Posted on March 13, 2017 by Charles Morris
It’s safe to say that the Tesla Model 3 is the most anticipated product in the history of the consumer economy. Its massive number of pre-orders (over 373,000 at last count) is unprecedented, and savvy observers are expecting it to transform the auto industry, sending ripples of change through our entire society.
Above: Side angle of Tesla Model 3 spotted outside of SpaceX offices (Source: Teslarati via Unplugged Performance*)
So, it’s not surprising that any morsels of information Tesla provides about the new electric vehicle (EV) command rapt attention and intense scrutiny, like scraps of fish dangled before a gang of hungry cats. On the company’s recent earnings call, Tesla execs revealed several items of interest to both investors and enthusiasts (via Motley Fool*).
Above: Tesla Model 3 alongside Hyperloop test track (Source: Teslarati via Unplugged Performance*)
Musk confirmed that Tesla is still “anti-selling” the Model 3 - in other words, steering interested buyers toward a Model S or X, which can be delivered right away, rather than encouraging them to join the waiting list for Model 3. “We don’t want to make the line longer,” said Tesla CFO Jason Wheeler. Naturally, analysts would love to know just how long that list has grown, but no details were to be had. “We’re still in great shape,” said Wheeler, and left it at that.
Above: A close-up of the grille-less front end of the Tesla Model 3 (Source: Teslarati via Unplugged Performance*)
Gross margin - accounting jargon for the amount of money that a company earns on each product sold - is a critical figure for any manufacturer. A strong margin means eventual profit, whereas a poor or negative margin means eventual bankruptcy. Musk admitted that Model 3 will show a “horribly negative margin” at first, because of the costs of ramping up production on a “giant machine.” However, he expects that to improve quickly.
Above: Front angle of Tesla Model 3 spotted outside of SpaceX offices (Source: Teslarati via Unplugged Performance*)
“As we get to the initial phase of capacity of 5,000 a week, I would expect to see gross margins comparable to that of the S and X,” Musk said. Model 3 production is forecast to exceed 5,000 vehicles per week “at some point in the fourth quarter.” Tesla reported the gross margin on Models S and X at around 22%, a healthy figure for the auto industry. So when will we get to see the final version of Model 3? Not before it starts rolling off the production line (which is supposed to happen in July), it sounds like. Musk said the first showing of the final product is “probably at least a few months away or maybe as far as July itself.”
Above: Spy video of the Tesla Model 3 driving around the SpaceX office area (Source: Teslarati via Unplugged Performance*)
“I’m not sure if it kind of makes sense for us to show the final version before starting production or after,” said Musk. “The initial cars [will probably] go to company employees because I think it’s important for us to have good feedback on the product that we’re making and if there are any issues or valuable things that need to be addressed that we can address those before customers experience them.”
Above: A shot from behind the Tesla Model 3 spotted outside of SpaceX offices (Source: Teslarati via Unplugged Performance*)
Have patience, because Elon has promised that, when we do finally get to experience the new way of driving, we’ll be impressed. “It’s going to be pretty close to what I showed at the Model 3 unveiling, but with polish and refinement and a few more details that are added. It will be better than what was unveiled. And I guess in some ways, it will be a lot better.”