Tesla’s Model 3 is a promise kept
As every long-time Tesla-watcher knows, the delivery of the first few units of Model 3 in July was the culmination of a grand plan that Elon Musk formulated over a decade ago. Although he has facetiously referred to it as a “secret” plan, in fact he has explained it in detail many times over the years, in blog posts, tweets and speeches. Back in 2003, realizing that it would be impossible for a small startup company to produce the mass-market electric car that the world needed, Musk and his partners - Martin Eberhard, Marc Tarpenning, JB Straubel and Ian Wright - devised a three-phase strategy to develop the required expertise and production capabilities. The lessons learned from the Roadster informed the design of Models S and X. These models allowed the company to build the scale needed to produce Model 3, and here we are. I found it such a fascinating story that I wrote an entire book about it, which I have recently revised and updated.
Above: Tesla Roadster, Model 3, Model S, and Model X (Instagram: model3guy)
The Tesla team has rewritten the history of the automobile, and forever changed consumers’ perception of electric vehicles. Whatever happens next, there can be no question that the launch of Model 3 was a momentous event, for several reasons.
In the first place, as even Tesla’s detractors would agree, the success or failure of Model 3 is an existential issue for the company - if Model 3 fails to live up to its potential, or even if the production ramp-up takes place too slowly, the company’s soaring stock market valuation will be in grave danger (to say the least).
Second, the new EV’s market debut is, or should be, a wake-up call for other automakers - Model 3 seems certain to start stealing customers from luxury brands in the small sedan segment, as Model S has done in the large luxury market. Despite what you read in the mainstream press, the legacy carmakers are not obsessed with competing with Tesla - their focus remains firmly on the most profitable segments of the market, which are trucks and SUVs - but they are definitely keeping a close eye on what goes on in Palo Alto.
The third reason that Model 3’s debut is a historic event: The range/price combination that has long been considered the tipping point for EVs is now a reality. Model 3, together with the Chevy Bolt and the upcoming second-generation Nissan LEAF, delivers the 200-mile/$35k Holy Grail that the prophets have assured us will herald the end of the Oil Age. Is this momentous transition truly at hand? We’ll find out over the next few years, thanks to Tesla.
Above: Tesla's stunning Model 3 (Image: Tesla)
Although Elon Musk has been talking about Tesla’s third-generation vehicle since the founding of the company, he (wisely) didn’t offer any details until it was well into development. He stated several times that it would have a range of at least 200 miles, would sell for around half the price of Model S, and would hit the market by 2017. He also promised that it would not suck. And that was about it.
To get an actual look at the messianic motorcar, we had to wait until the March 2016 unveiling, a typical Tesla sound-and-light show. Elon Musk reiterated Tesla’s mission, recapitulated his not-so-secret three-step strategy, and thanked buyers of Models S and X for financing the development of “the final step in the master plan: a mass-market affordable car.” Finally, to cries of “You did it!” the first three Threes rolled onto the stage.
Leading up to the event, media skeptics had predicted that Tesla would pull a bait-and-switch by presenting a $35k base model that lacked the amenities everyone wants. But a true knight doesn’t behave that way. The Iron Man assured us that every Model 3 would come with the main features that make a Tesla a Tesla: 5-star safety ratings; a 0-60 time of less than 6 seconds; a range of at least 215 miles; standard Autopilot hardware and Autopilot safety features; plenty of passenger and cargo space; and Supercharging capability.
The reservation list opened the morning of the show, and by the time Musk finished his presentation, 115,000 people had plunked down their $1,000 deposits. According to the company, that number has now grown to around half a million.
Above: Tesla stores had lines around the block to get an early reservation in for its Model 3 (Image: Hybrid Cars)
Even if all goes as planned, Tesla won’t be producing that many cars per year until the end of 2018, so the waiting list is obviously going to remain a long one for the foreseeable future. For this reason, Tesla has been “anti-selling” Model 3, trying to convince prospective customers to order a Model S instead, and put some money in the bank right now. Tesla makes it quite clear that Model S is the superior vehicle: “Model S is our flagship, premium sedan with more range, acceleration, displays and customization options...Model 3 is a smaller, simpler, more affordable electric car. Although it is our newest vehicle, Model 3 is not ‘Version 3’ or the most advanced Tesla.”
In February 2017, Tesla began building preproduction units. It streamlined the process of building the Model 3 production line by cutting out a step that was previously considered standard procedure. Automakers typically test a new production line with relatively cheap prototype equipment that can be modified to address problems, then discard the temporary tools once production is running smoothly - a process known as “soft tooling.” Tesla skipped that step, and installed permanent equipment on the line from the beginning. Musk told a group of investors that “advanced analytical techniques” (computer simulations) would help Tesla to advance directly to production tooling.
Tesla was not the first to try doing things this way. Audi recently launched production at a plant in Mexico using computer simulations of the assembly line, and the company said this allowed the plant to start production 30 percent faster than usual. An Audi executive involved in the Mexican plant launch, Peter Hochholdinger, is now Tesla’s VP of Production.
Limited production of Model 3 began in July, right on schedule (to the chagrin of pundits who had insisted that Tesla would be late). Replaying a scene that took place during Model S development, TSLA stock soared as it became apparent that Tesla would deliver the game-changing vehicle on time.
Above: Tesla Model 3 about to be delivered to an early customer (Instagram: mleaf21)
The first production Model 3, destined for Elon Musk’s personal stable, quietly rolled off the line in July. The big party took place at the end of the month, when the first 30 customers received their vehicles, and the configuration tool, which lets reservation holders choose their colors and options, went live.
Once again, Musk told the Tesla story and took some well-earned bows. With uncharacteristic understatement, he said, “The thing that’s going to be the major challenge for us over the next 6-9 months is, How do we build a huge number of cars?” Then he dropped his formal pose and said, “Frankly, we’re going to be in production hell. Welcome to production hell!”
Tesla plans to ramp production to 5,000 units per week by the end of 2017, and to build 500,000 cars (all 3 models combined) in 2018. When the company revealed that production for the third quarter had fallen far short of its forecasts, many were disappointed, but few were that surprised. The naysayers exulted, but Wall Street accepted Tesla’s assurances that there are “no fundamental issues with the Model 3 production or supply chain.” TSLA stock suffered a sharp drop on the news, but returned to its pre-announcement level within hours.
Tesla’s Supercharger network is one of the brand’s greatest assets. When Tesla introduced Model S, free Supercharging reassured prospective buyers who were worried about running out of juice, but the company can’t (and shouldn’t) continue to offer free unlimited Supercharging once it starts delivering vehicles in large volumes. Shortly after the first Model 3 launch party, Tesla replaced the “free unlimited” policy with a new one that it believes is fair to both existing and future owners (it is, however, a bit complex).
While some Tesla fans cried foul, most experienced EV drivers seem to agree that offering free-for-all charging would be a bad idea for all concerned. Some of the most popular Supercharger locations are already congested, and adding half a million Model 3 drivers to the user base could turn a quick and hassle-free charging experience into a nightmare. We value what we pay for, and services that are free tend to get abused. Even a nominal charge will encourage drivers to use the Superchargers when they really need them, and possibly to take better care of them. Drivers who can afford a $35,000 new car aren’t likely to mind paying ten or fifteen bucks if they get convenient access to a fast charge when they need one.
Outwardly, Model 3 looks pretty much like a smaller version of Model S, but in fact it represents a new platform, and there are important technical differences. CTO JB Straubel confirmed that in 2015, saying that the Model 3 would be built on an entirely new “third generation” platform. “For better or worse, most of Model 3 has to be new,” said Straubel. “We are inventing a whole new platform...It’s a new battery architecture. It’s a new motor technology [and] a brand new vehicle structure.” Tesla (with partner Panasonic) developed a new battery cell for Model 3. It also switched from an induction motor to a 3-phase permanent magnet motor, and from aluminum to steel body panels.
Another major difference between Model 3 and its predecessors: Tesla designed it to be easy to produce. The bells and whistles have been kept to a minimum, and the available options are few (at least for now). “We got quite adventurous with the Model X,” said Musk in 2015. “We’re not going to go super-crazy with the initial version of the [Model 3]. There are things that we could do with the Model 3 platform that are really adventurous, but would put the schedule at risk.”
Above: Inside Tesla's Fremont factory, a rare glimpse of the Tesla Model 3 body line at 1/10th the speed it will ultimately run at (Instagram: elonmusk)
Model S is currently available with 3 battery pack options, rear-wheel-drive or dual motor, 7 paint colors, 6 different interiors, 4 styles of wheels, two roof options, and more. It all adds up to more than 1,500 possible configurations. Model 3 has fewer than 100.
Another interesting factoid: Model 3, with its Nevada-made 2170 battery cells, may be as much as 95% US-sourced, making it the “most American” car available. Tesla also hopes to obtain much of the raw materials in those cells from the US. The company is believed to be developing a source of lithium at Silver Peak, not far from the Gigafactory, and Nevada lawmakers have proposed new tax incentives aimed at increasing lithium production in the state.
Model S has ruled the large luxury sedan segment for a couple of years now, outselling the offerings of legacy automakers such as Audi, BMW, Lexus and Mercedes. Will the Model 3 pull off a similar feat? Several media outlets have published detailed comparisons between Model S and small and mid-size sedans from Audi, Mercedes, Lexus, BMW and Jaguar, and their conclusions aren’t good news for the establishment.
When it comes to acceleration off the line, Model 3 beats almost every other sedan in its price class. Elon Musk has promised that Model 3’s safety ratings will be second to none. Autopilot is probably already the equal of any of the driver assistance systems offered by its competitors, and will be continuously improved via over-the-air updates. Model 3’s 8-year, 100,000-mile powertrain warranty is twice as long as that of many competitors. Standard features such as the giant touchscreen and standard internet access are either unavailable or optional on competing sedans.
Above: Model 3s lined up for test drives at Tesla's launch event (Instagram: teslahub)
Perhaps it’s fortunate for the legacy brands that you can’t drive a Model 3 off the lot today.
Will Model 3 prove to be the “wake-up call for the rest of the industry” that so many have predicted, or will the legacy OEMs hit the snooze button, as they have so many times before? The Chevy Bolt is an excellent automobile, and the next-gen Nissan LEAF is expected to be a contender as well. However, so far none of the majors has offered any real competition for Tesla. This has less to do with the quality of their EVs than with a fundamental difference of strategy. The Big Three and their European and Asian counterparts have chosen to build just enough EVs to satisfy government regulators, and not to advertise them to the mass market. However, this may be changing - GM has been taking out full-page ads for the Bolt in national newspapers and magazines, and there’s a rumor afoot that it plans to substantially increase production.
How will the Model 3 ramp-up play out, and how will the legacy automakers respond? The answers will shape the future of the auto industry, and perhaps much else as well. The next couple of years will see no shortage of fascinating news.