New Tesla model represents promise, peril
FREMONT, Calif. — For Tesla, everything’s riding on the Model 3.
The electric car company’s newest vehicle was delivered to its first 30 customers — all Tesla employees — Friday evening. Its $35,000 starting price — half the cost of Tesla’s previous models — and range of up to 310 miles could bring hundreds of thousands of customers into the automaker’s fold, taking it from a niche luxury brand to the mainstream. Around 500,000 people worldwide have already reserved a Model 3.
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. And a fully loaded Model 3 with 310 miles of range costs a hefty $59,500; the base model goes 220 miles on a charge.
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,” says 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 — CEO 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.
“It was never our goal to make expensive cars. We wanted to make a car everyone could buy,” Tesla CEO Elon Musk said Friday. “If you’re trying to make a difference in the world, you also need to make cars people can afford.”