Tesla has taken in well over 300,000 preorders since it unveiled the mass-market Model 3 vehicle just about a week ago.
That’s epic, and the frenzy to get in on the latest Tesla — at $1,000 a pop, and with a potential wait of several years before your car can be delivered — has led to some hyperventilating about what the electric-car maker has accomplished.
Yes, 325,000 deposits on an as-yet-constructed automobile is unprecedented in the auto industry. It might be unprecedented in any industry. (The only thing I can think of that comes close would be that time Led Zeppelin broke the internet when the band staged a one-off reunion in 2007, and seemingly every music fan on earth wanted a ticket.)
Tesla has every right to celebrate, and possibly panic. The carmaker so far has built 50,000 cars in a year. In 2016 it is aiming for between 80,000 and 90,000, but it isn’t off to a good start. And those 325,000 Model 3 preorders, and counting, represent about 200,000 more Teslas than are on the road globally.
But there’s a bigger problem than not being able to build the Model 3. Tesla may have repeated a mistake it made before, just on a much larger scale.
Fooled you once
When the Model S sedan launched in 2012, it had been under development for quite a while, and it had been designed and engineered in a world that had seen SUVs fall out of favour. The hangover of gas at $4 a gallon in the US was still fresh. It wasn’t clear then that SUVs would stage a comeback.
But stage a comeback they did, persuading many buyers to return to these most American of vehicles. Tesla had always planned to create a vehicle with more utility, having unveiled the Model X in 2012 (but not launching it until 2015). However, for three years, as SUV sales bounced back robustly, and it started to become obvious that the family sedan might be in terminal decline, Tesla wasn’t selling a ute.
All-wheel-drive was added to the Model S in October of 2014, but that was mainly to make the sedan more appealing to customers in the US Northeast and northern Europe.
With the Model 3, Tesla has indicated that the vehicle is actually a platform, a base on which other types of cars and trucks can be constructed.
But the 3 unveiling mirrors Tesla’s past: The original two-seat Roadster was followed by a large four-door sedan, and that sedan has been followed by a smaller version.
Given the state of the US market especially — and for now, the US is largely where Tesla’s sales are concentrated — it might have made more sense to skip the midsize sedan version of the 3 and roll out a compact SUV as the mass-market product.
In theory, if Tesla’s platforming strategy works, it shouldn’t make that much of difference: An SUV or crossover could be built of the same underpinnings as the Model 3 sedan.
But the optics aren’t quite right, and it makes matters worse that Tesla just launched the Model X, whose birth was difficult but whose arrival shows that Tesla can create a spectacular vehicle. That’s a tough act to follow.
The problems keep coming
There’s another problem: The Model 3 preorder customers won’t be able to configure their vehicle for some time. It makes sense that Tesla will have between now and 2017 or 2018 to develop a Model 3 crossover, and many customers may choose the truck over the car.
But Tesla may only be able to execute on a passenger-car design. Model S production, for a $100,000 luxury sedan, has come along nicely; Model S made up the bulk of the nearly 15,000 vehicles than Tesla delivered in the first quarter of 2016.
Model X is another story. Production is seriously lagging behind with this vehicle, as Tesla works through what it rather melodramatically described as its “hubris” in making the X overly complicated.
Tesla should be able to build just about any type of vehicle at this point. It has abundant excess production capacity at its plant in California; electric cars are simpler to assemble than gas-powered ones; and this isn’t exactly experimental particle physics we’re talking about here. Traditional automakers build everything from luxury sedans to big pickup trucks without breaking a sweat.
I knew we were going to see a sedan version of the Model 3 first, but I cringed slightly when it actually appeared. Not because it looked bad — it’s actually very cool-looking — but because I just knew it was the wrong vehicle for the market.
It gets worse
The situation could be worse in 2017, when the first Model 3’s are supposed to hit the streets. Fiat Chrysler Automobiles CEO Sergio Marchionne has argued that sedans are finished and the market has made a permanent structural shift to SUVs and crossovers.
Tesla could wind up delivering the Model 3 sedan to a limited market of buyers who want Teslas, while the larger market wants crossovers and won’t want to wait for Tesla to figure out how to build one that it can sell for $35,000 (the Model X, for what it’s worth, arrived with a price tag well north of $100,000).
I’m not sure this is something Tesla can easily correct. First impressions are important, and though the Model 3 could become a family of vehicles, the first editions — the ones that drove the massive preorders — were preproduction sedans. The company may have no choice but to follow through, and the challenge there will be to make sure that a small SUV is in the mix. Which could be tricky if Tesla’s production problems continue.
There is a silver lining. The Model X arrived late and was beset with glitches, from the exotic falcon-wing doors to the sculptural back seats. CEO Elon Musk admits that Tesla probably shouldn’t have built it. But in the flesh, it’s a fantastic car — a game-changing crossover.
The same could be true of a Model 3 SUV. But I’d genuinely like to see Tesla put a design in front of us. And they might. Musk has hinted that the Model 3 unveiling will be a two-part event. Part one is history. Now we can look forward to part two — and avoiding mistakes of the past.
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