Actually, an ‘Affordable Tesla Model 3’ Will Never Exist
Originally published February 9, 2018
Everyone likes rocket ships. They make us gasp and gawk as we ponder the outer reaches of the solar system.
Then, most Americans hop in their Nissan Rogue and head to work.
On the way home, stuck in traffic and hearing about the latest earthly disaster, they might wonder when that cool, affordable Tesla is coming out. Who knows, maybe they can finally buy an electric car and trim their carbon footprint.
Then you realize: It’s not coming. We’re not saying Elon Musk’s Falcon Heavy rocket was a distraction from the snail-pace of Tesla Model 3 production. No, we’re saying his spectacular rocket exists but, judging by the latest announcements, an affordable Tesla probably never will.
Here’s how the “Tesla for the masses” turned out to be a peculiar brand of fiction.
1. The $35,000 model’s timetable changed. Again.
Tesla’s quiet announcement to Model 3 reservation holders came shortly after Falcon Heavy’s majestic launch. In brief, it pushed back the date for the most affordable ($35,000) model.
Rather than sticking to the previously delayed estimate (“early 2018”), Tesla said it would be pushed back to “late” in the year. But the bigger change came in the order the automaker will release Model 3 trims.
As of February, the all-wheel drive (i.e., higher-priced) model will go to reservation holders first. Anyone waiting for that affordable Tesla will have to wait longer.
Next: Tesla’s continued cash-burn explains why.
2. It’s about the money, and Tesla doesn’t have any.
Nearly two years after Musk sauntered on the Tesla factory stage to launch the Model 3, only a few thousand people have the car in their possession. Considering the company’s previous vehicle launches, that isn’t very surprising.
Nor is the progression from pricey Model 3 production to the cheaper versions. Since the beginning, Tesla said it would prioritize the more expensive ($49,000) launch edition before moving on to the base Model 3. Following that, it would start on AWD editions.
But the continued cash-burn — Tesla beat its own record with a $675 million loss in Q4 2017 — forced the company to shift gears once again. This time, the base Model 3 would be getting bumped in an effort to boost income. But just a few months’ delay could mean everything to cost-conscious buyers.
Next: Even less of a chance at the federal EV tax credit
3. The $7,500 tax credit is a long-shot
When we discussed ditching our Model 3 reservation in the past, we spoke of the car moving from affordable (just north of $30,000) to unaffordable (over $40,000). That’s the effect the federal tax credit for electric vehicles ($7,500) has on a purchase these days.
It’s also the likeliest reason Tesla got 400,000 reservations in a few days for the Model 3. The flagship Model S, hailed by many as the world’s best car, didn’t have people banging down the door to pay $75,000.
The one mass-market buyers could afford did. With the new timetable in effect, it’s even more likely the $35,000 model won’t arrive before the tax credits expire.
Next: While $40,000 sounds good for a Tesla, it’s not a car for the masses.
4. Even $40,000 isn’t a mass-market car
Let’s say you dip into your savings, go for the $49,000 model, add some options, and get out for somewhere around $55,000. After taking the tax credit, you’ll be below $50,000.
As recently as 2015, that would sound great for a new Tesla. However, it’s nowhere near a mass-market car. Let’s say we go by the inflated average vehicle price from 2017: about $36,000.
If you start at the base Model 3 with delivery charges ($36,200), you’re already above that. But the “mass-market buyer” isn’t even considering the purchase, which would end up around $40,000.
Next: Did Elon Musk really say a Tesla would be affordable?
5. Musk: Model 3 will be ‘an affordable, high volume car’
Since Musk served for a spell on one of Donald Trump’s business councils, you might wonder if he actually “said everything he said.” By that, we mean maybe Musk never explicitly said a Model 3 would be affordable or a mass-market car. Maybe it was simply marketing magic re-interpreted by a gullible press corps.
For those scouring the Model 3 launch for proof Musk kept his word (seriously or literally), just flip to his “Master Plan, Part Deux.” Musk laid out his plan clearly:
- Use that money to develop a medium volume car at a lower price
Since Model S (No. 2) debuted at $57,400 and Model 3 debuted at $49,000, we’re wondering when he’ll get around to that affordable car.
Next: No Tesla will ever get cheaper than a Model 3.
6. Model 3 is as cheap as a Tesla will ever get
This idea also comes directly from Musk’s master plan. “A lower cost vehicle than the Model 3 is unlikely to be necessary, because of the third part of the plan described below,” he wrote.
That part of the plan was the “sharing” section, in which autonomous Teslas would drive themselves to short-term renters in the area. Needless to say, this future is not around the corner. (It’ll be more like 2025 if it happens.)
Next: These folks say mass-market cars are for suckers.
7. Tesla owners cheer
If you read through the Tesla owners forum or comments on EV websites, you’ll find savvy, in-the-know folks chuckling at the idea anyone would depend on a tax credit to afford a car. What’s $7,500 after all (other than the difference between a luxury car and a Toyota)?
You see, these folks, who took the tax credit for their Model S purchase, didn’t really need that $7,500. No, they took it as a modest offering of free taxpayer money. (Maybe they all donated that exact amount to a worthy charity.)
In that particular Tesla owner mindset, anyone who needs a tax credit is having a poor man’s dreams about a rich man’s car. (Cadillac owners used to think the same way about Chevy drivers.) It tells you a bit about Tesla’s market as it’s currently constructed, and why the automaker feels confident ignoring low-end customers.
Next: Tesla seems unsure of how this news will play.
8. Changes to Tesla’s own timetable
If you look at Tesla’s own delivery estimates for Model 3 reservation holders, the dates were changing by the day. First, Electrek reported on February 7 that Tesla had the dual-motor (AWD) Model 3 deliveries coming mid-2018, with the base model arriving later in the year.
Two days later, with Tesla stock down 10%, we found both models showing “late 2018” as the estimated delivery dates. Note: These estimates were for people who made their reservations on the first day of availability (March 31, 2016). Anyone who came later — and, we fear, anyone who hoped for an “affordable Tesla” at any point — will be disappointed.
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