Ok, maybe A8/7-series was too far. Maybe A6/5-series? My dad has a 5 series and it is no more luxurious than a Model S (unless you equate having 1,000 buttons with cryptic icons on them with luxury). Per your post size doesn't matter so then why do the A6 and 5-series exist? For your money you're pretty much only getting a larger vehicle. Very recently the mid-size cars are a bit quicker than the smaller ones but that hasn't been true in the past yet the mid-size cars have been around for awhile.
Model S is not not competitor for 7-series/A8. Those vehicles come standard with lots of features but the main reason is backseat.
5-series can be spec'd to be pretty much identical to 7-series (except rear seat comfort, champagne refrigerator, reclining multi-adjustable electric seats with footrest etc, monitors, remote, 4-zone climate, curtains etc etc etc.
But 5-series standard equipment is much less than Model S standard equipment. This is also why 5-series costs less. Yes it has automatic and yes it has dual climate control, but not electric seats nor navigation. No adaptive cruise control and no keyless entry. This makes 5-series base model more mid-class friendly.
Model S standard equipment is way more than 5-series base model. If we spec up 5-series to base Model S, 5-series will cost more.
Performance is only one specification when people choose vehicles. And there is a sweet spot. For BMW-s they set it to around *30* model (number before for series and letters after for engine/drivetrain, for example 530xd as 5-series with AWD, diesel). This is the sweetest spot. If we look at the numbers, that's around 6-second acceleration. Anything more is not really important for good driving dynamics.
For smaller series (1,2,3,4) Sweet spot goes down from *30* down to *20*. Most popular 3-series vehicles are 320d and 320i (this is EU specific, in US range of models is absurdly limited, CH also). This is around 7-second acceleration. Majority is not ready to pay more for more performance. And this is reasonable. Otherwise people tend to prefer higher series (330* costs more than 520*, 520* has around 8-second acceleration). This is why people don't buy Camrys and Corollas with V8 engines.
And this also mirrors for all other car manufacturers in the world. There is a sweet spot for passenger vehicles. The cheaper the vehicle the less performance is expected and preferred on average.
Therefore this preference will also continue in EV world. That includes Tesla Model 3.
Most people will not pay significantly more for performance if it is below 7-seconds.
And, as we already know, Model 3 base model will have much better results than 7-seconds.
Therefore very very FEW will consider higher battery capacity model due to performance.
And even less will consider highest performer. Less than on Tesla Model S and X (as those are bigger, more expensive vehicles, on average, people expect more performance out of it, this is why 85-90D models are very common, while P**D models are not).
Model 3 will have more customers on the low spec range, opposite what happens with Model X. This is why very weak Model X models are not even offered. Model S is slightly more distributed, with some choosing 60 models (as there is no real competition to fill the BMW 3-series sized EV demand, aka Model3). Model S 60 models will be less popular next year. Tesla is already ready today (they don't offer 60 packs any more). Damn they are smart.