Coming Soon: A Tesla for Everyone

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Back in May, I wrote about a certain Romanian financial analyst named Zoltan Ban and his take on Tesla:

…Tesla on the other hand is limited in terms of room to grow. Its current product line is literally tailored to the 1%, given that its model S sells for about $100,000 on average once all options are factored in on top of the base price. In the U.S., where Tesla currently sells most of its cars, this means than only about three million households make up its potential consumer base. Going worldwide would expand that base to over ten million households. The model E, which is supposed to hit the markets in 2016, is going to sell for far less, perhaps as low as $35,000 (base price). However, even in this price range the potential market, while much larger, is not a growing one by any means. It would still cater mainly to households than earn over $100,000 per year and the market in this range is already heavily saturated with options; including the ones coming from the Mercedes C Class line, which has a base price of $36,000.

Zoltan is right that there is more money at lower economic levels.  Which is why Toyota sells more Corollas than Lexi (“Lexuses”seemed a bit over-complex).  But later in the article he positions Renault as a model of the future, which leaves him open to…criticism.  I was thinking “ridicule.”

I thought back to that post when I got to this one about the “new Tesla.”  No not the SUV, the low-priced one.  Last month Tesla started teasing us with more details about the new EV.  GreenCarReport.com said:

Speaking to Chris Porritt, Tesla’s vice-president of engineering, Autocar reports the new Tesla will have “realistic” pricing next to its more established rivals.

That pricing does depend on how far Tesla can bring down the price of the car’s lithium-ion batteries–though Porritt says the planned ‘Gigafactory’ will make battery manufacturing “more cost-effective”.

To keep costs down, the new electric sedan will also be constructed from “appropriate materials”.

The car will sit on its own platform–around 20 percent smaller than the Model S–and widespread use of steel is more likely than the Model S’s all-aluminum construction. Autocar does suggest it’s likely to use bonding and rivets in its construction though, in lieu of heavy welds.

So Tesla announces a lower price–notice no one from Tesla has talked about “economy” or “entry-level” sedan to compete with the Merc’s and Bimmers sitting in the mid-$30’s to low-$40k range.  Good.

Their experience with more expensive cars has given them the institutional knowledge on how to produce a better vehicle, even a downmarket one.  Good.

By the time the new vehicle is launched, the odds are good that the battery pack will come from the new Gigafactory.  Which means substantially lower battery and production costs.  Good.

Also, the Tesla supercharger network will be more developed, with more places for all Teslas to recharge.  Good.

Manufacturing problems and bugs will be more under control.  Good.

All of these improvements set the stage to continually move downward, where there is more money AND a higher chance to screw up your brand with shoddy products and service.  But I think I said that before:

Let’s say it takes 7 years.  By that time they’ll have a solid brand and a nationwide network of charging stations.  They’ll have time to properly develop and deploy new battery technology and the economies of scale to produce them cheaper…the brand will be strong; one that I believe would get buyers who have previously owned EVs as well as those moving to an EV.  You can buy a Toyota minicar; or you can buy a Mini.  Sure, they’re both high mileage 4-bangers; but which one has the brand cachet?

In a world where your choice is between Dascia and Tesla, you betcha the winner is Tesla.

So, once this new Tesla is out and on the market, what is keeping them from moving even further down, and embracing the households that are probably thinking “if they ever make one I can afford, I’ll buy it”?

Nothing.

By the way, you’ve got to see this Renault Dacia that Zoltan swears is the future…I even included the EV variant:

The music alone makes me want to drive a stake through my ears.

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Sebastian James

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