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Is Tesla underestimating Model 3 demand?

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I would be very careful when talking about potential or gaining traction in Europe and any interpretation for future sales.

The markets where the Model S is selling the best are Norway, Netherlands and Denmark which all have big EV initiatives.

In addition the currency exchange rates really don't help Tesla as the prices have increased significantly over the last year. I remember when I made the Model S 70 price divided by 2 (assuming $35k Model 3) to get prices for Germany and it was like 36k, now it's 39k Euro. That means the Model 3 is almost 10000 Euro more expensive than a BMW 3 Series and you end up in the same price range as the new Mercedes E-Class
 
I would be very careful when talking about potential or gaining traction in Europe and any interpretation for future sales.

The markets where the Model S is selling the best are Norway, Netherlands and Denmark which all have big EV initiatives.

In addition the currency exchange rates really don't help Tesla as the prices have increased significantly over the last year. I remember when I made the Model S 70 price divided by 2 (assuming $35k Model 3) to get prices for Germany and it was like 36k, now it's 39k Euro. That means the Model 3 is almost 10000 Euro more expensive than a BMW 3 Series and you end up in the same price range as the new Mercedes E-Class

On the demand for Europe: Let's not get ahead of ourselves but let's consider a few things. For one, I really don't think that the full extent of the Dieselgate has unfolded yet. Incidentally there is a hacker congress (32C3) going on right now where a guy disassembled the VW software and determined - not in terms of rumours or gossip, but in actual software - how VW really doesn't care about the environment at all. Very interesting talk - have a look, it is in English (Link, skip first 15 minutes). I think this will give more and more people to think.

Secondly, we just now learned of driving restrictions in Rome & Milan (similar to what is going on in China). If you are modestly wealthy, you really don't want to be restricted in your driving, so considering an electric car is definitely in the books if that means you can actually use the car for what it was meant to be used for.

We always look into incentives and car prices. But if you are forbidden to drive a fuel burning car in certain places, it will take no time at all to convert to electric. It is amazing to me that there are still people buying Diesel cars if already a year ago Paris announced plan to close its city borders to Diesel cars by 2020. And Paris is not the only place that thinks of outright banning fuel burning - or at least Diesel cars.
 
The path to 350,000 Model 3 cars per year by 2020 isn't only a matter of demand and production. The important component that people never talk about is "delivery logistics". The current method of delivering Tesla vehicles is woefully inadequate for delivering 400K - 500K cars to customers per year. Tesla couldn't possibly open and staff that many service centers to prep and deliver cars between now and 2020. IMO Tesla will have to take on a national dealership partner to deliver 350K Model 3s per year. And I think I know who that could be. But this is a conversation that will have to wait until Tesla has more than 200,000 Model 3 deposits.

In 2015 Tesla will deliver 50,000 vehicles. If Tesla wants to deliver 500,000 vehicles/year in 2020, they will need 10X the number of service centers and staff to physically deliver that many cars. That's a lot of overhead. What is the likelihood that service centers can grow 10X in 5 years? Having a single national dealership partner who exclusively sells Tesla cars would be a huge asset, and would facilitate exponential growth. This partner could handle all of the low end Tesla vehicles, while Tesla showrooms would continue to educate consumers and sell their high end cars. I also believe that Model 3 will not be a build to order vehicle (after the signatures are delivered). Buyers will likely select from vehicles currently in the production cycle which closely match their desires. Production will be batched to reduce cost and improve efficiency.
 
I think Tesla is already considering phase 3 of growth but first they have to finish phase 2. Build the gigafactory and the ability to pump out 500k cars a year. Not an easy task for a startup car company.

They have built a production facility in Europe and they are talking about building one in China. I imagine those 2 will play a large part of phase 3.
 
Primary headwind in the USA is gas price. And the folks at OPEC are indicating they want to keep the price low "for their own good", it seems. To make Model 3 cool, owners will need to know they have a wide array of supercharger sites out there so they don't worry as much about off the beaten path travel. But selling Model 3 to a non-assimilated EV enthusiast will not be that easy. If you are a sales guy travelling 200+ miles a day to unknown locations or reacting to phone calls, not following the Tesla supercharger route there is concern that the expense of cool is lack of convenience of the gas station. Many BMW Model 3 series guys are reps, sale-oriented or similar job ilk. Who buys a Model 3 series from BMW just because? So many other good options out there. I really believe Tesla has to step up superchargers in the USA by at least triple by 2018 or face a limited market.

Speaking of GF - isn't the full-sized factory needed to reach 500,000 car-units per year? Since Panasonic is also building a new plant in Asia it would be likely that the backup plan if the full GF is not built is to have secondary sourcing (new Panasonic contract post-2017) from another plant in Asia which itself is supplying cells to other automakers as well.
 
Primary headwind in the USA is gas price. And the folks at OPEC are indicating they want to keep the price low "for their own good", it seems. To make Model 3 cool, owners will need to know they have a wide array of supercharger sites out there so they don't worry as much about off the beaten path travel. But selling Model 3 to a non-assimilated EV enthusiast will not be that easy. If you are a sales guy travelling 200+ miles a day to unknown locations or reacting to phone calls, not following the Tesla supercharger route there is concern that the expense of cool is lack of convenience of the gas station. Many BMW Model 3 series guys are reps, sale-oriented or similar job ilk. Who buys a Model 3 series from BMW just because? So many other good options out there. I really believe Tesla has to step up superchargers in the USA by at least triple by 2018 or face a limited market.

Speaking of GF - isn't the full-sized factory needed to reach 500,000 car-units per year? Since Panasonic is also building a new plant in Asia it would be likely that the backup plan if the full GF is not built is to have secondary sourcing (new Panasonic contract post-2017) from another plant in Asia which itself is supplying cells to other automakers as well.

Im on my 2nd 3 series (335d) and know quite a few people that own them, none of which fit your description. I've also owned a 5 series but prefer the 3 series. I drive bmw for now because the quality is superior vs Asian/American comparible cars and I'm willing to pay the premium, just as people will be willing to pay a small premium to drive a tesla model 3.
 
Im on my 2nd 3 series (335d) and know quite a few people that own them, none of which fit your description. I've also owned a 5 series but prefer the 3 series. I drive bmw for now because the quality is superior vs Asian/American comparible cars and I'm willing to pay the premium, just as people will be willing to pay a small premium to drive a tesla model 3.

I would agree. Here in the Bay Area and in SoCal there are tons of 3-series and A4s. And the vast majority are not driven by sales people covering >200miles per day. I would suspect the same for Mass, NY and NJ.
 
I would agree. Here in the Bay Area and in SoCal there are tons of 3-series and A4s. And the vast majority are not driven by sales people covering >200miles per day. I would suspect the same for Mass, NY and NJ.

+1 Agree - A4/3-Series are not just for sales people. Here in DK, a lot of people were switching from C-Klass/3-Series to Tesla Model S when the incentives were still available. Tesla was a bit more expensive but people switched.

I guess in the EU we will see quite a few of the C-Klass/3-Series/A4 people switch to Tesla and people on a Ford Mondeo, Passat, Skoda Octavia etc. not yet switching a lot as right now the difference between these two classes is essentially price / perceived level of "premiumness" or "sportiness" only. The point being: if you care enough about a car to "differentiate" yourself from the Mondeo/Opel/Oktavia people but don't want to spend 5-Series money, the 3-Series is good for you and then the Model 3 should be a perfect match.
 
I guess in the EU we will see quite a few of the C-Klass/3-Series/A4 people switch to Tesla and people on a Ford Mondeo, Passat, Skoda Octavia etc. not yet switching a lot as right now the difference between these two classes is essentially price / perceived level of "premiumness" or "sportiness" only. The point being: if you care enough about a car to "differentiate" yourself from the Mondeo/Opel/Oktavia people but don't want to spend 5-Series money, the 3-Series is good for you and then the Model 3 should be a perfect match.
But this is where the demand gets insane in my view. The Ford Mondeo, Passat, Skoda Octavia people probably will buy the Model 3. I can't even explain it fully but I can say that I drive a 2005 Scion Tc and a friend of mine drives a 2003 Chevy Silverado pickup as our commuter cars. We'd both probably be shopping for cars now. I'm sure he'd get another truck and I would probably be looking at a Subaru or Honda. But we are both waiting for the Model 3. I don't think our case is unique.
 
But this is where the demand gets insane in my view. The Ford Mondeo, Passat, Skoda Octavia people probably will buy the Model 3. I can't even explain it fully but I can say that I drive a 2005 Scion Tc and a friend of mine drives a 2003 Chevy Silverado pickup as our commuter cars. We'd both probably be shopping for cars now. I'm sure he'd get another truck and I would probably be looking at a Subaru or Honda. But we are both waiting for the Model 3. I don't think our case is unique.

I think there are quite a few people like you/your friend (or me for that matter). But also - let's face it - quite a few people who don't care / don't know and who will stick whatever the local dealer recommends. In my mind there is a (smaller) group of people like the A4/3-Series/C-Class who care enough about cars to buy "something special". Then there is a much(!) larger group of people in the Mondea/Passat class, that will probably be much more price sensitive/fuel price sensitive. Again, not everybody in that group but the majority. So I could see this go either way: if fuel stays cheap and we don't see a lot of inner city driving constraints, I believe a lot of people won't care about Model 3. If fuel gets more expensive and we see Diesel cars being kicked out of cities, I see huge, massive and overwhelming demand for Model 3. I currently think there is a 60/40% chance for the small model being the dominant for the next 3 to 5 years (and I honestly wish I will be wrong!)
 
On the demand for Europe: Let's not get ahead of ourselves but let's consider a few things. For one, I really don't think that the full extent of the Dieselgate has unfolded yet. Incidentally there is a hacker congress (32C3) going on right now where a guy disassembled the VW software and determined - not in terms of rumours or gossip, but in actual software - how VW really doesn't care about the environment at all. Very interesting talk - have a look, it is in English (Link, skip first 15 minutes). I think this will give more and more people to think.

Secondly, we just now learned of driving restrictions in Rome & Milan (similar to what is going on in China). If you are modestly wealthy, you really don't want to be restricted in your driving, so considering an electric car is definitely in the books if that means you can actually use the car for what it was meant to be used for.

We always look into incentives and car prices. But if you are forbidden to drive a fuel burning car in certain places, it will take no time at all to convert to electric. It is amazing to me that there are still people buying Diesel cars if already a year ago Paris announced plan to close its city borders to Diesel cars by 2020. And Paris is not the only place that thinks of outright banning fuel burning - or at least Diesel cars.
On the other hand we should not forget that in the end it's all politics and you won't make voters happy with certain actions. People in Germany are already a lot less enthusiastic about the Energiewende now that the feel the increased electricity costs in their pockets.

But this is where the demand gets insane in my view. The Ford Mondeo, Passat, Skoda Octavia people probably will buy the Model 3. I can't even explain it fully but I can say that I drive a 2005 Scion Tc and a friend of mine drives a 2003 Chevy Silverado pickup as our commuter cars. We'd both probably be shopping for cars now. I'm sure he'd get another truck and I would probably be looking at a Subaru or Honda. But we are both waiting for the Model 3. I don't think our case is unique.
US≠Europe

Those are completely different car and driving cultures, like tucks aren't a thing here at all on the other hand stations wagons are really popular.
Then we have Tesla and Elon Musk. Both aren't really popular here among your people. This whole SpaceX thing, which a lot of young Americans are really enthusiastic about... not a topic in my friend circle at all. So far most people who hand a bit more of an idea than just knoing Tesla was some American EV manufacturer, were people who could actually afford a Model S and probably looked into it because of that. But I actually don't know anyone who brought it.

...Then there is a much(!) larger group of people in the Mondea/Passat class, that will probably be much more price sensitive/fuel price sensitive. Again, not everybody in that group but the majority. So I could see this go either way: if fuel stays cheap and we don't see a lot of inner city driving constraints, I believe a lot of people won't care about Model 3. If fuel gets more expensive and we see Diesel cars being kicked out of cities, I see huge, massive and overwhelming demand for Model 3. I currently think there is a 60/40% chance for the small model being the dominant for the next 3 to 5 years (and I honestly wish I will be wrong!)
+1
The Topseller Mondeo is like 30000Euro with some options and 350000 if your really get all the stuff, same with a Octavia.

The Model 3 will start at almost 40k if we make the calculation from current Model S prices and assume $35k. That's with zero options. Price different of 10k and most likely even more once we see the Model 3 options is just really hard to justify.
 
The Topseller Mondeo is like 30000Euro with some options and 350000 if your really get all the stuff, same with a Octavia.

The Model 3 will start at almost 40k if we make the calculation from current Model S prices and assume $35k. That's with zero options. Price different of 10k and most likely even more once we see the Model 3 options is just really hard to justify.

I think there's one zero too many in bold above, but we get what you mean.

But I don't think the difference in price will be at all hard to justify in Europe, with fuel around 2 euros/liter. You'll certainly get a much better performing car, and cheaper to run, for that extra cost. Some people will stretch to do it, and even a couple of percent will be significant demand.
 
On the other hand we should not forget that in the end it's all politics and you won't make voters happy with certain actions. People in Germany are already a lot less enthusiastic about the Energiewende now that the feel the increased electricity costs in their pockets.


US≠Europe

Those are completely different car and driving cultures, like tucks aren't a thing here at all on the other hand stations wagons are really popular.
Then we have Tesla and Elon Musk. Both aren't really popular here among your people. This whole SpaceX thing, which a lot of young Americans are really enthusiastic about... not a topic in my friend circle at all. So far most people who hand a bit more of an idea than just knoing Tesla was some American EV manufacturer, were people who could actually afford a Model S and probably looked into it because of that. But I actually don't know anyone who brought it.


+1
The Topseller Mondeo is like 30000Euro with some options and 350000 if your really get all the stuff, same with a Octavia.

The Model 3 will start at almost 40k if we make the calculation from current Model S prices and assume $35k. That's with zero options. Price different of 10k and most likely even more once we see the Model 3 options is just really hard to justify.

OK, but you generalize too much ! And draw some invalid conclusions from your specific circle of friends.

1. Europe is NOT one monolithic market, or even one big blob of people even in a specific country. TSLA only needs 1 percent of the market is be significantly successful for TSLA.

2. 100 PC of a potential market does NOT make decisions on price alone. Quality, finish, handling, power, acceleration, overall technology etc ...besides design / looks will matter to all, to different levels on each factor.

3. Very few people in the broad US population know Elon Musk or Space X ( neither are household words), and a very, very insignificant percentage of those that do will buy a Model 3 based on Space X.

4. As marketers, global US corporations have been successful at marketing their brands and products and services and those that many Europeans ( including those in your circle of friends ) simply do not like or even despise. And, many of the US corporations ( with no Elon Musk type status or PR CEO at their companies ) also have had moderate success even with cosmetics and fragrance marketing in Europe.....heck even Budweiser sells and has significant revenues in Europe....as do high end US clothing brands, or accessory ( like high end luggage ) brands.

So, I believe a lot of your take on this subject is a personal viewpoint influenced by your small ( statistically speaking ) circle of friends . And, I am speaking here as guy who has had decades of experience in Fortune 100 global business and P & L management and with European marketing and sales teams, all done on a country specific, and segment by segment market in all/ each of the European countries .

1-2 pc of the market ( within 5 years of launch ) should be eminently doable for TSLA, with the right product in all its dimensions. And, particularly if leasing is attractively packaged and marketed, on a country specific basis.
 
Then we have Tesla and Elon Musk. Both aren't really popular here among your people. This whole SpaceX thing, which a lot of young Americans are really enthusiastic about... not a topic in my friend circle at all.

Germans were standing in line at the German Economics Ministry to hear Elon Musk speak a few short months ago. About half the questions were about SpaceX and Mars colonization. German Economics Minister Sigmar Gabriel mentioned that the Economics Ministry is not used to hosting a rock star reception.

Musk biggest applause came when he said (paraphrasing); life can not simply be solving one miserable problem after another, we must have something exciting to look forward to, a reason to get up in the morning.

Last time Elon spoke in Oslo the speech needed to be moved to a concert hall to accommodate demand.
 
Then we have Tesla and Elon Musk. Both aren't really popular here among your people. This whole SpaceX thing, which a lot of young Americans are really enthusiastic about... not a topic in my friend circle at all.

Watch this with them.

ORBCOMM-2 Full Launch Webcast - YouTube

Come back to the forum and share some new comments.

Happy New Year from the US!!!
 
I would put money on this (1M reservations by the time the first Model S rolls off the line). I have lost count of how many people that I've had conversations with this year, that have said something to the effect that the Model 3 is their next car. If Tesla doesn't mess up the design, the demand for it will be off the charts.

No way. The people who want a 35K-ish car cannot afford to have $5000 (or even $1000) tied up indefinitely to reserve a car.

I expect demand after production is proven to be significantly higher, but reservations will be, I think, significantly lower than what we see for the Model X, unless Global reservations, particularly in Europe, take up the slack for North America.
 
...

I expect demand after production is proven to be significantly higher, but reservations will be, I think, significantly lower than what we see for the Model X, ...

Do you mean that Model 3 reservations will be actually lower than Model X reservations (so somewhere under 30k reservations) when the car first starts delivery? Or that the reservation total will be higher, but less enthusiastic than would otherwise be expected?

Given $5k for a reservation (of course we don't know that's what they will charge - it's a figure we're using for this conversation), I expect significantly more than 30k people to put that down. I realize these reservations will mostly not be for a minimally configured car. I'm expecting the reserved cars to be more on the order of 50-70k with big battery, performance, and other options. It'll be sometime later, and I wouldn't be surprised if its a full year, that we start seeing $35k Model 3's being ordered and delivered.