Studio711

Tesla Model 3

teslamodel3Over 325,000 people lined up to put $1000 down on the new Tesla 3. It’s an incredible accomplishment for Tesla considering that many people lined up without even knowing what the car looked like. Tesla could be the next Apple in terms of producing stuff that people blindly want. They’ve built an incredibly good reputation.

The concern is whether or not Tesla can deliver. It seems like Elon Musk’s plan from the beginning was to learn about electric cars with the early expensive models. Now we’re seeing the full gamble play out. This is make or break time for the company. Tesla can currently make about 50,000 cars per year so at that rate, it will take them six years to fill the orders and they aren’t even going to start shipping them until late 2017. With that many orders lined up, Tesla can go to investors and request a lot of money to build out even more factories so they should be able to ramp up production.

That’s a huge number of electric vehicles. Estimates put the total number of electric cars in the US around 410,000. Tesla sold about 63,000 of those. It’s pretty easy for people to back out of their orders and get their $1000 back, but if even half of the people buy the car, it’s a very sizeable percentage of the total market.

They’ll have to really bring down their production costs too. Car companies generally include research and development costs in the cost of their car. That’s how the companies can stay afloat. Tesla does NOT include R&D in the cost of their cars and even then they aren’t making much money on each one sold. It may be a viable business strategy in the beginning but at some point they have to turn the corner and really be a profitable company.

I hope they succeed and given all of the amazing things Elon Musk has accomplished, it’s hard to bet against them. That being said, this is a huge undertaking. It will be fun to watch!