Can Tesla Really Make a $35,000 200-mile EV?

By · August 11, 2014

Tesla Model S

The Model S is suffering from a lot of drivetrain replacements, but so far volumes are small. (Photo: Bradley Berman)

The EV community is probably guilty of talking about Tesla too much, but here’s a topic that really does need discussion. Can the company, having successfully introduced two cars and on the verge of launching a third, really pull off the big score and get the all-important Model 3 on the market with the promised specifications?

The Model 3 is the big one, the car that will launch Tesla on its way toward the goal of 500,000 cars a year, profitability, and really using that cavernous factory. It’s set a high barrier: a $35,000 to $40,000 price, and 200 miles per charge, while retaining a high level of equipment and coolness. And it’s due on the market right around the corner in 2017, set on an entirely new platform (with batteries from the all-new Gigafactory).

"Yes, He Can!"

Interestingly, the experts I talked to think Tesla can pull it off, though all bets are off if Elon Musk leaves the company. Would Apple have developed the iPod or iPad without Steve Jobs? Peter Thiel, the billionaire investor who worked with Musk at PayPal, told me bluntly: “I would never bet against Elon.”

Tesla Model C design

This is independent designer Dejan Hristov's concept of what a Tesla compact, perhaps named Model C, could look like. Falcon wing doors are a possibility. (Courtesy of Dejan Hristov)

I asked Thiel to elaborate, and he said it might take a bit longer than expected (after all, the Model X has been delayed several times), and then he repeated, “I would never bet against Elon.”

Phil Gott, the senior director of long-range planning at IHS Automotive, told me essentially the same thing, “Elon Musk has managed to do everything he has said so far.”

Real-World Challenges

I get it, Musk is one of the world’s game changers. But he’s only one guy, and the challenges the company has are many and varied. Right now the company’s dealing with reports of repeated Model S drivetrain replacements, including on high-level press cars. Some owners have reportedly had their car’s entire power unit replaced five or six times. Oops.

But what’s instructive here is Tesla’s response to the problem. Instead of denying that there was an issue—like GM’s solution with its ignition woes—Tesla, according to Musk, went overboard by replacing entire drivetrains so it could get cars back to customers quickly. Although it’s costly to the company, Tesla is focusing on retaining customer loyalty here, which is a good thing for the long haul.

Tesla Model 3 design sketch

Here's a very conservative non-Tesla vision of the Model 3 as a scaled-down S. My guess is that the company will want a bolder departure. (Courtesy of Remco Meulendijk/RM.design)

Tesla is clearly counting on per-cell cost reductions from its Gigafactory to build the III, since battery costs are such a big chunk of the manufacturer's bottom line. The Model S's pack is around $40,000, about what the whole car is slated to cost here. And maybe there will be some common components from existing models to make a cheaper car possible.

Mountains to Climb

But here are a few things to think about. The Model 3 will be a volume car, with a target production of about 100,000 units a year out of the gate. And if there are teething problems, the resulting recalls on that scale could be very costly to the company. Fixing a few Model S cars doesn’t break the bank, but imagine replacing the whole drivetrain on hundreds of thousands.

And could Tesla be expanding too fast? The German magazine Auto Bild, citing Tesla insiders, is reporting that after the Tesla Model 3, the company will offer Models R and C. The R, due in 2017, is a Roadster replacement, and the C (for “city”) is a Smart-like urban runabout. Get this: that one is supposed to cost less than $20,000 and have a 93-mile range.

Don’t get me wrong, Tesla could use both those cars in the lineup, but I hope it’s not devoting too many resources to them now. Throwing out the concepts to build excitement makes sense, though. I remember a couple years ago asking chief designer Franz von Holzhausen about the Model 3, and he told me it was a doodle on the back of an envelope. That was a good response.

The final caveat is that, with the Model 3, Tesla will have to tightly control costs in a way it didn’t with the expensive S. That’s important if the company is finally going to be profitable. It’s fine to deride the “bean counters” at Ford, GM and Chrysler, but they serve a purpose. If there are too many beans in the blue plate special, it loses money for the restaurant.

But hey, I'm just one guy trying to read the tea leaves. See the video below for what John Rettinger of TechnoBuffalo thinks.

Comments

· · 11 weeks ago

Yes, Tesla can do it. What will help it go farther on a smaller battery, is also what will make it less expensive - and that is efficiency of the car itself.

We know that an EV can consume less - a lot less than what typical EV's do today. Typical EV's consume between 250 and 350Wh/mile at highway speeds. The EV1 consumed ~160Wh/mile and the Illuminati Motor Works '7' consumes ~130Wh/mile at 60-70MPH. And '7' goes over 220 miles with "just" a 33kWh pack.

If seven people can build an EV in a barn in Illinois that is that efficient, then so can Tesla.

· · 11 weeks ago

In many ways, the Model III will be easier to pull off than the Model S. Vendors are much more willing to work with Tesla now (beating down the door would not be too strong of a characterization). When they were trying to build the Model S, this wasn't the case at all, they had trouble getting products made to their specs and good pricing.

It's also much easier for them to attract top talent now that they have a successful, highly praised product, vaunted reputation, and stock on a tear.

I believe the Tesla Model III will be the most successful new car introduction of all time. The Model X will probably sell its entire first year production in advance.

· · 11 weeks ago

I am cheering for Tesla to deliver the Model III. Tesla roadster gave me my first introduction to EVs and I have been hooked ever since. We own a 2011 LEAF with 33,000 trouble free miles. But the LEAF only goes 50 to 70 miles on a charge, (Real World Range). I would happily buy a Model III even if it only got 150 miles of RWR. But if the new LEAF, (w/150mile RWR), comes out before Tesla, I will probably buy that one. At least a 150 mile Real World Range, RWR, is needed in the 30K to 50K price range. So I guess I am really cheering for ANY company that is developing an EV for this segment. I am sure this segment is probably the largest EV demographic. Yeah Tesla! Yeah Nissan! Hurry up!

· · 11 weeks ago

I agree that the main concern is WHEN Tesla will have the Model 3 available, not if. With so much publicity already it would seem that Nissan or BMW might try and outstrip the model 3’s sales (e.g. BMW i5?) I hope that the model 3 does not look like either of the concepts provided but instead has a model S face on the body of something like the Mazda Protege5. I think that a smaller 5 door will offer the versatility that people will want at the price point.

· · 11 weeks ago

I am a LEAF sales consultant and am assured (unofficially) that the 150 mile range LEAF is no more than 2 years away. It will hit the market before the Tesla Model 3 but they will only help each other succeed by making EVs in general be more mainstreamed as practical and more desirable than ever before. One is a versatile luxury family sport hatchback and the other will be a stylish sports sedan, its a win win.

· · 11 weeks ago

@Masiguy,

I assume that you are not referring to the current Leaf as a "versatile luxury family sport hatchback". "Luxury" is a stretch, and "sport" is ludicrous. So if the next gen Leaf will really be a "versatile luxury family sport hatchback", that alone is a giant leap forward from it's current "versatile but quirky, modest family hatchback".

I have to believe that there will be some competition between the Leaf and the Model III. But I also believe that Nissan has the means to undercut Tesla in price. In no way do I believe that the Model III will be $35k before incentives - maybe the base price is $42,500 making it start at $35k after incentives. But then you add in $2k for supercharging, and more for other options - it will get pricey quickly. The Leaf, on the other hand, I expect will get no higher than $42,500 FULLY LOADED, if it gets over $40k.

· · 10 weeks ago

I don't believe the Model S battery pack costs Tesla $40,000

I have heard numbers that are less than half of that. Maybe you mean the retail price of a replacement pack without core exchange? My neighbor just had a refurbished battery pack installed in his out-of-warranty Roadster when the 12 volt converter failed, it cost him on the order of $5000 if I recall.

· · 7 weeks ago

Uh Well... I am waiting for the TESLA "Y" Why? Because I NEED a TRUCK. A light weight, lowsides, narrow Thing that will get up my steep and narrow driveway when the S won't and allow me to load my little critters without killing my shoulders. Elon! Get with it!

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