If you have even the slightest interest in Tesla Motors, here’s a fundamental question: What will the Model 3 cost?
No, not what does Tesla CEO Elon Musk say the Model 3 will cost, but what will the Model 3 actually cost?
Among those who believe the Model 3 will cost far more than the $35,000 Musk has promised is blogger Montana Sceptic who writes for Seeking Alpha (http://seekingalpha.com/). He convincingly argues that the base version will cost at least $45,000 (all figures in U.S. dollars).
Sceptics from Montana to Timbuktu have many reasons to doubt Musk. The one from Montana cites:
- the cost of capital Tesla needs to stay in business and bring the Model 3 to market;
- the cost of materials such as lithium hydroxide for batteries;
- the cost of growth, including the completion of the Gigafactory in Nevada and the expansion of the sales, distribution and support network around the world;
- and the challenge of breaking through the clutter to sell the Model 3 in an “intensely competitive” market. Yes, other global automakers are bringing Model 3 rivals to market now and in the future.
We also have Musk’s track record to ponder: “Reality: both the Model S and Model X both ended up costing much more than originally promised,” notes Montana.
To be clear, those who have put down refundable deposits on the Model 3 are not guaranteed a $35,000 price tag, nor are they even guaranteed a car when and if the Model 3 comes to the marketplace. As Tesla itself notes:
“While this Reservation (sic) secures the approximate delivery priority within your region, it does not constitute the purchase or order of a vehicle.”
Only after one makes a purchase agreement with Tesla will you have a legally binding order for a Model 3.
The world is filled with Musk acolytes and Tesla cheerleaders, and it is also filled with sceptics. The one from Montana also poses four other questions, every one of which is worth pondering whatever your position is on Tesla:
Can Tesla really accelerate production of the Model 3?
How much more money will Tesla need to begin building the Model 3?
What combination of “equity and debt” will be needed to keep Tesla in business and moving forward?
What residual value has Tesla promised its leasing partners?
These are legitimate and useful questions to ask and Montana Sceptic’s work is worth visiting for more details and analysis (you’ll need to subscribe to Seeking Alpha). The answers should determine whether or not you’re a Tesla believer or a sceptic.