Tesla cus­tomers get first Model 3s

Northwest Arkansas Democrat-Gazette - - BUSINESS & FARM - DEE-ANN DURBIN

FREMONT, Calif. — For Tesla, ev­ery­thing is rid­ing on the Model 3.

The elec­tric car com­pany’s new­est ve­hi­cle was set to go to its first 30 cus­tomers Fri­day even­ing. Its $35,000 start­ing price — half the cost of Tesla’s pre­vi­ous mod­els — and 215-mile range could bring hun­dreds of thou­sands of cus­tomers into the au­tomaker’s fold, tak­ing it from a niche lux­ury brand to the main­stream.

Those higher sales could fi­nally make Tesla prof­itable and ac­cel­er­ate its plans for fu­ture prod­ucts like SUVs and pickup trucks.

Or the Model 3 could dash Tesla’s dreams.

Po­ten­tial cus­tomers could lose faith if Tesla doesn’t meet its ag­gres­sive pro­duc­tion sched­ule, or if the cars have qual­ity prob­lems that strain Tesla’s small ser­vice net­work. The com­pact Model 3 may not en­tice a global mar­ket that’s in­creas­ingly shift­ing to SUVs, in­clud­ing all-elec­tric SUVs from Audi and oth­ers that are go­ing on sale soon.

Lim­its on the $7,500 U.S. tax credit for elec­tric cars could also hurt de­mand. Once an au­tomaker sells 200,000 elec­tric cars in the U.S., the credit phases out. Tesla has al­ready sold more than 126,000 ve­hi­cles since 2008, ac­cord­ing to es­ti­mates by Ward­sAuto, so not every­one who buys a Model 3 will be el­i­gi­ble.

“There are more rea­sons to think that it won’t be suc­cess­ful than it will,” said Karl Brauer, the ex­ec­u­tive pub­lisher for Cox Au­to­mo­tive, which owns Au­to­trader and other car buy­ing sites.

The Model 3 has long been part of Palo Alto, Calif.based Tesla’s plans. In 2006 — three years af­ter the com­pany was founded — Chief Ex­ec­u­tive Of­fi­cer Elon Musk said Tesla would even­tu­ally build “af­ford­ably priced fam­ily cars” af­ter es­tab­lish­ing it­self with high-end ve­hi­cles like the Model S, which starts at $69,500. This will be the first time many Tesla work­ers will be able to af­ford a Tesla.

Tesla started tak­ing reser­va­tions for the Model 3 in March 2016. Within a month, 373,000 cus­tomers had put down a $1,000 re­fund­able de­posit. Since then, Tesla has re­fused to say how many peo­ple have re­served a Model 3, but its web­site said peo­ple mak­ing reser­va­tions now should ex­pect to get their car in the mid­dle of 2018.

Lisa Gin­gerich, a Mil­wau­kee-based at­tor­ney, re­served a Model 3 within min­utes of the or­der bank’s open­ing. She doesn’t know when she’ll get to choose from the lim­ited num­ber of op­tions, in­clud­ing color and wheel size, or when her car will ar­rive. She’s bor­row­ing a friend’s Chevro­let Volt plug-in hy­brid while she waits.

Gin­gerich thought about get­ting a Model S, but found it too ex­pen­sive and flashy for the char­i­ties she of­ten works with. She could get an all-elec­tric Chevro­let Bolt, which is the same price as the Model 3 and has more range. But she wants ac­cess to Tesla’s fast-charg­ing Su­per­charger sta­tions, which are strate­gi­cally placed along U.S. high­ways.

She also wants to sup­port Musk’s bold vi­sion. Musk, the bil­lion­aire founder of PayPal, also runs rocket maker Space Ex­plo­rations Tech­nolo­gies Corp. and dab­bles in ar­ti­fi­cial in­tel­li­gence re­search and high- speed trans­porta­tion projects.

“It’s kind of like or­ganic food. The more peo­ple buy it, the more it be­comes ac­ces­si­ble for ev­ery­body,” Gin­gerich says.

But mak­ing cars has proved a chal­lenge to Musk. Both the Model S and the Model X SUV were de­layed and then plagued with pesky prob­lems, like doors that don’t work and blank screens in their high- tech dash­boards.

Tesla’s lux­ury car own­ers might over­look those prob­lems be­cause they liked the thrill of be­ing early adopters. But main­stream buy­ers will be less for­giv­ing.

“This will be their pri­mary ve­hi­cle, so they will have high ex­pec­ta­tions of qual­ity and dura­bil­ity and ex­pect ev­ery­thing to work ev­ery time,” said Sam Abuel­samid, a se­nior re­searcher with Nav­i­gant Re­search.

The Model 3 was de­signed to be much sim­pler to make than Tesla’s pre­vi­ous ve­hi­cles. But al­ready it doesn’t ap­pear to be stick­ing to its sched­ule. Musk said ear­lier this month Tesla should be mak­ing 20,000 Model 3s per month by De­cem­ber; that’s half the num­ber of his pre­vi­ous es­ti­mates.

Musk aims to make 500,000 ve­hi­cles next year at Tesla’s Fremont fac­tory, a num­ber that could help Tesla fi­nally make money. The com­pany has only had two prof­itable quar­ters since it went pub­lic in 2010. But even at that pace, Tesla will re­main a small player.

Toy­ota Mo­tor Corp. made more than 10 mil­lion ve­hi­cles last year.

Abuel­samid said even if it doesn’t meet its am­bi­tious tar­gets, Tesla has done more than any­one to pro­mote elec­tric ve­hi­cles.

“A decade ago they were a lit­tle more than golf carts. Now all of a sud­den, EVs are real, prac­ti­cal ve­hi­cles that can be used for any­thing,” he said.

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