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

July 7, 2017

Friday is a big day for the 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.

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