Is Tesla Taking A HUGE Risk With The All-New Model 3 Or Does Musk Know Something NO ONE Else Does?

Actually - Elan Musk now knows something that we ALL should be able to realize - that there will be - within 2 years - a LOT of different choices in the EV market - several from mainline manufacturers. He does not have the money to refund a large portion of those advanced deposits. He cannot even hope to compete with their advantage of many more sales and service outlets - and he also cannot afford to support the "3" in the same warranty manner as he has with the Model S. Remember - people who buy entry level - also keep their cars longer and put more mileage on them. (They cannot afford the depreciation losses as easily). This means that they will get out of warranty - and the cost of that 200 mile tow to the nearest service center is going to be a real problem - when the customer has to pay for it.

Good points, Tom.

The way the Model 3 is being handled it seems incredibly risky. It will either be the greatest business move of all time or the biggest bust of all time.

Weak points. The reservations add up to half a billion, so actually the company could refund all of them with $3B in cash (Elon himself is worth $10B).

There is very little or no advantage in terms of service outlets for the most important markets. There are 8 service stations in the Bay Area, 9 in LA, 8 in New York. This is more than Lexus, Audi, or BMW. Oh, and Teslas require less service than normal cars.

A 200 mile tow would be an issue for 0.5-1% of customers (even for the Model 3), which honestly is a rounding error in terms of the overall business. In 2018 all major and minor markets will be covered, so you would really have to live in booniesville to not be able to get service within 50 miles.

THe points are not weak - San Jose Driver.
1 - Tesla has - over the last few years - repeatedly gone to refinance the company - by issuing more stock - dilating the value of the existing share holders - something that it hard for him to do. He cannot just loan the money to the company - most of his net worth is in STOCK of the Company - and selling it reduces his control.

2 - I live in an area where Ford has MORE service areas in a local New Jersey COUNTY - than Tesla has in the entire state - and that is the norm around the country. All he would need is a single recall - which would swamp "8" service areas in the NY area - And your numbers are wrong they have only 3 in New York State and 2 in New Jersey. I am not talking about auto body service.

3 - Two and Three hundred dollar tows would still be common in New Jersey where all the service centers are up north- And ALL of the authorized service centers in NY are in the Lower area Near NYC - A Tow from Syracuse to Westchester county PLUS the cost of getting there to pick up a vehicle after service is NOT cheap. THe idea that this would affect only a small percentage of the owners is NOT ESTABLISHED - and again - all you would need is a recall for a bad wire - to swamp the current service system. STILL - even if every car had a service area within 50 miles - that is still far from being competitive with GM or Ford - of Chrysler. AND - service can still be gotten for THOSE cars at many local service centers who can access the computer information AND reset the check engine light too - something TESLA has not allowed anyone to do but their own centers.

San Jose. What you laid out as Tesla's strategy is a niche marketing approach that is great for selling expensive "gotta have" second or third vehicles to the top 10% income households in only 3 of the wealthiest markets. Works for the Model S and X; for a while. The Euro premium brands around here have already set up satellite dealer service only shops to support those customers living 50 miles away from their showroom. So their new EVs will be hassle free. The Model 3 is supposed to be for the masses and it will compete with the Bolts, Volts, etc. that have service all over the place. That's going to be a lot harder.

@Vette The Model 3 will still be expensive until late 2018. The average selling price will be $45-50k based on initial surveys of options reservation holders are planning to get (with estimated prices). Your average Joe buying a base $35k base model is not going to be an early adopter like the people already on the list. By late 2018 there will be another 50 US service centers and more mobile service centers that can address most service items and issues in remote places. In the Bay Area they even started a trial of a mobile tire service that will come to you and resolve tire/wheel related issues within an hour--offloading the need to go to a service center.

I feel for people that live in remote areas, but I don't think it will be an issue by the time Model 3s start being delivered in massive numbers.

I don't know what's going on in Musk's mind, but I do wish him tremendous success with Tesla Motors. As much as I love my Audi Q5 "Dieselgate edition" SUV, I'm excited by the prospect of vehicles that are less expensive to buy and operate, which pollute the air (and those who breath it) a lot less. I look forward to the day when EVs are a no-brainer for virtually everyone.

Then it's a matter of cleaning up our power generation. In North America, we still get about 2/3 of our electricity from burning stuff.

You also have to include all the homes in northern states, particularly the midwest and northeast, where fuel oil (same as diesel) and natural gas are the heating sources. That's a huge pollution source that no one wants to take on least they start a revolution by forcing all those homes and businesses to change to less efficient and costly ($.23+/kwh) electric.

The cost of wind energy is already comparable to new coal or gas power plants at less than 5cents/KWh, and continues to improve with newer designs. GE is marching forward with new class of wind turbine with increasing power and lower cost (of building and maintenance), especially for offshore wind farms.

Here's hoping that the new administration has some wisdom to continue to promote this renewable source of energy and slowly move away from coal and fossil fuels.

The 2 links below show: (1) a long list of wind farms in the US, encouraging but (2) apparently not enough as compared to other countries/regions around the world

https://en.wikipedia.org/wiki/List_of_wind_farms_in_the_United_States
https://en.wikipedia.org/wiki/Wind_power_by_country

Henry N. Any mix of electric generation methods needs to have a huge portion of its capability in 24/7 plants (nuke, coal, gas, hydro). Wind and solar are not 24/7 and don't work on hot sultry nights or during nor'easters and other severe storms. The East coast doesn't have hydro except Quebec and environmentalists are blocking new transmission lines to get it where it is needed. Wind and solar have to be subsidized driving up power rates. I have solar with full net metering and get lots of checks for selling my excess. I still buy 1/2 my annual power from utilities. Windmills are being shut down as they cause health problems for nearby residents. Coastal windmill farms have been stopped by environmentalists (Kennedys) for spoiling their view and harming birds and fish. We are a long way from the vision you lay out with lots of hurdles to overcome.

The East Coast does have hydro, have you ever been to Tennessee? Wind already powers Northern Europe and is going bonkers in Texas. It is just a matter of a few years.

Tesla - while likely to be forever remembered as a true pioneer and trailblazer - is headed for total failure.

At the high end, most of the major brands have announced luxury EV's are on the way (and soon).

At the mainstream tier, the Chevy Bolt is just the first of many mid-level brands coming (albeit a bit late) to the party.

Where will this leave Tesla?? They are but a speck in the grand scheme of the auto industry. They do not have the resources or the clout to reign supreme over the established major players.

Thanks, Tesla. You did a supberb job ... in laying the groundwork for everyone else!

Except they already have the upper hand in EV manufacturing experience, a Silicon Valley innovation-based mindset, a network of stores with no annoying salespeople, a huge supercharger network that now covers all of US and Europe, the most advanced autonomous driving tech being sold today (including MB and Volvo which do not allow autopilot on the freeway) and vertical expansion with the Solar City purchase. All the other auto manufacturers are scrambling to catch up and it won't be easy. I like the Bolt, but it is still a low-volume compliance car that won't be able to compete with a Model 3. It will become obvious in a few years how behind they are.

Yes - indeed - Telsa in the end will be a blip on the radar that faded out. Tesla does not have the upper hand in production - they actually produce very few cars today - and a large Manufacturer of cars has the upper hand - GM and FORD will swat Tesla like a fly. Their sales model (no annoying salesmen) will be a failure in the general market where they have decided NOT TO compete. YOU can bet the dealers of other vehicles will - along with their far greater numbers - they will compete with other dealers of their own brand as well - and if TEsla attempts to maintain its no haggle policy - people will simply walk out of the door and go to another seller. ANd the failure to allow computer access to OWNERS of the vehicles - means you MUST return to them - even if only to reset the computers. Thank you - but they are trying to create a monopoly - something that will fail in the marketplace.

They are doing almost exactly what Apple did with computers. If it is a quality product, people will be willing to pay for it even though they can't haggle (which most people hate in the US anyway) or get extra discounts. The demand is already obvious, the biggest question is execution. Service is not going to be as much of a concern as an ICE car and they will eventually open up the platform to more body shops (already started doing that).

Tesla has problems delivering product in a timely fashion. If they can figure out how to deliver product on time they could become a huge player. They have something in Elon Musk that no other car maker has...a charismatic CEO who has the uncanny ability (somewhat like Steve Jobs) to turn ordinary presentations and product releases into almost theatrical events. The power of this can be seen in the almost 400k in preorders they got for the Model 3. These people put down a $1000 deposit so its not just people that signed up for some mailing list...I don't think any other car company could even get 400k people to sign up for a mailing list to be notified about a new car.

It's true Tesla had been late in their release of the S and X. Now they are ahead of schedule and you still don't like it ?

I guess I fail to see how the Model 3 is a huge risk. If anything, it's a "Hail Mary".

It's essentially a Model S type of vehicle taken down a few notches in price. If anything the second Tesla should have been a Model "3X" ("affordable" crossover) and the third one the Model 3. How the truly horrible Model X got the green light, I'll never know.

Perhaps because it is not truly horrible?! I agree with you, Tesla should tackle the compact crossover and pickup market sooner than later.

@vdiv It is truly horrible. The quality glitches are well documented and the reliability of the fancy doors is definitely suspect.

As a long time investor in Tesla and future Model 3 owner, I have confidence in Tesla pulling it off - like they always did before regardless of many challenges they faced. Call me whatever but will see who has the last laugh.

The reason for thus level of confidence and short development time ? Modelling and robotics. The Model S was designed from scratch and came out an instant hit. By year 3, it already was one of the best handling fullsize sedan out there, not to mention the quickest sedan money can buy. Now with a more experienced development team and advanced modelling software, most parameters can be predicted even before the car is built. Add advanced robotics to the manufacturing process, what you have is predictable and consistent results. There will be cars for testing to dial in some parameters but pulling the schedule should be seen as a positive. Stock price and recent cancellation announcement of the S60 reflect that confidence.

Another thing to take into consideration is that Musk also runs SpaceX, a young upstart that shows the incumbent Lockheed and Boeing a thing or two on rocket design. The Model 3 seems like an easy job in that regard.

The X was designed by modeling and it's had its share of issues that real world testing would have borne out.

The qualifying word for modeling is "advanced". Everyone uses modeling these days, what separates them is in the details and accuracy of the models.

The X admittedly had a whole bunch of problems, mostly due to complexity of several components, lack of experience and poor quality from the suppliers (Falcon doors, windshield, ...) which had been corrected without a recall or major rework. Besides these non-driving nuisances, the X is a marvelous vehicle to drive. It feels much livelier than other SUVs including the Cayenne and to some degree the smaller Macan.

The Model 3, on the other hand, is much simpler to build. It incorporates the hard lessons learned from the S and X, and the projects are now being managed by people with strong background in automotive engineering and production (Hochholdinger from Audi, Bell from Volvo), also Lattner, Autopilot Software from Apple. If there are serious risks to the Model 3, I expect these people would raise the alarms.

Elon is spreading himself and his capital sources too broadly across too many inspired but high risk ventures. Something has to give somewhere sometime. When his creditors reel him in he will have to consolidate his resources and concentrate his efforts to increase his chances of long term success.Would love to be wrong but can he keep this entertaining high wire act on much longer. Time will tell.

His take is that the various ventures are really part of one and he needs them all to make it happen, change the transportation paradigm.

@Vette The Model 3 will still be expensive until late 2018. The average selling price will be $45-50k based on initial surveys of options reservation holders are planning to get (with estimated prices). Your average Joe buying a base $35k base model is not going to be an early adopter like the people already on the list. By late 2018 there will be another 50 US service centers and more mobile service centers that can address most service items and issues in remote places. In the Bay Area they even started a trial of a mobile tire service that will come to you and resolve tire/wheel related issues within an hour--offloading the need to go to a service center.

I feel for people that live in remote areas, but I don't think it will be an issue by the time Model 3s start being delivered in massive numbers.