Tesla Inc Can’t Deliver A $35,000 Model 3 Yet. Here’s Why

Tesla Inc launched the most important electric car of all time on Friday. The Model 3, which CEO Elon Musk has slated as the first “affordable” EV, is now going into production. For those who are waiting for a $35,000 Tesla Model 3, however, the presentation contained something of a surprise. Tesla, it turns out, isn’t even making that car.

According to a statement from the firm, the “Standard” version of the EV is going to be delayed in order to “simplify” its factory process. That means that even if you have a reservation you won’t be able to get the car until the Fall at the earliest.

The delay is likely to disappoint a lot of those waiting to buy the car. We don’t have any good estimates on the proportion of buyers looking for the least expensive option possible, so we can’t really guess what effect it will have on the corporation’s demand model either.

Tesla Inc delays affordable EV

Tesla isn’t really going to start mass producing the Model 3 until this Winter, so it’s no surprise that the firm decided to limit production options to start. The delay in the production of the affordable Tesla Model 3 likely comes as a blow to some, but it’s not clear how much of an effect this will have on delivery dates.

Tesla Motors Inc (TSLA) Model 3 Source: Tesla
Source: Tesla

Elon Musk reckons that true volume production of the Tesla Model 3 will only begin in December. Because of the exponential production ramp, the delay of the $35,000 EV may not have that much effect on delivery dates.

For Tesla this is all about production efficiency.

Any color as long as it’s black” is a line you’re going to see quoted a lot today. Tesla is planning on offering the Model 3 in six different colors. If you want anything other than “Solid Black,” however, it’s going to cost you $1,000 extra.

That choice shows just what sort of constraints Tesla Inc is under. The firm is doing its best to limit the different types of vehicle so that it can greatly improve efficiency. That limit on choice may be a risk with its consumers, however.

Here’s the Tesla Model 3 you can buy

Tesla is trying to step away from using battery capacities to differentiate vehicles. Instead the firm is using descriptions to get across the capabilities. The result is that two Tesla Model 3 set ups are available. Standard Battery is the $35,000 version that won’t be released until later this year.

If you want to buy a Tesla Model 3 right now, however, you’re going to have to shell out for the $44,000 Long Range Battery version. If you want to get Autopilot on top of that, you’ll have to pay $5,000. To unlock the full self-driving capabilities of the car, you have to pay $3,000 more. Any color other than black costs $1,000 extra.

Tesla Motors Inc (NASDAQ:TSLA) Model 3

The price of the Tesla Model 3 is going to rise quickly. A red “affordable” EV with full Autopilot will cost $58,000 today. That includes the option of a “Premium upgrades package.” That includes enhanced audio, heated seats and other frills that may appeal to some Model 3 buyers.

For a “First Production” version of the Model 3, the car that will be delivered first, that premium package is included, bringing the price to a base of $49,000. That’s very much out of the “affordable” range.

The Long Range Model 3 will be able to drive up to 310 miles according to Tesla Inc . It’s going to be able to get from 0 to 60 in 5.1 seconds, and has a top speed of 140 miles per hour. You’ll be able to get 170 miles of range into the battery with just 30 minutes at a Supercharger.

Tesla Model 3 delivery dates remain a mystery

We don’t know if Tesla is going to put the Standard Battery Model 3 into mass  production at the same time as the Long Range version. Right now it’s very hard to guess when the Model 3 delivery dates will start to be sent out.

If you’re not a Tesla Inc employee, however, don’t expect to get your hands on the EV before the end of the Summer. The firm also states that it will favor people who already own a Tesla.

After that it’s possible that Tesla will follow something of a location based structure. Customers in the United States are sure to be favored, and customers willing to take delivery in California are likely to be ahead of the rest of the pack.

Tesla did put out a delivery estimator on Friday as part of its “Model 3 reservations FAQ” but it was broken on release and apparently hadn’t been fixed at time of writing.

Fred Lambert over at Electrek.co said that delivery dates on his version of the FAQ kept changing. The information offered doesn’t seem to be accurate right now, and we don’t know when Tesla is going to solve the issue.

Model 3 delivery dates are still an unknown quantity, despite the many attempts to estimate and forecast out there right now.

Tesla stock lives on the margin

Tesla Inc may say that the standard Model 3 delay is about efficiency, but there may be another reason. Elon Musk got to where he is today by promising Wall Street that he could make a high margin EV. With the launch of the Tesla Model 3, he actually has to come through on that promise.

Starting off with the higher price, and presumably higher margin, car will make this easier, at least in the short term. Tesla still loses money year-on-year and the firm’s cash burn rate is of major concern to investors.

Tesla Motors Inc (TSLA) Model 3

The sale of a higher margin car could slow down that burn rate, leaving the firm in a stronger position when it publishes earnings for the second half of 2017. We won’t have any idea what the split between Standard and Long Range Model 3s is until then. Even after that report it’s likely that there will be some argument about the numbers.

The list of priorities for investors appears to be Production, Margins, Demand, Model Y in more or less that order. The most effective thing that Tesla could do right now is keep to the production schedule outlined in its published graph.

The second most important number will be its gross margin on the Model 3. After that questions about the Model Y and the firm’s “real” demand model crop up.

By focusing on the non-affordable $49,000 version of the Model 3, Tesla is addressing the two top priorities of investors in one go. We will have to wait to see he effect it has on long term demand.

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Adrian Smith

Adrian Smith is a finance and tech writer and currently working on a Masters in Business Information. He has developed a keen interest in all things finance and technology and loves to write about it.


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