Tesla and the Model 3

July 31, 2017

At the beginning of the summer, 30 BERC members had the pleasure of touring the Tesla factory in Fremont. Due to a strict non-disclosure agreement, I cannot include specifics about what we saw. Suffice it to say, Tesla is doing very impressively as an electric car manufacturer.

If you follow Tesla to any capacity, you have undoubtedly heard of the “master plan” – a plan for Tesla’s successful wide-scale adoption laid out by Elon Musk over 10 years ago. If you know about this plan, then you also know why this moment in Tesla history is the most critical of the past decade. Everything to this point has been done to pave the way for the Model 3.

Specifically, the “master plan” was put forth by Elon Musk as a way to overcome the insurmountable barrier to entry for a startup electric car company. There essentially hasn’t been a new successful car start-up in the last 90 years (Chrysler in 1925), and so there is no precedent for how to enter the market.

Musk’s plan is threefold:

  1. Build up the identity of Tesla’s brand with a crazy expensive, awesome, all-electric sports car.
  2. Scale up production and introduce a more reasonably priced option for the upper-middle class.
  3. Massively scale up production with a revolutionary option that can provide reasonable range and performance at an extremely reasonable cost (~$35,000).

To borrow a cartoon graphic from a WaitButWhy blog post on this topicthe plan is schematically shown in the figure below. Step 1 was clearly the part played by the Tesla Roadster, which was a low-volume, high-priced option appealing to a very small portion of the car market. As stated in the Model 3 releaseMusk points out that Part 1 was necessary because new technology requires multiple iterations and economies of scale before making great and affordable products. In Musk’s words, “before the Roadster, people thought electric cars would be slow and ugly.” The transition here was clearly about reformulating how we think about electric cars, and they certainly got the industry’s attention. According to Musk’s pitch during the Model 3 release, Bob Lux (former vice President of GM) credits the Roadster as the motivation for starting the Chevy Volt program, which subsequently led to the Nissan Leaf program – the world’s all-time best-selling electric car as of the end of last year.


The answers to Step 2 of the master plan (mid-volume, mid-high price) were the Model S (a four-door sedan) and the Model X (an SUV with falcon wing doors).  Allowing for two options at this step diversifies the way in which they can provide for the middle-to-high range of options. While these cars have had their fair share of problemsthe Model S and Model X demonstrated Tesla’s early ability to scale up its business and justify economies of scale. By the end of 2016, the Tesla Model S was the second all-time most sold electric car in the world.

So here we are now. The entire plan of Tesla has been to get to this point – the Model 3. It is likely that the successes/failures over the next two years will be looked back on for years to come. The specs on the Model 3 are now available:

  • 0-60 in less than 6 seconds
  • 220 miles per charge minimum
  • Autopilot hardware (don’t need to purchase hardware, software is downloadable in the future);
  • Fits 5 people comfortably
  • On-board charger can adapt to any country’s voltage and includes supercharging capacity (without any upgrades.)
  • You can fit a 7-foot-long surfboard inside

By the end of the Model 3 announcement ceremony in March 2017, a total of 115,000 pre-orders had been placed for the Model 3 (placed in just 24 hours). People are now paying close attention to how things play out between now and the end of 2018 (when many of the Model 3’s are scheduled to be delivered).

One problem with people getting so excited about this, in my opinion, is that it really is the overall trajectory that is going to be the story – not the week-to-week production updates that are routinely reported in the news. I understand that routine media updates are common in a situation this exciting, but factory problems reported on a weekly basis seem overkill for the average consumer.

As a graduate student on a graduate student stipend in a city with reasonable public transportation, I am not looking to buy a car this year.  As an advocate for clean and responsible energy usage, I am excited to purchase an electric car at some point in the future.  Given the dire need to transform our transportation system, we need companies like Tesla to break through the legacy car sales market and bring us into the 21st century. We owe it to Tesla to be patient with factory setbacks. Tesla is uniquely positioned to bring us into a large scale electrified transportation system, which we can all benefit from.