Tesla Model 3 Ramp Up Aims to Crush BMW and Mercedes
Tesla Model 3 Ramp Up Aims to Crush BMW and Mercedes
Elon Musk rewrites the playbook for launching a new car.
by Tom Randall March 26, 2017, 11:00 PM PDT
One year ago this week, Elon Musk took to a stage to
unveil his most important vehicle yet: the $35,000 Model 3. The electric
five-seater accelerates as fast as the the best-selling luxury sport sedans in
America—the BMW 3 Series and the Mercedes C Class—and costs about the same.
The value proposition was the best ever for an electric
car, and the crowd ate it up.
But none of his pronouncements that night were as
audacious as those to come. After taking in about 400,000 deposits at $1,000 a
piece, Musk ramped up production plans. And then he ramped them up some more.
Now, three months from the official start of production, the billionaire Tesla
CEO seems to think he can not only match the performance of those top luxury
brands, but outsell them in the U.S., too—in just one year.
Tesla has a number of tricks in store for the Model 3
launch, but first it’s worth taking a moment to appreciate just how high Musk
has set the bar: With unusual specificity for an automaker, he disclosed
detailed production targets in a call with investors last month that begin to
paint us a picture.
First, Musk said the company is placing orders with
suppliers for “1,000 cars a week in July, 2,000 a week in August, and 4,000 a
week in September.” 1 Tesla then plans
to increase production to 5,000 cars a week by the end of the year, and 10,000
a week by the end of 2018. For context, the company is currently able to make
about 2,000 Model S and Model X cars a week.
Here’s what the Model 3 ramp begins to look like.
Tesla's production targets
For Musk to hit all of his targets, Tesla would need to
build about 430,000 Model 3s by the end of next year. That’s more than all of
the all-electric cars sold planet-wide last year. The rollout will begin in
California and move east, focusing on U.S. reservation holders. Even if half of
the Model 3 inventory shipped to other countries, 2 U.S. sales under Musk’s targets would outpace
the BMW 3 Series and the Mercedes C class—combined.
Another forecast Musk reiterated is that Tesla thinks it
can build 500,000 total cars next year. 3
Model S and Model X growth would continue, but at a slowing rate. The
chart below, as far as we can figure, is the ramp that Tesla is forecasting.
To sell that many $35,000 sedans in the U.S. “would be
absolutely unprecedented based on what we know about car markets today and how
people spend their dollars,” said Salim Morsy, electric car analyst at
Bloomberg New Energy Finance. “It could happen. I’m pretty sure it won’t.”
Virtually every Wall Street analyst agrees. Even the most
bullish among them don’t think Tesla can sell half a million electric cars next
year, and Musk has a long history of never setting a deadline that he’s likely
to keep. But it’s still important to understand the lofty targets Musk is
setting, and some of the crafty ways he’s trying to make it happen.
Rewriting the rules for a car launch
Tesla is redefining how cars are developed, built, sold,
and updated. Some of the tricks Musk plans to speed up the launch can only be
done once. Others may transform the automotive industry much like Tesla’s
over-the-air software updates. Here’s what we know:
Tesla is skipping “beta”—sort of. On Friday, Musk fired
off a barrage of 50 messages on Twitter while on a flight to Cape Canaveral,
Florida. Among them was a six-second video clip, the first glimpse of what he
calls a “release candidate” Model 3. The term is more typically used in the
software industry, referring to a final version that’s almost ready for public
release.
Musk is condensing the typical timeline for a new car. A
traditional auto manufacturer spends about six months testing a beta cars prior
to a rollout. Musk seems to have skipped a step, and is building test vehicles
using the same equipment line that will feed mass production. If that’s the
case—and this truly is a “release candidate”—then it implies that production is
on track. The car looks very much like the vehicles Musk showed a year ago, and
that fidelity to the original prototype will have helped keep engineers on schedule.
A standing army of testers. There’s tremendous demand for
the Model 3 among Tesla’s 30,000 employees—most of whom are probably unable to
afford the pricier Model S and Model X. Musk is putting that interest to use,
releasing the first several thousand Model 3s to employee reservation holders.
This is a huge advantage unique to the Model 3. As early
problems are identified, they can be fixed at the work site. If there’s a
hardware problem that requires a recall of the fleet—as happened with a seat
defect in the first 2,700 Model Xs—employees need only drive to work to have
them fixed. This means that even while Tesla shortens pre-launch testing, by
the time production ramps up to a wider audience, the Model 3 may have
nevertheless undergone more rigorous internal troubleshooting than most
cars.
Features are being stripped down. One of the primary
goals of last week’s Twitter barrage appears to be downplaying expectations for
new features. Musk said there will only be one display—the car’s 15-inch
touchscreen—with no additional gauges or heads-up-display projected at the
windshield.
Additionally, the dual-motor all-wheel drive, and high
performance versions of the Model 3 will be delayed for six to nine months to
keep the rollout simple. Musk’s stream of clues may have taken the place of a
second unveiling he had previously indicated would come by April. It looks like
the company decided to keep it simple, and there’s not much more to unveil.
It’s simpler to make. Musk has been making the case for
the last year that the Model 3 is designed for manufacturing efficiency. Steel
is used for some of the body instead of an all-aluminum build. The amount of
wiring in each car has been cut in half, from 3 kilometers worth in the Model S
to 1.5 kilometers in the Model 3. There’s one screen and one computer now
instead of two of each in the Model S. And there are no eccentric flourishes
like self-presenting door handles or falcon-wing doors.
Top-tier suppliers. Tesla also gets to pick from the best,
most reliable suppliers. When the carmaker first built the Model S, suppliers
assumed it would never sell more than 3,000 units and the company would
eventually go bankrupt, according to Musk. That’s changed. It “went from
basically getting like the worst team on second-tier suppliers to getting the
best team on first tier suppliers,” he said in February. “Really big
difference.”
Levers of Demand
If, against all odds, Tesla is actually able to produce
500,000 cars in 2018, there’s still the question of whether it will be able to
sustain that kind of demand, which would establish it as the leading U.S.
luxury car manufacturer.
Again, Tesla has some levers left to pull. The company
has never paid for television or print advertising. There will also be attention-grabbing
upgrades. In addition to the all-wheel drive and performance models, Musk said
last week that a crossover version of the Model 3, called the Model Y, will be
coming in the next few years. Given U.S. preferences, that’s likely to be Tesla’s
most popular car yet, and it's a good strategy to first establish the scale of
a mass-market manufacturer before releasing it. And of course, there is the
last big mystery...
How far Tesla is going with Autopilot for the launch? In
October, Musk set some wild timelines for full self-driving capabilities in the
Tesla fleet. The company upgraded the hardware suite of its full line-up of
cars to eight surround cameras, 12 ultrasonic sensors, a forward radar, and a
massively powerful new computer. It was all the hardware that will be needed
for driverless transport, he said. By the end of 2017, Musk said, he hoped to
drive coast to coast without any driver interaction.
Tesla immediately started charging new customers an extra
$3,000 for an option called “Full Self-Driving Capability.” However, the
software hasn’t been released that would take advantage of it, and to date, the
pricey option adds no new functionality to the normal “Enhanced Autopilot”
features.
Musk has dropped a number of hints that those features
will start being available around the launch of the Model 3. In January, I
asked him at what point Full Self-Driving Capability will depart from Enhanced
Autopilot features. His response, via Twitter: “3 months maybe, 6 months
definitely.”
Six months would coincide with the July launch. As Musk
wrote last week, when explaining why a heads-up display would be unnecessary:
Follow
Elon Musk ✔ @elonmusk
@arctechinc The more autonomous a car is, the less dash
info you need. How often do you look at the instrument panel when being driven
in a taxi?
7:47 AM - 24 Mar 2017
93 93
Retweets 571 571 likes
It’s possible that whatever Tesla has planned for
self-driving features will be delayed. The company has had a slog over the past
few months getting its new Enhanced Autopilot hardware suite to match the
performance of the old Autopilot.
But it’s also possible the Model 3 will be the first car
designed from scratch for automation—navigating city streets, responding to
stop signs and stop lights, possibly even making its own turns. Musk is now engaging
in a bit of what he calls “anti-selling” on Twitter, downplaying features that
will be unique to the Model 3 as he tries to convert some reservation holders
to the more expensive Model S.
Differentiating the two classes of vehicle will be
important going forward. But with Autopilot the entire Tesla lineup may be
headed for a launch upgrade.
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