Elon Musk's Great Model 3 Bait and Switch

  • Written by Zero Hedge
  • Published in Economics

The Tesla Model 3 was supposed to be the "entry-level" electric vehicle for the middle class, that "made it up in volume": leading up to the release of the Model 3, it was positioned as the people's EV that everybody could afford and that, once mass produced, would help Tesla generate cash and profits consistently. The car's relatively modest $35,000 price tag was heralded as one of its key selling points, low enough that Tesla could generate the volume needed to gain operating leverage from selling it to the masses. 

But as Elon Musk himself admitted this weekend on Twitter, selling a $35,000 Model 3 right now would cause Tesla to "lose money and die". 

With production, 1st you need achieve target rate & then smooth out flow to achieve target cost. Shipping min cost Model 3 right away wd cause Tesla to lose money & die. Need 3 to 6 months after 5k/wk to ship $35k Tesla & live.

— Elon Musk (@elonmusk)
May 21, 2018

So, instead of selling this mass-market vehicle, Tesla has focused on selling a more expensive version of the vehicle. A much, much more expensive version, in fact more than double the base price... and, if Elon Musk's Tweets this weekend are any indication, Tesla doesn’t have any near-term plans to start selling the vehicle at anything close to the $35,000 price tag that was initially promised anytime soon.

Instead, Musk was busy introducing yet another high priced variation of the Model 3, this time the dual motor, all wheel drive Model 3 that could run a price tag of just under $80,000.

Cost of all options, wheels, paint, etc is included (apart from Autopilot). Cost is $78k. About same as BMW M3, but 15% quicker & with better handling. Will beat anything in its class on the track.

— Elon Musk (@elonmusk)
May 20, 2018

As Bloomberg details, " Musk unveiled specifications for a faster and more powerful version of the Model 3 in a series of tweets over the weekend. It will cost $78,000, more than double the $35,000 base-model starting price discussed into the run-up before the electric car’s deliveries started last year. And that doesn’t include the Autopilot driver-assist feature."

The increasingly expensive configurations for the Model 3 are planned steps, if somewhat counterintuitive ones, toward Musk’s vision of Tesla Inc.as a mass-production player with vehicles affordable to a broader swath of buyers. The $78,000 sticker puts the electric sedan beyond reach of many consumers, and, by Musk’s own estimations, brings it closer to the realm of luxury cars.

Ever since the Model 3 has started being delivered, the price tag has done nothing but drift higher, fueling critics who have...

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