This past week, Elon Musk, founder and CEO of Tesla Motors, revealed its third generation car as the Model 3. Currently, the company has released the Model S and is in the process of producing their crossover SUV, the Model X. In a humorous interview, Musk revealed that they wanted to call the newly announced Model 3 "Model E" instead, but were threatened by legal action from Ford Motor Company, who already owned the name. All humor aside, the Model 3, currently projected to be released for sale in 2017, could lead a major shift towards electric vehicles for customers. [1]
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| Early rendering of the Tesla Model 3 [5] |
The major reason the Model 3 could potentially be a game-changer is its cost. Musk, also founder and CEO of aerospace company Space-X, estimates the new model will cost around $35,000. For reference, the 2014 BMW 3 Series, the car Tesla is aiming to compete with using the Model 3, has a manufacturer's suggested retail price (MSRP) of $32,750. Other similar luxury vehicles like the 2014 Audi A4 have comparable prices as well. The Model 3 will also be about 20% smaller than the Model S, which currently has a MSRP of nearly $70,000, and have a range of over 200 miles. The reason for the steep reduction in price is current efforts to construct what Tesla calls a "Gigafactory" for its batteries. Costing about $5 billion total, this factory will allow efficient production of Tesla's lithium-ion batteries, reducing its cost by 30 percent. A location has yet to be announced, but construction is slated to begin this year in order to start production by 2017. It is no coincidence that this is also the year the Model 3 is scheduled to start production. If all goes as planned, consumers will have a new option next to the traditional sports sedans that doesn't sacrifice performance or feasibility of cost to be energy efficient. [1][2][3][4]
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| Tesla Model S [6] |
It seems that the only thing that can slow the arrival of the Model 3 is time. Currently, the company is working to get its Model X SUV out to market, which has been delayed into next year. This has pushed back projections of the Model 3's release from 2016 to the current estimation of 2017. Even with these delays, Musk expects sales for his cars to increase as the Gigafactory nears completion and the Model X finally reaches the road. The company expects to sell about 35,000 cars in 2014, but by 2020, that number is projected to rise to 500,000 per year. The construction of the Gigafactory and introduction of the reasonably-priced Model 3 are expected to be major drivers in that estimate. [1][2][3][4]
While much can happen between now and 2017, such as more delays for the Model 3 or the Gigafactory, Tesla Motors currently have a plan in place to insert an electric car in the luxury sedan market. As emphasis on energy efficiency and reduction of fuel costs continues to increase, Tesla is putting themselves in a place to benefit and shift those in the market for a luxury vehicle to the affordable Model 3.
References:
[1] http://www.autoexpress.co.uk/tesla/87867/tesla-model-3-to-challenge-bmw-3-series-world-exclusive
[2]http://www.forbes.com/sites/hannahelliott/2014/07/21/teslas-model-3-will-be-best-selling-car-in-its-class-despite-musks-failure-to-work-sex-into-the-name/
[3]http://www.greentechmedia.com/articles/read/Is-This-the-Site-of-the-Tesla-Giga-Battery-Factory-in-Nevada
[4]http://www.forbes.com/sites/amitchowdhry/2014/07/22/tesla-motors-idles-california-plant-to-prepare-for-electric-suv-line/
[5]http://static.autoexpress.co.uk/sites/autoexpressuk/files/styles/article_main_image/public/7/03//tesla-model-e-front.jpg?itok=Q-r6AMlD
[6]http://g.foolcdn.com/editorial/images/138917/model-s-twitter-2_large.jpg
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