Investor's Corner

Tesla Model 3 in $35k base trim to start production ‘in the next 8 months’

Elon Musk’s prediction last July that the Model 3’s production hell is coming to an end seems to be ringing true. Tesla is currently in the final month of Q3 2018, and according to Musk in a letter to employees shared last Friday, the company is on the cusp of its “most amazing quarter” yet, as it prepares to build and deliver “more than twice as many cars” as it did in the second quarter.

The catalyst for Tesla’s growth is the Model 3. Dubbed by Elon Musk as a “bet-the-company” vehicle, the Model 3’s success or failure could dictate Tesla’s future. So far, though, the Model 3 has been performing well, being dubbed by auto sales tracking website GoodCarBadCar as the 5th best-selling passenger car in the United States last August. Tesla was able to achieve this despite producing only three variants of the electric car — the Long Range RWD, the Long Range AWD, and the AWD Performance version. The Model 3’s base trim, which is expected to cost $35,000 before any options, is still not being produced.

If Tesla plays its cards right, the $35,000 standard trim Model 3 could very well become a fossil-fuel car killer. At its price point, the base Model 3 becomes comparable in price to some of the United States’ best-selling passenger cars like the Toyota Camry, whose top-of-the-line XSE V6 trim is priced at $34,950. While the potential of the $35,000 Model 3 is vast, Tesla and even CEO Elon Musk have been quite conservative when releasing updates about the upcoming electric sedan.

That is, until now. Just recently, Worm Capital analysts Eric Markowitz and Dan Crowley published a post on the financial firm’s website outlining their insights on Tesla after a tour of Gigafactory 1. Tesla’s head of investor relations Martin Viecha facilitated the tour, while also provided some updates on the company’s upcoming projects. Among these projects was the $35,000 standard trim Model 3.

According to the analysts, they were informed that the Model 3’s base variant, which is equipped with a shorter-range battery, would likely start production “in the next 8 months.” With this statement in mind, it appears safe to infer that by April or Mar 2019, Tesla would be manufacturing the $35,000 base Model 3.

Contrary to an emerging Tesla bear thesis that demand for the Model 3 is declining, the analysts noted that the electric car maker is currently focused on selling higher-margin cars such as the Model 3 Performance and the Long Range AWD Model 3, where “demand continues to exceed what is being produced.” This is in line with Tesla head of sales Robin Ren’s statement in the Q2 2018 earnings call, when he noted that the company is seeing “more orders for the All-Wheel Drive dual-motor car and performance cars combined than the rear wheel drives.”

Musk unveiling the production Model 3. [Credit: Gene/Teslarati]

Back in June, Tesla CEO Elon Musk provided a rough estimate as to when the initial production of the $35,000 Standard trim Model 3 would begin. Musk also noted that Tesla would likely start producing the vehicle’s smaller battery packs at the end of 2018.

“We will definitely offer a $35,000 version of the Model 3. And probably at the end of this year is when we will be able to make a smaller version of the battery pack, and get into volume production of $35,000 version in Q1 next year. We would definitely honor that obligation, and we would do so right now if it were possible,” Musk said.

The recent timeline related by Martin Viecha covers and exceeds Q1 2019, considering that his estimated timeframe ends at either April or May next year. That being said, Tesla definitely appears to be getting ready for the rollout of the $35,000 base Model 3, as well as succeeding models like the standard-range AWD version. Once Tesla is manufacturing the full range of the Model 3’s variants, it would not be too surprising if the vehicle ends up dethroning best-selling passenger cars like the Toyota Camry in the United States.

The Tesla Model 3’s base variant has a 220-mile range, a 0-60 mph time of 5.6 seconds, and a top speed of 130 mph. The vehicle starts at $35,000 before any options.

Tesla Model 3 in $35k base trim to start production ‘in the next 8 months’
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