Why Tesla continues to delay production of $35K Model 3?
In March 2016, Tesla Chief Executive Elon Musk announced the company would be designing a new vehicle model to appease the masses at a price point affordable by all. He introduced the Tesla Model 3, the newest electric design for the popular company. Fast forward over two years to now, and you can’t even attempt to purchase a Model 3 for less than $49K, a far cry from the $35K model Musk optimistically promised. So what gives? For one, the company is notorious for being unable to meet deadlines. This disappointing fact coupled with the fact that Tesla experienced record-breaking back to back profit losses in the most recent two quarters does not inspire confidence.
Musk recently tweeted, “With production, 1st you need achieve target rate & then smooth out flow to achieve target cost. Shipping min cost Model 3 right away wd cause Tesla to lose money & die. Need 3 to 6 months after 5k/wk to ship $35k Tesla & live.” Basically, the company must average sales of 5,000 cars per week for a consistent period of time before they even attempt to sell the bare bones model if they have any hope of turning a profit. So right now, Tesla is focusing production on the fully-loaded Model 3 which will debut soon after announcing an anticipated $78,000 price tag that does not include the vaunted auto pilot feature. Musk claims this Model 3 will have all the bells and whistles, plus the ability to beat anything it its class, including the similarly priced BMW M3.
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Analysts are still leery though, and it is speculated by some that a $35K Model 3 may very well never be available. In fact, back in 2013, Tesla cancelled a nearly $50K Model S base version citing lack of consumer interest. It is very possible that the company will take a similar route again and claim there is no customer demand for the lower price point Model 3. A review of the vehicle by Consumer Reports is not helping the cause, stating that the Model 3 has a stopping distance that exceeds all contemporary vehicles, far worse than even Ford F-150 full size pickup. While the review praised the car’s brisk acceleration and impressive range, it took issue with the limitations of having all functions regulated via a centrally mounted touchscreen.
Despite these set-backs, Tesla did make it a point to announce that they have 450K reservations for the Model 3, but refused to differentiate how many are holding out for the base model versus how many are more than willing to fork over the big dough for the fully-loaded version. In fact, they also made no mention of how many reservations have been cancelled so far due to delays in production. The numbers of reservations are slightly lower than those from this time last year, but the company doesn’t appear to have shot itself in the foot just yet. Tesla does however have a very specific and passionate fan base which helps with obtaining and maintaining their reservations. After all, if you had waited two years for a specific model, what’s another six months? One thing’s for sure, they are not making the same mistake twice and although Tesla has promised the approximately $78K Model 3 sometime this summer, no tried and true date has been set for the $35K version. At the earliest, you can expect to see this base model Model 3 at the end of this year, but it is possible it was just another pipe dream by the visionary Musk and will never be available at all.