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Tesla Motors Inc (NASDAQ:TSLA) Needs Working Gigafactory to Build Affordable Model 3

Tesla Motors Inc NASDAQ:TSLA

Tesla Motors Inc CEO, Elon Musk has revealed a timeline for the Model 3 and the it suggests that the market can expect the Model 3 no sooner than March 2016. Late last night, Musk tweeted that “Model 3, our smaller and lower cost sedan will start production in about 2 years. Fully operational Gigafactory needed.” A later tweet said, ” $35k price, unveil in March, preorders start then”.

In essence, the public will see a concept idea for the Model 3 in the next six months and they can start pre-orders if they like what they see. Judging by the comments in response to Elon Musk’s tweet, the demand and pre-orders for the Model 3 should be off the charts. The $35,000 price tag also serves as a sales driver for the EV. Yet, Musk has mentioned a fully working Gigafactory as a key factor for the 2017 release of the Model 3.

Mass market EV will trigger mass demand

Tesla’s EVs attracts high-income buyers who can afford to spend about $85,000 on its Model S and upcoming Model X. Just yesterday, news broke that Oprah Winfrey has endorsed Tesla Motors, and it is normal to expect an increase in the number of VIPs and celebs that will start free campaigns for Tesla.

The Tesla Motors Model S has an entry-level price tag of $70,000 tag, which is beyond the reach of most people that might be interested in buying an EV. The firm’s solution to putting its EVs within the reach of most people is to produce an affordable mass market EV called the Model 3.

The Model 3 will supposedly have a price tag of $35,000 at half the price of a Model S. However, no one outside Tesla knows how the Model 3 will look and there are fears that Tesla might not be able to maintain its brand of premium luxury and quality in a mass market low priced EV.

Gigafactory can make or mar model 3

Tesla needs to have the Gigafactory firing on all cylinders before its goal of getting the Model 3 to the market can be reached. For one, the Gigafactory will help Tesla get economies of scale to produce batteries at a cheaper cost. Tesla Motors has already hired the services of a Li-Ion genius from Dalhousie to help with the chemistry behind its batteries.

However, recent confusion about a deal to procure lithium from Mexico for Tesla Motors Gigafactory leaves less to be desired about how the Gigafactory project is faring. A press release suggested that the “Sonora Lithium Project Partners” had signed a deal with Tesla for supply of lithium. A few days later, there were indications that the deal might not be real.

 

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Adam Green is an experienced writer and fintech enthusiast. He he worked with LearnBonds.com since 2019 and covers a range of areas including: personal finance, savings, bonds and taxes.

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