
How Tesla's Model 3 Could Conquer Low-End Luxury - rezist808
http://www.bloomberg.com/news/features/2016-03-22/how-tesla-model-3-can-complete-its-take-over-of-the-u-s-luxury-market
======
tinbad
I cant believe so many negative (for Tesla), yet sensible comments get down
voted. I understand the tech community orgasms with everything that comes out
of Elon Musk but, like many have pointed out, the low end luxury market is
ultra competitive and has been dominated by the likes of BMW, VAG, Mercedes,
Honda, etc for quite some time. These companies haven't just been sitting
still in the last decade, and, besides having a century or so head start with
actually building mass market high quality products they are also heavily
invested in electric drive and other alternatives.

Unlike the markets for model S and X, cars in this segment rely on enormous
volume to be successful both product-wise and financially, and, considering
what we know about Tesla and how hard it is to mass manufacture such a complex
product like a car, it's really questionable whether Tesla will be able to
pull this one off. The relative success of the (niche) model S is no indicator
here at all.

Unlike some here on HN may think, the automobile industry, especially in this
segment, is already a hyper competitive space and the existing OEMs have not
only the infrastructure and experience building high quality products that
people actually want but also a far bigger war chest to battle it out with. I
don't think anyone (including me) is hoping for them to fail but im certain
that this will be a pivotal point for the company on whether they'll truly be
able to become a mass market manufacturer or stay a niche luxury player they
are now.

~~~
djrogers
Did you read the article? The author is specifically discussing cars like the
BMW 3 series, which sold 140k units in the US last year. I wouldn't call that
anywhere near an 'enormous volume'...

As for all the vaunted experience "building high quality product people
actually want"? If 150,000 or so people want an all electric car that's fun to
drive and has a 200+ mile range, they'll be buying it from Tesla, not BMW.

~~~
tinbad
The article is flawed with comparing the stats and here's why. The 3 series
had a total worldwide production of over 500,000 in 2013 (and growing about
10+% YOY). Producing and selling half a million cars of just ONE model. Or
consider this, BMW alone sold 2.2 million vehicles last year, many of which
share many parts and components. That's the scale Tesla is up against, not
just the 140k 3 series sold in US. Also, BMW sold almost as much of its semi
electric cars in 2015 alone as Tesla did in all of its existence.

~~~
Chronic51
There are way too many Tesla (and Elon Musk) fanboys in this thread and on HN.

------
bobbles
Lots of Tesla haters in here apparently.

For me I'll be looking into a family car in maybe 2 years as an upgrade, and
having some form of Tesla on the horizon would definitely hold off until it
was available.

It's just not just the price factor, its the cool factor, the tech factory AND
the ev factor.

The fact that the article talks about petrol prices as a decision factor seems
short sighted. Do we really think they arent going to shoot back up in the
next 10 years AND that electric car charging infrastructure / prices wont come
back down? Thats the sort of lifecycle thats going to matter for these

~~~
mr337
Same here, almost a year into buying a used Nissan Leaf and loving the crap
out of it. If your still interested in an EV after the Tesla announcement
would be an excellent time to pick one up - if it can work with your driving
habits.

Looking at a 2013-2014 Nissan Leaf with 14K miles for about $9-$10k.

------
sna1l
It is pretty amazing to watch how well Tesla is being run from a business
point of view irrespective of their technology.

Earnings are expectedly bad -> stock takes a beating -> new car announced ->
stock skyrockets -> debt raised at very high valuation -> long delays for car
-> rinse, repeat

Bravo Elon, Bravo!

------
pilingual
This shows 2015 data. There were early adopters and it took some time for
people to learn about Tesla. I think the same will be true for Model 3. It
will require a network effect of neighbors, friends, and coworkers to saturate
demand potential.

The biggest concern I have: superchargers. If they want to sell hundreds of
thousands of Model 3 a year, what happens during Thanksgiving in the US?
Newark, DE had 4 superchargers and they are now completing an upgrade to 12 or
more. While there are other superchargers in New Jersey, Newark is a critical
location between DC/NY/Philly and west. It takes 40 minutes to go from ~50 to
215 miles and that is if your supercharger isn't shared by another car (2
superchargers per transformer). Additionally, you won't get 215 miles because
the heater will suck a lot of energy, and forget about charging to 300 unless
you want to wait another 40+ minutes.

My hope is that Tesla has the same vision as Nissan and others with wireless
road charging. That sounds crazy and inefficient, but I don't see any way you
are going to accommodate thousands of Model 3, Model S, and Model X drivers
Thanksgiving 2018.

~~~
aerovistae
Easily. The network is already massive and that's almost _three years away._
Most of the existing network was built in the last 3 years, and they have far
more resources now than when they started, so you can count on the pace
accelerating.

Elon has said from day 1 that the supercharger network would be designed to
grow ahead of demand. This is _definitely_ well-planned for and not at all
something they're sitting they're frantically wondering how they'll manage.

According to their website, there are currently over 3500 superchargers. If
they sell 500,000 cars in 2017, which of course they won't nor do they plan
to, that's 142 drivers per charger _if they didn 't build any more._

Imagine if you only had to share a gas station with 142 other people total. Do
you think you'd ever even see them at all, let alone have to wait?

Note that the geographic distribution of chargers matches the distribution of
owners, i.e. more chargers in urban areas, so there will not be overload on
some and underdemand on others.

~~~
pilingual
> This is definitely well-planned

No, it isn't. First, Hawthorne has been a huge pain for owners. Lines waiting
to charge. Second, there are several places which are mind-boggling as to why
they "planned" it the way they did viz.: Philly to Pittsburgh you have to
route through Baltimore and stop at Hagerstown in winter, then stop again at
Somerset due to the massive elevation change. If Tesla had put a supercharger
at Breezewood there'd be no problem. See the Tesla forum for complaints.

> that's 142 drivers per charger

This is a straw man. Few people will be charging at the Mitchell, SD
supercharger. I chose Newark as an example because it is at a rest stop
(contrast with others your have to go out of the way to get to) and it is
right in the middle of a large metros. If you want to do the math on how many
people will be stopping to charge there spending 30+ minutes each -- again,
assuming you get the transformer to yourself -- I don't think it'll work out
well.

~~~
rdtsc
I like Tesla because it is cool but I would never bother to alter my route or
wait in line or do any of those things. Even if I only traveled 2-3 times a
years. The reason is, if I buy a luxury/fun/toy car, it has to be a
luxury/fun/toy, it cannot be a hassle. Waiting in lines and altering the route
to charge is a hassle. I am glad others don't mind but even if I could afford
it, until there is a better charging network or some kind of swappable battery
thing or something else, I'll stick with hybrids or plain gasoline cars.

~~~
greglindahl
Yeah, you're definitely not in the Tesla demographic. When Consumer Reports
dropped Tesla from the recommended list due to the number of repairs needed,
they noted that an astonishing 97% of Tesla owners would buy another one...
despite all the hassles.

That says a lot about people who buy Teslas.

~~~
rdtsc
Well for one, I can't afford it, so realistically I am not in the demographic.
But if I could afford it, I would want it to be less hassle. Besides that I am
really excited for it, well heck, for any tech Elon builds.

~~~
greglindahl
Day-to-day, it's less hassle to charge in your garage every night than have to
visit a gas station once a week. It's only long trips where it's more hassle.
Current Tesla buyers are people who think that decision is a slam-dunk. It's
safe to say that there are some number of similar fanatics in the lower price
band of the Model 3.

------
tsunamifury
They are going to face very tough competition in this market against companies
with a lot more money to burn and, frankly, likely a better product not to
mention a far more established support network.

The S was an amazing consumerist statement that unlocked a class of people
willing to spend 100k+ on a car because of its Eco-cache. For several years I
thought it would be my next vehicle, then I watched the age, saw their poor
quality interiors and decided I could get a lot more from BMW at half the
cost.

I'm the person who would buy a Model 3, as I currently own a BMW Gran Coupe.
But look at a Designo AMG C Class coupe or an M4. These offer thrilling rides,
high quality interiors, and handling the current S doesn't even offer short of
the D version. The Model 3 will have to be down market from there, putting
them way behind the current market offering. This is a high competition low
margin arena, and they can't even profit in the high margin low competition
space yet.

I hope the Model 3 succeeds, but it will have to be amazing.

~~~
aerovistae
A lot more money to burn?

Tell me one thing: these other companies with all this money to burn, where
are they going to get batteries?

Oh....I forgot, from the overwhelmingly abundant supply that's readily
available.

Really makes you wonder why Tesla is building the largest battery factory in
the world, which they had to start planning and construction for multiple
years in advance....it almost leads you to wonder if perhaps _there 's nowhere
else to get them from._

It doesn't matter how much money they have. Even Apple can't conjure a battery
factory out of thin air. Rest assured _money_ is not slowing down the progress
of the gigafactory. It's not as if "if only tesla had more money, they could
finish the factory sooner!" They're going as fast as construction allows.

At this point, it is no longer a game where more money will help, and most
observers don't get that. Elon has said this explicitly time and again, and
for some reason people ignore him.

~~~
givinguflac
The factory has been running for a little while now.

~~~
djrogers
No, a very small portion of it has been open where they are assembling power
walls and battery packs from batteries made elsewhere. The other 90% of the
factory is still under construction.

------
fweespee_ch
The problem with the low end "Luxury" market being compared to the "Lol, screw
the rules I have money" market is simply one is grounded in the mass market
realities while the latter is not.

I know a couple people in the former category who own multiple cars that cost
6 figures. They'd buy a Tesla just because they want one without cost
considerations. They also have a Ferrari, a Porsche, etc. Pretty much any
iconic brand of luxury car they have at least 1.

The low end luxury market are engineers, doctors, etc. and they will seriously
consider buying a minivan or a SUV or whatever instead. It is a completely
different market and one that [frankly] is just as likely to dip into brands
like the Prius hybrid.

I'm sure Tesla will get sales but imagining some sort of dominance is silly.

~~~
mytochar
> The low end luxury market are engineers, doctors, etc. and they will
> seriously consider buying a minivan or a SUV or whatever instead.

I would say this is a big "it depends". I think I'm in that low-end luxury
market. I paid 36k for my car, when all is said and done. I absolutely did not
consider minivans or SUVs, and for one really big reason: I don't have kids.
Kids aren't even on the horizon. When I look at minivans and SUVs, I think of
mobiles that, while great people movers are, generally, not very fun cars to
drive (there are some amazing Mazdas and Acuras in this collection, though).

I bought a Subaru WRX, because I like the way it feels; but, I am VERY excited
about this new Tesla, and I completely believe that the next car I purchase,
bar getting a huge amount of money that I can choose to not be practical with,
is going to be an electric card, and is also probably going to be a Tesla.

I have a friend who owns a 90k Infiniti. He prefers luxury more than I do;
but, he's 100% on the Tesla bandwagon and is very excited at the prospect of
owning one. He'll be one of the first in line when they announce the price.

I have another friend, similar market. He owns an Audi ... A5? S5?

Barring my infiniti-owning friend, we are people that like cars and want a
little extra. We definitely do exist, and I suspect many of us will be looking
very intently at that Tesla.

~~~
ghaff
>I absolutely did not consider minivans or SUVs, and for one really big reason

Minivans and SUVs are also handy if you do outdoor activities involving a lot
of gear--including boats, etc. that go on the roof. A number of paddling
friends I know actually consider minivans more practical than SUVs for this
purpose.

Of course, said activities also often involve going to places where electric
cars aren't practical--even if they didn't have gull-wing doors that preclude
roofracks.

That said, I also have a small second vehicle. But then I paid $18K for it in
1998 or so and it's still going strong at 170K miles. (Honda Del Sol.)

~~~
Grishnakh
Putting a boat on the roof of a vehicle is dumb: it really kills your fuel
efficiency. You can get a small trailer to put the boat on instead, and then
you can get a small car with a trailer hitch to pull it (if the boat is light
enough to put on the roof of a minivan, it's probably a kayak and weighs very
little), which means you don't need a big, ugly, gas-guzzling minivan or SUV
at all. Any small car can pull a 500-pound utility trailer.

~~~
ghaff
To each his own. I do know people who use trailers for sea kayaks and it can
be quite a pain getting into tight quarters. So putting boats on the roof may
be dumb but it's what 98% of the people I know with boats do.

------
bkjelden
$35k is a price point where a lot of cars are sold as status symbols: it's the
bottom end of the price range for new or certified pre-owned cars from the
iconic luxury brands, and yet it's a price point that is attainable for most
white collar professionals.

I think Tesla is poised to do quite well in that market. Their marketing is
generally very good, and they are not above putting a couple flashy features
in the car that no one else has (gull wing doors).

The Model 3 may not be able to compete with ICE cars on cost per mile when gas
is <$2/gallon, or on maintenance costs, but the Model 3's price point is still
one where looking cool is more important than the bottom line.

~~~
ohazi
> or on maintenance costs

 _What_?

Perhaps with the exception of Lexus (Toyota), the iconic luxury brands have
abysmal track records for reliability. And when they do need parts, they tend
to require slightly special parts that are exorbitantly expensive.

In what universe does an electric car, which doesn't even need oil changes,
fail to compete with this?

~~~
FireBeyond
In the universe where things that are largely solved problems for the other
manufacturers are still pain points for Tesla:

[https://teslamotorsclub.com/tmc/threads/door-handle-
issues-s...](https://teslamotorsclub.com/tmc/threads/door-handle-issues-self-
fix-by-fuse-pull-re-insertion.15637/)

Body squeaks and rattles are common too - in a car that can easily hit six
digits, I do not want to merely put a hand on the dash and have it squeak and
give way.

~~~
greglindahl
You mean that no other car manufacturer has shipped a novel feature (like
Tesla's hiding door handles) which subsequently had problems? In fact, that's
a common problem in high-end cars. It's hard to test new stuff that isn't
already shipping in volume.

------
GreenPlastic
I don't have any hard evidence to back this up (mostly anecdotal), but I think
the demand for a Model 3 is much, much larger than people think. Estimating
demand based on current luxury car demand is probably not accurate. It's
pretty obvious that many people making 125-200k who would never buy an 80K car
have chosen to spend more and buy the Model S.

Like I said, purely anecdotal but I know 30-40 people, many of whom aren't in
tech, who plan on putting a deposit down on the first day. It's literally 1
out of 6 people I talk to. When I mention "I won't buy another car unless it's
a Tesla" I often hear "me too." Many of these people I was shocked even knew
what Tesla was, let alone were waiting for this car. I've only driven BMWs and
Infinitis and won't buy a gas vehicle again after driving a Model S. A 35K
Model 3, assuming it performs similar to a 60KwH Model S has a couple
advantages over a 3 series. 1) With tax incentives, it can be had for much
cheaper in many states 2) if you factor in gas savings, it brings it closer to
25K. I really think it will appeal to the BMW crowd as well as those who would
never touch a BMW because of the image it portrays.

~~~
jkestner
Halo effect in action. The Model S has established the quality of experience
you'll expect with the Tesla you can actually afford. It's not about whether
it's the most rational choice - cars say something about the owner, and Tesla
has built the strongest message since the Prius.

------
pfarnsworth
Tesla is burning through massive amounts of cash. They are debt-laden and
don't have plans of being profitable until 2020 at the very least, if that's
even possible. They need to keep issuing debt in order to stay afloat, so
their financial position is tenuous. If anything goes wrong in their
execution, they will go bankrupt, so it's a high risk venture to say the
least.

~~~
aerovistae
This is such a skewed portrait I would've thought you were looking through a
fisheye lens.

You're making it sound as if Tesla is riding the edge of bankruptcy, and Elon
Musk is up late fretting over spreadsheets wondering where he'll find the
money to make payroll.

On the contrary to your unsourced assertion that they won't be profitable
until 2020, he just said in the last quarterly investors' call that Tesla was
likely to be profitable this year. [1]

As for "burning through massive amounts of cash," again you're making it sound
like money is just slipping through their fingers with no return. This is such
a misleading sentence on its own. Yes, they have enormous capital expenditures
because they're doing something _extremely difficult_ that requires the
construction of enormous facilities and requires immense amounts of
engineering work. And by all accounts, given that they're now selling about
50,000 cards a year (sorry, how many were they selling two years ago? four
years ago? looks like the number is going up) and given the reviews of the S
and the X, _they 're doing a superb job delivering results from those
expenditures._ Their expenditures are not "out of control" nor unplanned--
they're spending exactly what they need to in order to accomplish a near-
impossible goal.

Given where they've gone from 2009 to 2016, you think that between now and
2020 it's all going to collapse in on itself, the Model 3 will reveal itself
to be a poorly designed flop that few will buy, or they'll find themselves
unable to actually manufacture it? Where exactly are you seeing evidence of a
downward trend or a failure waiting to happen?

You sound like one of those people on the radio that proclaim apocalyptic
double-meaning in random numbers they've taken out of the Bible.

[1] [http://www.reuters.com/article/us-tesla-results-
idUSKCN0VJ2J...](http://www.reuters.com/article/us-tesla-results-
idUSKCN0VJ2J6)

~~~
rjdagost
Keep a few things in mind about Musk's prediction of profitability. First, he
is talking about non-GAAP profitability for this year. He doesn't predict true
GAAP profitability for a few more years, maybe by 2020. Second, he has blown
many previous predictions about achieving profitability and being cash flow
positive, so many investors are rightfully skeptical about this new prediction
as well.

~~~
aerovistae
You are quite right, and this is by design. I believe all the evidence points
to this not mattering any more than Amazon's profitability has mattered. Tesla
has its eye on something bigger and longer term than narrow early quarterly
profits.

In the meantime, Elon is indeed saying whatever he has to to keep investors
from losing their shit with impatience over a startup that's been working for
over a decade without having transformed the world yet-- they've grown too
accustomed to Dropbox's and Facebooks. If he let them speculate wildly without
occasionally throwing them a bone, he would end up with a feedback cycle of
bad press for no reason-- an analyst would downgrade Tesla for [some reason],
a hundred articles would be written with titles like "Is this the end of
Tesla?", and the cycle repeats. This is what he's keeping at bay while they
prepare their grand slam.

------
trhway
the Tesla model 3 would oversell all the BMW/Lexus/Mers taken together if -
and that is a big if - it would cost $35K which, with all my respect to Musk,
i just don't believe to happen. I think it will cost about $50K and at that
price it will be a worthy competitor, yet not conqueror, to the 3 series,
etc...

------
singingfish
Yay, by the time I drive my 2005 prius into the ground these should be good
value on the second hand market ;)

------
diskcat
You can't really say much until the specs are released.

~~~
mikeash
I'm not sure why this is downvoted, because you're totally right. I'm sure it
will be a great car, but all we know at the moment is that it will cost
$35,000 for the base model, have a range of at least 200 miles, and be
somewhat smaller than the Model S. We have no idea what it will look like,
what the options will be, what sort of features it will have, how the interior
will be, etc. All of this will make or break it.

~~~
FireBeyond
Especially when the S starts at $70,500 (I HATE their pricing that has a whole
bunch of rebate pricing, some of which may not be realized), but can go up to
$133,500.

At that ratio, you could be looking at $35,000 to $66,150.

And that's not assuming (which is entirely possible) that the $35K is the
"with all possible eligible rebates" price. Without that it's more likely to
expect that you're looking at a $45K base.

~~~
mikeash
They've said the $35,000 price is before any tax credits or rebates.

The rest is spot on, of course.

------
LAMike
Would there be a market for a 12k Telsa Motorcycle?

~~~
bagels
Zero is probably the closest to that:

[http://www.zeromotorcycles.com/zero-s/](http://www.zeromotorcycles.com/zero-s/)

The motorcycle market is approximately 1/30 the volume (in terms dollars even
less) of the automobile market.

------
sjg007
This is a no brainer. Time to buy Tesla.

------
ams6110
I'm staunchly in the "would never buy an electric car" camp, but I'm
interested to see how this plays out.

~~~
sanj
Can you elaborate? I'm interested in why you'd take that stance.

~~~
mytochar
I'm not the author; but,

1) "I can't work on it, myself"

2) "It'll have terrible resale value" considering the life of batteries

3) It's definitely going to have a computer in it, and probably be phoning
home all the time and that data could be siphoned to find out where I've been
and how fast I've gone.

4) Cars with modern computers are scary easy to hack

5) I just don't drive

6) I haven't driven an electric car and so I have biases

7) I do very long road trips with very short pit-stops. Electric cars will
never be able to do that (for some size of 'ever')

8) I'm over 60, and the technology won't be where I want it by the time I'm
likely to leave this earth.

9) (added) I don't think we'll need to own electric cars. I think Uber or some
other company will send out electric cars to us that will drive autonomously
to their destination, and I think this will happen before I need to buy a new
car.

There's several potential reasons.

~~~
aeliusadrianus
2) terrible resale value / battery life: "A survey of 80 European Model S
owners has demonstrated that, on average, most Tesla Model S batteries seem to
degrade only 5% after 30,000 miles (50,000 km). After that point, degradation
appears to slow down, showing very little further degradation for the next
30,000 miles." [0]

4) Cars with computers: what are the alternatives?

7) Short pit-stops: 30 minutes for 170 miles at a supercharger, for free
(estimated to cost Tesla around $2K over the lifetime of the vehicle). The
company expects to reduce this to 10 minutes in the next few years. [1]

9) Car ownership: Good point. But the low cost of fuel and maintenance will
accelerate the switch to EVs. This way, you might use them and we might even
own them - provided that we launch local cooperative fleets to replace Uber.

[0] [http://electrek.co/2015/05/08/tesla-model-s-battery-
degradat...](http://electrek.co/2015/05/08/tesla-model-s-battery-degradation-
shown-to-level-off-at-5-after-30000-miles/)

[1] [https://www.technologyreview.com/s/516876/forget-battery-
swa...](https://www.technologyreview.com/s/516876/forget-battery-swapping-
tesla-aims-to-charge-electric-cars-in-five-minutes/)

------
jordache
jumping on the tesla bandwagon much? Tesla needs to demonstrate they can
scale.. the paltry few highend units they move today is a far cry from the
volume they would potentially move with a cheap model. The reliability of
model s is pretty bad, but servicing them is manageable given a smaller
customer base.

I think we'll see challenging times ahead for Tesla

~~~
matt_wulfeck
Increasing production is a problem that's easy to fix with time and money.
Creating demand and a superior product is much harder to do.

~~~
csours
If they do an AMAZING[1] job of utilizing their current factory, they can make
500k car/yr.

If/when they have to stand up another assembly plant, that will be on the
order of $2-5 billion and 2-5 years.

I would imagine that at some point they will enter a joint venture with
another OEM rather than expand into another assembly site.

1\. 24hr x 365 day @ 1 veh per minute would be 525,949 vehicles per year.

Disclaimer: I work for a Tesla competitor, any opinions are solely my own.

