Why Tesla’s Lead Just Got Bigger
Back on March 31, 2016, Tesla (Nasdaq: TSLA) began accepting reservations for its Model 3 sedan, its “make or break” inexpensive electric vehicle (EV) for the masses.
When the dust settled, Tesla ended up with 455,000 Model 3 reservations. And it continues to receive new ones at the rate of 1,800 per day.
With the cost of each reservation at $1,000, there is $455 million (and counting) worth of confidence in Elon Musk, Tesla’s CEO and founder.
On July 28 of this year, Musk handed over the keys to the lucky first 30 folks who ordered Model 3 cars.
From this initial run, Tesla plans to ramp up production to 10,000 cars per week by the end of next year.
That may seem like a tall order. The current run rate of the Model S and Model X combined is about 100,000 units per year.
But the Model 3 is nothing like Tesla’s other vehicles. First, there is no driver display.
Drivers handle every function via the central, horizontal touch screen. That means fewer buttons and switches.
The same thing goes for sideview mirrors and steering wheel positions. According to Musk, “There’s nothing in the Model 3 that doesn’t need to be there.”
Everyone learns from difficulties and problems, and Tesla is no different. The Model X was the most complicated car Tesla has produced.
In turn, the Model 3 was simplified. Unless something has a compelling reason to be included, it isn’t.
Even the Model 3 battery pack is simplified. It has just three battery modules, whereas the Model S has 16.
If you go through Tesla’s Model 3 ordering process, you will see just how few options are available for the Model 3. This simplifies everything, including ordering parts for the vehicle.
It also allows Tesla to make Model 3 cars as fast as it possibly can. Musk believes he can build 250,000 vehicles per year in the same factory footprint that churns out 50,000 units of the Model S per year.
What About Big Auto?
When all the hoopla over the Model 3 settles, Musk and Tesla have to contend with Big Auto. These are the well-established car companies.
They have solid sales and existing dealers with repair operations in place. And let’s face it: These guys are tough competitors.
Some already have competing models to the Model 3. General Motors (NYSE: GM), for example, has the Chevy Bolt.
The Bolt’s range and price are comparable to the Model 3’s. And it beat the Model 3 to market by nearly a year.
BMW has its futuristic i3. It even has a small range-extending engine (which kind of defeats the whole purpose of buying an EV in the first place).
But none of that matters…
Both the Bolt and i3 have failed to capture the public’s imagination. Buyers aren’t clamoring for either model.
Here’s why: GM and BMW are traditional carmakers with a single EV model.
Tesla, on the other hand, is a sustainable energy company. And all of its vehicles are EVs.
Tesla owners can jump in their EVs and take a long road trip without getting range anxiety. They have access to Tesla’s proprietary, global supercharger network.
What do other EV owners have? Right now, it’s a hodge-podge network that’s mostly in hotel parking lots. Not exactly convenient for a cross-country jaunt…
Tesla, meanwhile, has created a neat and tidy ecosystem.
It’s an ecosystem not unlike that created by Steve Jobs, Tim Cook and company over at Apple. Would-be Tesla owners can walk into a Tesla store, see the car, and then go home and buy it online (along with a charger and some home energy storage) from the comfort of their living room couch.
How is Big Auto going to compete with that?