the company can convince the Trump administration to extend a $7,500 federal tax credit that will phase out after a carmaker sells 200,000 electric vehicles in the US, that perk will vanish for the el-cheapo Model 3 crowd.
Tesla could hit that threshold as soon as July, according to a forecast by Inside EVs. Once that credit starts to phase out, how many middle-class buyers will be able to afford a Tesla of any kind?
Cost is the most prominent roadblock preventing EVs from capturing market share, as well as the public imagination. But there are other factors: still-slow charging times; the lack of a cheap, prevalent charging infrastructure; no viable pickup option; and that old bugaboo, range anxiety.
The failure to launch is not just Tesla’s problem: Volkswagen will no longer sell its all-electric e-Golf, and Fiat (maker of the 500e, sold only in the EV stronghold of California) is struggling to maintain its brand in the U.S. Led by the Model 3, EV sales topped 54,000 in Q1 of this year, a 32 percent increase over the same period last year. But for context, there were 1.7 million light-duty vehicles sold in Q1, so EVs accounted for just 3.3 percent.
Unless you’ve got the budget to afford what is still a luxury choice, take a look at all options available, including flex-fuel vehicles. An FFV might not be as sexy, but it’s ready right now, at a reasonable price.
- Check out the 10 coolest flex-fuel vehicles for 2018
- Magical thinking drives EV projections
- EV use in China is skyrocketing. That’s terrible news
- So where are we with the electric pickup?