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Latent demand: Tesla Model 3 attracts an evasive market hiding in plain sight

Tesla [NASDAQ: TSLA] has been a trailblazer in the electric vehicle space. A once fringe automotive technology relegated (mostly) to golf carts now boasts that quickest production car on planet earth. Thanks in large part to Elon Musk and his unstoppable ambition, the Tesla Model S has become the best-selling large luxury automobile in the U.S. topping the likes of gas-mobiles from Germany's finest including Mercedes, BMW, and Audi. 


Above: Tesla Model 3 at a Supercharger (Image: Motor Trend)

Other automakers have finally taken notice of the Tesla phenomenon. InsideEVs reports, "According to a survey conducted by KPMG, 50% of the automotive executives who participated in the survey believe that battery electric vehicles will be the number 1 automotive trend in 2017... [and] this is a big jump for electric cars. Back in 2015, in the same survey, battery electric vehicles ranked 9th in automotive trends." Even with car sharing, connectivity, and self-driving cars trending, vehicle electrification still topped the list this year.

 

Above: Results from KPMG's 2017 global automotive executive survey (Source: InsideEVs via KPMG)

In addition to industry executives, auto consumers are finally beginning to strongly consider electric vehicles (EVs). With the launch of the Tesla Model 3 accumulating ~400,000 pre-orders, it's clear a lower-priced electric car could have serious mass appeal. And according to Ars Technica*,  "A recent report from consulting firm McKinsey & Company took a hard look at the electric vehicle (EV) market and found... in the US, 30 percent of the vehicle buyers McKinsey surveyed reported that they considered purchasing an EV, but only 3 percent actually did so." Perhaps the Tesla Model 3 has already begun to tap into that 27% of buyers considering an EV who haven't pulled the trigger yet. 


Above: Tesla Model 3 (Image: Motor Trend)

Or, perhaps, Tesla will penetrate this latent demand once hundreds of thousands of Model 3s start hitting the streets. Either way, this could prove a massive market opportunity hiding in plain sight. Because the auto industry has neglected to introduce meaningful electric vehicles to auto consumers, options have been severely limited. Most EVs have had limited range with limited availability — funny-looking compliance cars that really haven't had the sex appeal of the Tesla Model S. In fact, Tesla VP Diarmuid O’Connell has said that other automakers have, "delivered little more than appliances." Elon Musk has said that Tesla's Model 3: "will be way different from any other car on the road... in a way that's really useful and just doesn't feel like a weird-mobile." 

 

Above: Tesla Model 3 (Image: Motor Trend)

The Tesla Model 3 will (undoubtedly) tap into this fast-growing market of auto buyers considering EVs. What's even more exciting is the remaining 70% of buyers who've here-to-fore not considered EVs. With the Model 3, Tesla may duplicate the way its Model S came to dominate the large luxury segment and beat out Germany's industry stalwarts. Look out BMW 3-series, Audi A3, and Mercedes CLA. And this $35,000 price range includes far more vehicles than Germany's finest. It's reasonable to consider that Tesla can — once again — change hearts and minds in order to move the auto buying public ever closer to a sustainable future.

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*Source: Ars Technica

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