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3 things we just learned from Elon Musk about Tesla’s Model 3

Tesla says Model S orders have taken a hit because some customers think the 3 is a new version. (May 4, 2017) (Sign up for our free video newsletter here http://bit.ly/2n6VKPR)

Investors and waiting customers were assured Wednesday that Tesla’s mid-market Model 3 electric sedan is set to start rolling off the assembly line in July as scheduled, and will reach volume production later in the year. Tesla Chief Executive Elon Musk and fellow executives had several other things to say about the car:

The price, with options: $42,000 to $45,500. Maybe.

Tesla’s base price for the Model 3 is $35,000. But who wants a base Model 3 when all that hot Tesla technology is available?

Musk said the “typical average” option premium in the auto industry is 20% to 30% over base. Head of Tesla global sales Jonathan McNeill said, “I think 20% is a fair number to use.”

The company has long talked about a mid-40s figure. But they haven’t committed to it. And that didn’t change Wednesday.

“I think it’s really guesswork at this point,” Musk said.

The wait could be long. Very long.

Having more customers than product available is not necessarily a bad problem to have — as long as customers are willing to wait and don’t go shopping elsewhere.

At least 375,000 customers have placed refundable $1,000 deposits to get in line for a Model 3, the company said last year. They stopped releasing wait-list numbers, although Musk said Wednesday that “our net reservations continue to climb week after week.”

But the company’s production guidance on Wednesday means a majority of those customers may have to wait years for the chance to buy the car.

In 2016, Musk and Tesla said it planned to produce 500,000 cars of all models by the end of 2018. The company said Wednesday it plans on making 5,000 cars a week “at some point this year” and 10,000 cars a week “at some point next year.”

In other words, total production of Models S, X and 3 could range between 260,000 and 520,000 cars in 2018.

If Tesla produces 100,000 Model S and Model X luxury cars in 2018, as it plans to do this year, the low-end estimate leaves 160,000 Model 3s.

So more than half of those who put down deposits could be waiting until 2019 or beyond to receive their automobiles.

Manufacturing is hard.

One way Tesla plans to keep Model 3 costs down is by packing the factory with cutting-edge software and automation.

The end result will be “the machine that builds the machine,” according to Musk. He has nicknamed this machine the “Alien Dreadnaught.”

No one outside the company knows what he’s talking about. But give him a break – if you were revolutionizing automobile manufacturing, you wouldn’t want your competitors peering through the windows.

One thing became clear on Wednesday, though — Musk is pulling back on his warp-speed implementation of the Alien Dreadnaught. Last year, he said 2017 would mark Version 0.5 of the Alien Dreadnaught, and that the full 1.0 version would hit in 2018.

Here’s what he said Wednesday:

“I think we'll be roughly comparable with the best high-volume vehicle production lines in the world. Better in some respects, a little worse in others. But roughly comparable. And then with some further iteration, I think it will probably be a little bit better than the next-best automotive production line.

“Then where things will really be a step change, I think, beyond any other auto manufacturer, will be the Model Y factory.”

The Model Y is a future crossover vehicle, currently in concept stage. Musk said to expect it by 2020.


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