The unveiling of the Tesla Model 3 was a big moment not only for Tesla but also for the entire electric car industry. Here’s why; while the hugely popular Model S started at $70,000 and the 2016 Model X starts at $80,000 (but can go over a $100K), the Model 3 is slated to start at only $35,000.
Tesla Model 3 is the company’s latest entrant into the electric auto industry; it is also the first step into making a truly mass-market electric car. This is huge and represents a significant shift for the industry. Experts are already predicting that in a few years time, perhaps by 2020, electric vehicles will have gone mainstream and will be cheaper than some gasoline-powered cars.
If you doubt this, consider the fact that in March of 2016, tens of thousands of people had already started making reservations for the Model 3 before they had even laid eyes on it. To make a reservation for a Tesla Model 3, you had to pay a refundable $1,000. Just 24 hours after the March 31st unveiling, over 180,000 advanced orders had been placed. A week after the unveiling, this figure had gone up to 325,000, or $14 billion in sales. Compare this to the Model S that sold just 107,000 units by the end of 2015.
The age of electric cars has arrived. It will not be long before everyone from Silicon Valley billionaires to the local football coach is seating behind the steering wheel of a fully electric vehicle, be it a Tesla or any other brand.
How Tesla Got Here: A Brief History
In 2013, Tesla wowed the auto world when Elon Musk announced that the Model S had received a perfect safety rating from the NHTSA (National Highway Traffic Safety Administration). Only a handful of cars, around 1 percent, have ever received such a rating. However, this was just another indication of the excellence culture Elon Musk was developing at Tesla. Combine this culture with the vision and technological skills of the engineers and you have a company that has been destined for greatness right from the start.
Tesla Motors was incorporated into a company in 2003 and faced a rough start in the first few years of operation. At some point, things got so bad that the company faced the threat of bankruptcy, getting enough financing just in time to get back up to shape.
When Elon Musk took over as the CEO in October 2008, he had to fire a quarter of the company’s workforce to streamline its operations and stay above water.
Thing started picking up with the launch of the first electric car in 2008, the Tesla Roadster. It was the beginning of Musk’s vision of creating a powerful but affordable mass-market electric vehicle. The Roadster was not perfect or even close to perfect. They had to recall 75 percent of all Roadsters sold in the period between March 2008 and April 2009. However, having invested over $50 million of his money in Tesla, Elon Musk was not about to throw in the towel. He got down to working on the Model S, the product that would finally set Tesla on the path to success. With a low-interest government loan of $465 million, the Model S design and manufacturing kicked off.
The Model S was launched in June 2012 and had sold over 100,000 units by the end of 2015. The many imperfections of the Roadster were absent in the Model S, even earning itself a perfect 5-star rating from the NHTSA. This was mostly thanks to Elon Musk’s design approach of safety first.
Since the Model S was launched, it is has been a marathon growth for the company and its CEO. Instead of firing employees, they are now on a hiring streak, with the staff count as at 2015 being 13,058. Tesla Model X, which is more expensive than the Model S, was unveiled in 2015 and has already sold several thousand units. With the fourth electric car from Tesla, the Model 3, Elon Musk has finally gotten close to his initial dream; of creating an affordable electric vehicle.
When people remember the Tesla Model 3, they will remember it as the key that opened the world of electric vehicles to everyone. It will be the car that, just like Ford’s Model T in 1908, spurred a new auto revolution.
After all the lows and recent highs of Tesla Motors, to which direction do they blaze to next?
Tesla’s Future: Model 3 and Beyond
It is worth emphasizing just how big of a turning point the Model 3 is. The Model S and X were excellent cars, blowing past any and all expectations. However, are expensive, making them somewhat of niche vehicles that would have never advanced the electronic vehicle industry. With the Model 3, the future has begun, and Tesla is at the wheel.
Responding the exceptionally high demand for the Model S, Model X, and Model 3 electric cars, the company announced that it would build half a million electric car units by 2018, a full two years ahead of planned schedule. It intended to produce double that by 2020. The Gigafactory in Nevada, already under construction, will help cope with the ramped up schedule.
This is still a small proportion compared to the number of cars traditional companies sell per year. For example, Ford sold almost 800,000 F-Series pickups in the United States in 2015 only. However, it is an indication of the confidence the company, and in particular, Elon Musk has in the future of the electronic vehicle industry. You could say that this confidence is because the company itself is driving history, especially with its latest Model 3.
The Model 3 is a big first step, what will come after it is even more important in defining this emerging industry. It is highly likely that we will not see the announcement of a new electric car from Tesla anytime soon. They might wait to see the public response to the Model 3, which is slated to start shipping at the end of 2017.
Tesla’s future is not only tied to its shareholders’ wealth but also to the success of the overall electric vehicle industry. This is why the path forward from here matters so much.
Whatever happens, here are several possible directions Tesla Motors could take beyond Model 3.
- A wider range of mass market electric cars
As we have mentioned, Model 3 is just the beginning. It is expected to start at around $35,000 but might average out at $42,000 when you consider additional features. In terms of price, they really cannot go much lower than that while maintaining profitable margins. The average cost of a new car in the US is between $27,000 and $35,000. With time and as the technology gets better and cheaper, the price might even go below $30,000.
Instead, what we might see in the meantime is more variety. If sales of the Model 3 works out well, expect several more mass market models (and a few high-end ones) in the coming years. This will give consumers the ability to have more options.
2. Self-driving technology
Another area they are already getting into and are likely to develop is self-driving capability. All electric cars manufactured starting from September 2014 came with several autopilot features. These include a camera at the top of the windshield, a radar in the lower grill and location sensors in the rear and front bumpers of the car. These allow the vehicle to detect lane markings, road signs, pedestrians, obstacles and other vehicles on the road.
An additional package, costing $2,500, allows the Model S to drive and park hands-free. An update transmitted wirelessly in October 2015 allows Tesla cars to self-park even without the driver in the car.
There are reports that the Model 3 could feature even more radical self-driving technology. After announcing the Model 3, Elon Musk sent a cryptic Tweet saying that Part 2 of the unveiling was coming. Many experts speculated that he was referring to the car’s autonomous technology. Though Google is the leader in this field, Tesla seems to have more appetite for risk taking and might just be the first to make a truly autonomous mass market electric vehicle.
According to reports, they seem to have found a way to go autonomous at a fraction of the cost of Google’s autonomous system.
3. Entry into other products
Tesla is not just a car company. In 2015, it announced the production of home and industrial Powerwalls. A Powerwall is an energy-storage pack meant to encourage the use of alternative sources of energy such as solar and the wind. With his passion for clean energy, it is highly likely that Elon Musk will be just as dedicated to the energy side of the business as he is to the auto electric one.
The Impact of EVs: A World of Electric Vehicles
The launch of Model 3 means that electric vehicles or EVs are soon going to be a mainstream thing rather than a novelty reserved for the tech elites. So what will a world of electric vehicles look like? What will get better, what will get worse and what will stay the same?
One thing that many experts agree on is the improved road safety. The Model S and Model X are already regarded as some of the safest cars on the road today. Part of that is because of their exemplary build. One car with five passengers in it was in a severe 80-foot fall accident, but all passengers survived. However, another reason for the safety improvement is the lack of a gas engine. An electric car is less likely to catch fire, making it safer on the road and especially during car accidents. Safety will likely improve even more as self-driving technology gets better.
Another area that will be impacted heavily by electric cars is the environment. Some might argue that the electric vehicle is not any better than gasoline cars on the environment because the electricity they use is produced using fossil fuels. Others say that the environmental benefits far outweigh any negative impact. Here are a few of the environmental effects many people agree on:
- Cleaner urban air. Electric cars have little to no tailpipe emissions that can affect people’s health or damage the ozone layer.
- A drastic reduction in oil dependence since electric vehicles do not run on gas. The ripple effects of this would extend far and wide, even reaching political arenas. Bloomberg reports that this could result in a massive oil crises especially as the number of EVs on the road increases.
- Reduced urban noise and heat pollution. Electric cars do not have noisy pistons. Also, unlike the inefficient gasoline cars where most of the energy is wasted as heat, they use their electric power more efficiently resulting in less heat output.
The impact of electric cars will likely be eclipsed by the effects of self-driving technology. So while there may be many benefits (and a few bad ones) most people’s attention will be on autonomous driving. The combined effect of the two technologies will be huge. Fatal road accidents will become rarities; traffic jams will ease up, and the sharing economy might experience its biggest boost yet.
A Second Auto revolution
Model T, regarded as the first affordable automobile, was in many ways a revolutionary product. It opened up driving to the everyday person and laid a foundation for the rapid growth of the auto industry. More than a century later, Tesla has taken up the responsibility of ushering in the second auto revolution.
If the astronomical number of orders for the Model 3 is anything to go by, people are more than ready to welcome the next generation of cars. Even the United States government has shown its willingness to support both the electric and autonomous car industries. Those two reasons alone are enough to make the electric vehicle a success.
Elon Musk is blazing the way forward by producing electric cars that are practical, beautiful and with the Model 3, affordable. Other companies have made their own, albeit short reaching, attempts at building a great electric vehicle. In 2014, Tesla relinquished patents to its electronic vehicle technology. This could help other companies develop their car models and particularly improve battery technology.