Tesla logging 1,800 Model 3 reservations daily

Source: Anne C. Mulkern, E&E News reporter • Posted: Friday, August 4, 2017

Reservations to buy Tesla Inc.’s midpriced Model 3 electric car are coming in at 1,800 a day since the company released a few of them last week.

Tesla plans to make 5,000 Model 3s every week by year’s end, and 10,000 a week by late 2018, company officials said yesterday. Elon Musk, Tesla’s co-founder and CEO, described it as a transformational period in a conference call to discuss second-quarter finances with stock analysts.

“Friday night was an amazing time for Tesla, one of the most important days in the history of the company,” Musk said, referring to the car’s release. “It’s something we’ve been striving for 14 years. The Model 3, handing over those 30 production-model Model 3s, was just an incredible milestone in the company’s history.

“We wanted to make a great affordable electric car, which is a fundamental thing that is missing,” Musk added. “We wanted to make that from day one.”

Tesla sold the first Model 3 plug-in cars to employees and stockholders, in order to keep a tight internal loop as it finds and irons out glitches, Musk said.

Those released were an upgraded model with an estimated range of 310 miles and a price tag starting at $44,000. A version with a range of 220 miles will be available later this year starting at $35,000, the company said.

Popular add-ons will raise the price closer to luxury status, including $5,000 for Autopilot technology. Those costs are still less than that of Tesla’s flagship Model S, which typically runs more than $100,000 before federal and state tax credits.

Musk said demand for Model S and the crossover Model X is up, as well, quelling fears that the Model 3 reservations could start to eat into demand for the higher-priced cars. People who reserved a Model 3 had to provide a refundable $1,000 for the right to get in line to buy the car later.

Musk corrected a statement he made Friday night that the company had 500,000 net reservations for the Model 3. It’s 455,000, a number that includes cancellations over the past year.

He said Tesla could pump up reservations by promoting the car but quipped that if you are a hamburger restaurant with an hour-and-a-half wait, “do you really want to encourage people to order more hamburgers?”

Tesla still isn’t making money, however. The company posted a $401.4 million net loss for the three months ending in June, compared with a $293.2 million loss for the same period a year earlier.

The company reported higher quarterly revenue of $2.79 billion, compared with $1.27 billion in the same period a year earlier. In response, Tesla shares rose as high as 8 percent to $351.67 per share in late trading, Reuters reported.

Tesla sold $100 million worth of zero-emission vehicle, or ZEV, credits from April through June. California’s Air Resources Board (ARB) requires automakers selling in the Golden State to make a growing number of ZEVs. Automakers that fail to manufacture enough can buy environmental credits from other automakers. Musk has complained that the rules are weak and the credits lack demand.

More EV buyers needed

If Tesla can produce and sell the volume of Model 3s it’s projecting, it will create an important shift in the plug-in electric vehicle market, said Gil Tal, research director at the University of California, Davis’ Institute of Transportation Studies.

“It’s not a small number,” Tal said in an interview. “It’s a major change in bringing full-electric battery electric to the market.”

Other manufacturers, he said, will “want to figure out how they can keep their market share.”

That could mean other carmakers will accelerate their development of plug-ins or longer-range cars with automation. “Every car Tesla sells … is not being sold by someone else,” Tal said.

He noted, however, that those buying the Model 3 specifically wanted that car.

“The transformation that we are waiting to happen is a larger share of the new car buyers will consider if an electric car is right for them,” Tal said. “That hasn’t happened yet.”

The new Nissan Leaf and the Chevrolet Bolt haven’t generated enough headlines to bring enough people into the market to make that change, Tal said.

“This is probably the main point of how Tesla can have impact on the market” as it grabs publicity, Tal said. People who never thought about an EV might start looking at it, he said. He noted that the Model 3 has technological advances, including the Autopilot, that make it appealing.

Battery costs remain an issue, said Jeremy Michalek, a professor of engineering and public policy at Carnegie Mellon University.

“High production volume alone isn’t likely to be the key to driving down battery costs, since our analysis suggests that economies of scale have already been all but exhausted,” he said in an email. “Technology innovation will be needed to continue driving battery costs down and make long-range electric vehicles more affordable for more mainstream consumers.”

Tal warned that Tesla also needs to focus on expanding its supercharger network. The car’s charging is proprietary, so it can’t use non-Tesla chargers. As the company ramps up production and sales on the Model 3, it risks creating a charging bottleneck.

“They will have to spend a lot of money and effort to keep up with the cars on the road,” Tal said.

Musk said during the call that the number of superchargers will triple between now and the end of next year. He said he’s “confident that will address the needs” of Tesla owners.

Tesla plans to soon unveil its first “mega-supercharger” location, with amenities including “great restrooms,” food and other diversions for the 30-minute charge.