Since the Model S was released in the middle of 2012, it has set the bar for all electric cars, beating out combustion cars in almost every competitive way, from a luxurious, quite ride, to beating Mustangs and Corvettes at the drag strip. It’s looking like EVs are the wave of the future and there is little that can be done to stop them. Before the Model S, EVs were small, slow, uncomfortable cars that couldn’t make it through a day of errands on one charge. But the Model S set itself apart from the rest of the EVs. Tesla has continually been developing improvements for the car, from self-driving to the point that someone could drive from LA to Chicago driving 95% on autopilot, to building the car with enough power for it to be considered the fastest production car in the world. However, the price tag of $70,000 has kept a great EV out of the hands of many consumers.
That is where the Model 3 comes in. From what has been shown by Tesla, the car is on par with the Model S when it comes to luxury, power, and range. The price set for pre-orders is $35,000 before incentives, far lower than the Model S and Model X that Tesla previously released. Creating a car in this price range is a huge success for Tesla and could open the market for EVs to the masses. It’s still on the more expensive side for a new car, but still less than most Mercedes and BMWs and other comparable high-end vehicles, and the Model 3 is absolutely a high-end car.
Tesla’s building of the “gigafactory” in Nevada is a huge help in being able to bring down the price of their cars. The building has the largest footprint of any building in the world and builds the batteries for Teslas, the most expensive part of the car. The building costs Tesla over a billion dollars but allows the company to take advantage of economies of scale, where the advantages of mass production brings down the individual costs per products, to build their batteries. Tesla works with Panasonic to build batteries on a large scale for the cars, battery packs, and power walls. And that’s not the only large endeavor that Elon Musk is undertaking; he also runs SpaceX and the Boring Company (tunneling is actually quite exciting)
It isn’t cheap to build a Tesla. So where is all of this money coming from? The answer is a lot is outside investment. Tesla’s current share value is at $330 and has millions of outstanding shares. But what is interesting is that Tesla operates with very little profit from their cars and batteries. Tesla actually has no profits or revenue to speak of; their money is going into these new building projects and R&D for their new cars. The Model 3 will make or break Tesla. If the company is able to fill all the pre-orders and continue to sell cars, the company should start showing revenue and letting investors buy in at the current inflated value of a payoff.
Tesla has been operating with virtually no competition since it released the Model S. However, in recent years, a few other startups have begun to advertise their own competitive EVs to Tesla’s cars. If these companies are able to give the market a better product, then that could create some big problems for Elon Musk. Some of these new cars have even been dubbed “Tesla Killers” such as the Lucid Air due to the producer’s boasted specs about what the car will be able to do and their price. But with none of these cars on the road or even open to press review, it’s all talk right now. Since Tesla has been operating for the longest, it has some really big advantages like being able to get the gigafactory up and running and having the supporting infrastructure going up all over the US to charge the cars.
One thing that could put an end to all of these start-ups, however, is that none of the major manufacturers are seriously investing in developing new EVs. Sure, most of them have 1 or 2 Models that are all electric or hybrid but none of them are chasing the idea of great EVs in the way that Tesla is. At this point, it looks like there is no avoiding the inevitable future of all electric cars. At some point, the major manufacturers are going to have to switch the majority of the line-up of cars to be all EVs. There are some signs that this is already happening; in 2019, Volvo will not be producing any combustion-only cars. Their entire line will only consist of EVs or Hybrid vehicles. And VW plans to become a leader in EV’s and hybrids by 2025. When this happens, the massive amount of capital that these companies have and have had in place for decades will be switched over to EV production. It will bring down the costs of EVs and possibly put Tesla and Lucid and the other start-ups out of business.
With so much of the future of EVs resting on the Model 3 it is no wonder why everyone is watching it so closely. If a good EV can really be sold for $35,000 and make a profit for the company, it will lead to many great things for America’s and the world’s road ways.
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Noland, David. "Lucid Air Electric Luxury Sedan: A Tesla Model S Owner's Take." Green Car Reports. N.p., 12 July 2017. Web. 20 July 2017.
Durden, Tyler. "Chinese Carmakers, Volkswagen, BMW Roll Out "Tesla Killers"." ZeroHedge. N.p., 18 Apr. 2017. Web. 20 July 2017.