April 9, 2016 - 8:00 pm
There’s something about that Tesla name. A cache that Chevy Volt or Nissan Leaf simply can’t match.
How else to explain the consumer frenzy last weekend over Tesla’s new Model 3? Consumers could begin ordering the vehicles on March 31 and by April 3 some 276,000 drivers worldwide had plunked down $1,000 for the privilege of doing so. The $35,000 vehicle — which includes a handsome federal tax credit available to U.S. buyers — doesn’t even go on sale until late next year.
To put this in perspective, electric car sales in the United States represented a tiny 0.66 percent of the overall market in 2015, down from 0.75 percent in 2014, according to hybridcars.com. The number of Model 3 orders placed in three days dwarfed the 211,000 six-year sales total of the Nissan Leaf, the world’s top-selling plug-in.
The question now: Can the company deliver?
Tesla, which is building a massive battery factory in the Reno area, has routinely fallen short of its ambitious production goals. Last week, the company said it delivered 12,420 Model S sedans and 2,400 Model X utility vehicles, below its total target of 16,000. The 276,000 orders the company received for the new Model 3 is well more than double the 110,000 cars the company has sold since 2008.
Despite the company’s popularity with investors and high stock price — it hovered last week at around $240 a share — Tesla has yet to make any money. Instead, it survives in large part off the millions it earns by selling California emissions credits to its competitors who still market cars featuring that old throwback, the internal combustible engine. The millions in deposits generated by the Model 3 orders will also provide the company with a healthy influx of cash.
But as Erik Sherman of Inc.com noted last week, “Tesla has demonstrated that it has problems managing suppliers and lacks the infrastructure to control its own manufacturing and ensure delivery times. … Having great marketing is important. Designing products that people want is critical. But if you don’t deliver on time — if you can’t get your hands dirty and make sure things run on time — you run the risk of alienating consumers and disappointing investors.”
The challenges ahead surrounding the Model 3 are many, writes Charles Fleming of the Los Angeles Times. Tesla “must turn the prototype into a working car, find a way to sell it at the stated price point, get their growing auto plant and new battery factory up to full capacity, and bring the Model 3 to market in time to beat the competition.”
Perhaps Tesla will indeed eventually transform American transportation. Consumer response to the Model 3 is certainly without precedent, as far as electric cars go. Now, however, comes the difficult part. It takes more than cache to sustain a challenging and untested business model.