Tesla’s to un­veil BMW-Fight­ing Model 3

The Pak Banker - - COMPANIES/BOSS -

Tesla Mo­tors Inc. gave some hope to in­vestors who have suf­fered a 40 per­cent drop in the car­maker's shares this year by af­firm­ing that it's on track with de­vel­op­ment of its lon­gawaited Model 3, the com­pany's mass mar­ket rai­son d'etre.

Tesla said the Model 3 would be un­veiled March 31, the first time the com­pany has set a date for the event, and re­it­er­ated that it will start pro­duc­tion and de­liv­er­ies in late 2017. Given Tesla's his­tory of prod­uct de­lays and overly op­ti­mistic guid­ance, com­bined with the fact that Gen­eral Mo­tors Co. will roll out its all-elec­tric Chevro­let Bolt later this year, that was good news for the na­tion's youngest, and small­est, pub­licly traded au­tomaker. The stock rose more than 9 per­cent in ex­tended trad­ing Wed­nes­day.

Chief Ex­ec­u­tive Of­fi­cer Elon Musk needed some good news for stock­hold­ers, who were sell­ing off shares amid fear that cheap gaso­line and com­pet­ing elec­tric cars would un­der­cut sales. While af­firm­ing that the Model 3 is on sched­ule, Musk also said that sales will be bet­ter than ex­pected this year and that mon­ey­los­ing Tesla is "in strik­ing dis­tance" of pos­i­tive cash flow.

"We're re­ally look­ing for­ward to the un­veil­ing of the Model 3 at the end of next month," Musk said dur­ing the fourth-quar­ter earn­ings call Wed­nes­day. "I think it will be well re­ceived, and then get­ting into pro­duc­tion and de­liv­ery at the end of next year."

Tesla is pin­ning its hopes of get­ting out of the red and into sus­tain­able prof­itabil­ity on the Model 3, whose lower price will ap­peal to more buy­ers. The Model 3 will have a price tag of roughly $35,000 be­fore in­cen­tives like the fed­eral tax cred­its or state re­bates, but Tesla will ini­tially roll out a highly op­tioned ver­sion, as it did with its Model S sedan and Model X SUV.

Musk said the Model 3 will be an elec­tric al­ter­na­tive to small lux­ury cars from Audi and BMW rather than a com­peti­tor to the Chevy Bolt. GM will sell the Bolt, which will go more than 200 miles on a sin­gle bat­tery charge, for as low as $30,000 af­ter tax cred­its. Though the Model 3 will be sim­i­larly priced, Musk is al­ready try­ing to po­si­tion it as a higher-end car than the Bolt.

"You should think of the Model 3 as sort of re­ally com­pet­ing in kind of the BMW 3 se­ries or Audi A4 mar­ket," Musk said. The 3 se­ries and A4 can eas­ily sell for more than $40,000 with op­tions. With Model 3, Tesla was able to take more time and en­gi­neer the car to be eas­ier to build, Musk said. The car is 20 per­cent lighter and less com­plex to man­u­fac­ture than the Model S, he said.

"The Model S was re­ally the first car we ever made our­selves," he said. "So we were de­sign­ing to make it work as op­posed to de­sign­ing for ease of man­u­fac­tur­ing, whereas the Model 3 is re­ally de­signed for ease of man­u­fac­tur­ing."

Nearly a decade ago, in Au­gust 2006, Musk pub­lished "The Se­cret Tesla Mo­tors Mas­ter Plan," a blog post that spells out the strat­egy of en­ter­ing the auto mar­ket at the high end and then mov­ing down mar­ket with higher vol­umes and lower prices.

"In short, the mas­ter plan is: Build sports car. Use that money to build an af­ford­able car. Use that money to build an even more af­ford­able elec­tric car. While do­ing above, also pro­vide zero-emis­sion, elec­tric power gen­er­a­tion op­tions," wrote Musk. Tesla be­gan sell­ing the Model S in June 2012 and added the Model X in Septem­ber of last year. The Palo Alto, Cal­i­for­nia-based com­pany strug­gled with sup­ply and parts is­sues, from the com­plex­ity of the Model X's "Fal­con Wing" doors to sec­ondrow seats to prob­lems with the chrome fin­ish and seals on the panoramic win­dow.

"The seals have been a huge pain," said Musk Wed­nes­day. "I mean, es­sen­tially the seals had to be re­designed, and then the seals that we did have had to be re­worked by hand in or­der to sort of fit cor­rectly." De­spite those is­sues, Tesla now ex­pects to de­liver 80,000 to 90,000 cars in 2016, top­ping the av­er­age an­a­lyst es­ti­mates for 76,200 de­liv­er­ies. "It doesn't sound like they have the Model X com­pletely fig­ured out from a pro­duc­tion stand­point, but they can get there," said Ben Kallo, an an­a­lyst with Robert W. Baird & Co., in an in­ter­view Wed­nes­day.

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