The Global Implications of the Model 3 Release
The Tesla Model 3 is finally here! The battery is powers the automobile from 0-60 mph time in under six seconds, it boasts a range of 215 miles, it’s packed with tech, it’s stylish, and a bargain if Tesla can deliver it at the $27,500 base price Musk promises you’ll pay after the federal tax credit. However, there is a good amount of risk involved as the company is putting all their hopes on the Model 3. Tesla, which has never had a profitable year “[has] to make sure that they make a profit,” says Rebecca Lindland, a senior analyst at Kelley Blue Book. If not, the company could be dire conditions.
Also, the $7,500 federal tax credit that pushes the base price of the Model 3 below $30,000 won’t last forever. It only applies to the first 200,000 electric vehicles a manufacturer sells in the US. With over 100k orders already listed, the credit is due to expire before the first batch of customers receives their car.
A day after announcing the listing for the Model 3, Saudi Arabia’s crown prince announced that the country will be weaning off oil and diversifying their investments. They sold a portion of their stake in their state oil company and will invest over 2 trillion dollars in the global market. The money invested will provide a lot of power as the 2 trillion could purchase google, apple, as well as Berkshire Hathaway and Nike, and still have money left over
Tesla’s Business Strategy
“The strategy of Tesla is to enter at the high end of the market, where customers are prepared to pay a premium, and then drive down market as fast as possible to higher unit volume and lower prices with each successive model,” says the founders. Thirteen years after Eberhard and Tarpenning founded the company, Tesla remains firmly entrenched in step one of that process. Its cars are the best on the market, but they have only gotten more expensive over the years. Also, while being in business for over a decade, they have only captured a small market share. To put Tesla’s market share into perspective, the company sold 50,580 cars last year. General Motors moves that many in a single weekend.
But, with battery production at the Gigafactory in Nevada beginning later this year, they may be able to finally drive down the price of their product and capture a bigger share of the market. The battery accounts for one-third of the price of the car. But the costs are plummeting. Between 2010 and 2015, the average cost per kilowatt hour (kWh) dropped 65 percent, from $1,000 to $350, according to a recent report from Bloomberg New Energy Finance. “By 2022,” the report says, “the unsubsidized total cost of ownership of [battery electric vehicles] will fall below that of an internal combustion engine vehicle.”