As First Model 3 Rolls Off The Line, Can Tesla Sustain Momentum?

Jul 7, 2017
Originally published on July 7, 2017 12:19 pm

Friday is a big day for Tesla. The automaker's very first Model 3 will roll off the assembly line, the culmination of years of planning, engineering and hype.

Elon Musk, the company's co-founder and chief executive, has been promising an affordable long-range electric car meant for the masses. He first wrote about the dream vehicle in the company's not-so-secret Secret Plan in 2006.

And with a $35,000 price tag (and a $7,500 government rebate), the Model 3 is well within the reach of the new-car buyer. The Model 3 is expected to have a range of 215 miles per charge. Musk plans to hand over 30 vehicles to customers on July 28, ramping up to 1,500 in September.

But the real question for many is: Can Tesla and Musk pull off a mass-market success? Last month, Tesla sold about 4,400 cars total. While the company won't confirm exactly how many orders it has for the Model 3, it's thought that nearly half a million customers have signed up to be on the waiting list.

"Tesla has proven it can manufacture and market vehicles in some volume on an ongoing basis," says Jack Nerad with Kelley Blue Book. The automaker's recent success puts Tesla significantly ahead of most startup specialty vehicle manufacturers. "But now the rubber is going to hit the road in the form of the Tesla Model 3," Nerad says. "It's volume play."

Tesla plans to vastly scale up production, to 500,000 cars next year — more than the annual sales of Toyota Camrys.

A key to the future of Tesla is in building batteries. The company has invested billions in its battery Gigafactory in Nevada, and on Friday announced plans to install a massive lithium ion battery in Australia to help solve a local energy shortage.

With all of this going on, can Tesla sustain its momentum? Already, Tesla's lofty stock price has taken a hit, losing nearly 20 percent of its value after Musk reported disappointing sales of current models amid battery shortages. The company says it has resolved the battery issue.

Cost and production of batteries are still impediments to widespread acceptance of electric cars. Adoption of battery technology is unlikely without continued major government subsidies, which essentially "consigns batteries to a suboptimal solution," says Geoff Wardle with the Art Center College of Design.

Electric cars won't take off, he says, until batteries can hold more capacity and weigh less. That moment is "still a bit over the horizon," Wardle says.

Copyright 2017 NPR. To see more, visit http://www.npr.org/.

MARY LOUISE KELLY, HOST:

Big week this week for electric and hybrid cars. Volvo became the first automaker to commit to making all its models either electric or hybrid after the year 2019. And today, Tesla is rolling a new car off the assembly line, the Model 3. It's supposed to fulfill CEO Elon Musk's promised to make an affordable, long-range electric car. NPR's Sonari Glinton is on the line to help us work out whether this premise is hype or horsepower or something like that. Hey, Sonari.

SONARI GLINTON, BYLINE: Hey, Mary Louise.

KELLY: So this Model 3 is a sedan, I gather. Why is Tesla banking that a Model 3 sedan is what the world needs?

GLINTON: Well, the Model 3 is a stab at the mass market. It's an all-electric car. And it retails for $35,000 with about a $7,500 rebate. And that puts it well within the range of a new car buyer. The average new car is about $33,000. So it goes 215 miles. And that's a lot. Elon Musk plans to have about 30 vehicles by the end of the month, ramping up to about 1,500. And this is a really big bet.

KELLY: Yeah, no, absolutely. Well, and in terms of the numbers they're making, I'm going to have to ask you about scale because the goal here for Tesla is not just to persuade people they need to buy this electric car, it's to persuade a lot of people they need to buy this car, right?

GLINTON: Yeah, exactly. This car is very hype. And I think a lot of the other car companies can actually touch it. Last month, Tesla sold 4,400 cars. And now they're wanting the scale to produce about half a million. Now, to give you an idea...

KELLY: Ah.

GLINTON: ...Toyota sells about 450,000 Camrys. So it's doable. But that is hard. It's a hard task.

KELLY: It's a huge ramp-up, yeah.

GLINTON: Yeah, exactly. And so - and one of the problems is actually not whether or not they can build the cars but whether they can build the batteries quickly enough to go into the cars and produce batteries for a whole number of platforms.

KELLY: Well, can you tell yet, is it a good car? Have you had the chance to drive it?

GLINTON: Well, I have not had the chance to drive this car. And...

KELLY: Yet.

GLINTON: Though, I've - yet.

KELLY: We'll hope to get you in there soon, yeah.

GLINTON: Yes, though I've ridden in it. But, you know, Tesla has gotten a lot of praise for the quality of its cars, though sort of that long-term quality has sort of fallen off a little bit. And there's no telling how well a car company can do when it goes from selling 4,400 cars to selling, you know, tens of thousands of them in a month.

KELLY: What would it take for Tesla to consider this car a victory, a win? I mean, we've talked about trying to persuade people they need an electric car. What does Tesla have to do to pull this off and say, OK, we did it?

GLINTON: Well, one of the things about the car business is anybody can make one good car. But it's really can you make 20 different cars, you know, year after year? That is the hallmark of a really great carmaker. But Elon Musk is not just betting on cars, he's betting on the electrification of cars. He's betting on autonomous cars. He's betting on revolutionizing the dealer process. He's built this gigantic battery factory that wants to cheapen and change how we manufacture batteries.

Oh, and by the way, while he's trying to do all of this, General Motors already has a car on the road that's doing exactly what the Model 3 says it's going to do. And every other carmaker has plans for a full-on electric car coming sometime in the future. So it's not like this is a space without competition. But what Elon wants to do is blow things up and change the way we do things.

(SOUNDBITE OF LJONES'S "JAZZ TECHNICIAN")

KELLY: That's NPR's Sonari Glinton. Transcript provided by NPR, Copyright NPR.