Tesla isn’t shipping the much touted $35,000 Model 3. It’s not a secret and they are in no hurry either.
But before we get to discussing why Tesla is selling higher priced Model 3 version, lets get one thing out of the way. Model 3 is not a mass market car. Not when it is priced at $35,000, in the vicinity of BMW 3 Series, Mercedes C Class and Audi A4.
None of these car makers are going to be happy, if you call their car a mass market model. Model 3 is a product that will bring in more volume for Tesla but not a mass market model for the automobile industry.
3 is a crucial product in Tesla’s history, one that will allow the electric car maker to keep moving to a lower price point and attract more customers.
Tesla is moving down the curve, to capture more demand.
So why are they not building $35,000 Model 3’s?
Well, simply because don’t want to.
How much money will you need to build a single luxury sedan? It could easily run into 100’s of thousands.
What if you build 100 luxury sedans? What happens when you build 1000’s or 10,000’s of them. The more your production is, the lower your average cost will be. The lower your average cost is, the lower you can move your average selling price.
Tesla needs to produce cars en masse, to reduce production costs and make $35,000 Model 3 a reality. Musk was candid about this fact, telling his twitter follower that Tesla will lose money and die if it starts shipping low cost Model 3.
It’s no real surprise that Tesla is pushing higher priced Model 3 versions first. If you are looking for Model 3 in any color other than black and decide to throw in some options, then be ready to shell out in excess of $60,000.
The dual motor, all wheel drive performance Model 3 with all options included (no auto pilot) will set you back by $78,000. That’s Model S territory.
Ramping up needs money. Tesla cannot keep piling up debt or keep dipping into the stock market to finance all its needs. So they have taken the middle ground. Build cars that will not hurt their finances as they ramp up.
