Model 3 Target Market

[Quant]

So, I love Elon and Tesla. Just like I loved Steve Jobs....I want to buy an X. However, I am not sure what I would do if I needed to travel from Austin or Dallas to some of the smaller ( non top 5) city in Texas.

And, in the same vein, I was wondering what folks under 30 , or even 35, who were in the market for a Model 3 ( when it is out in 2017 or 2018) would do, if they happend to live in an apartment complex or condo? How do they charge and how do they get to the smaller cities and back in a large swath of state like TX, IL, GA, CO etc. Same thing in most European countries or Canadian cities, IMO, just tripling or quadrupling the Supercharger network will not be sufficient to target a large enough market to sell 1-2 million, or even half a million cars a year, in the $35-$45K range.

These are not people,who are gonna be able to afford multiple cars, may not have a private charger access where they live and may need to drive over 300 miles round trip , say once a month. Also, for example, sales people who do not have company cars, for example.

I realize CA is covered quite well but for a Model 3 roll out, I think it would have to be at least a 40-45 state strategy, targetung at least 30-40 million potential candidates in the USA.

I am actually a NYer, but I do love Austin and was wondering what I would do, if I wanted to transition to TSLA, from my current vehicle. I currently drive a Benz and have only driven MB's for more than 20 years. And, I love them.

i am not in a position now ( single now) to have 2 cars ( used to have 4) , since I spend at least a third of my time traveling, internationally, for pleasure.

i missed investing in TSLA back when it was in the $80's , but I am long now, and considering adding to my position.

i do have some thoughts on what Elon and Co may be upto with their new race car industry hire, in terms of getting creative with the battery swap program, but I think that will not be scaleable for a Model 3 volume selling strategy.

So, I am wondering if any of you has any thoughts on my question? Thanks!

 

[eloder]

Well, apartment dwellers are able to have gas cars now. The Tesla Model S is the first electric car that's very realistically possible to own without access to your own private charger, and that becomes more and more true as the supercharger network kicks into gear. People will eventually have access to a city supercharger in a large number of big markets, and people in major cities are most likely to be apartment dwellers.

Millenial city dwellers (speaking very generically here) probably commute far less than the average person with a private charger. An affordable 200 mile range car could make charging an EV a weekly or biweekly occurrence for such a person, and I imagine it wouldn't be too hard to find two reasons to spend 20-60 minutes at a supercharger weekly when set in the proper location.

Another factor to consider is that millenials (again, very generic here) tend to be a bit more cash-strapped. Renting inside a city can very often be more expensive than a mortgage further away from town, but that fails to stay true once ICE commutes are factored in. However, a low-cost high-range EV would enable such a person to mortgage a cheaper suburban home or condo, increasing the chances of private charging without breaking the bank on gas bills.

In my own situation, I used to live near the city core and had no car--I didn't even have a bus pass for a year. I was able to walk to work and walk to all essential services with ease. Since then, I have moved out of that tiny 450 sq foot apartment, and now mortgage a condo 2.5x the size with a private garage, a charging station, and my mortgage payment is less than my monthly rent. I live a few miles away from the old address. I do spend a good bit more on transportation, but the low-cost smart ED I have on the way will be able to drop those costs back down substantially. Columbus is a pretty awesome city due to its low cost of housing, but I imagine some of urbanites in the larger cities may begin viewing home/condo ownership as a more viable option without a huge gas expense to worry about--suddenly moving 20/30 miles away doesn't seem like such a bad idea when it costs 2 cents per mile and you have little maintenance to worry about.

Urban dwellers also have a much bigger incentive to go electric for costs than do those outside cities. The maintenance and efficiency differences becomes substantially magnified when the majority of your driving is in the city.

One other thing you should also remember about millenials: a lot of us care about environmental issues. A pure EV has always been a dream of mine, even since driving a Prius back as a teenager; a big reason for my move away from my preferred urban environment was because the private garage would enable use of a low-cost low-range EV without any difficulties. A lot of studies have suggested that millenials still care about owning and driving cars, so when you add a lot of plusses to the economic factor of it, you'll see more and more people take the plunge with the Model 3 even in heavy urban situations.

 

[jhm]

I think it is far too early for Tesla to be worried about narrow demographic segments to try to maximize their addressable market. Pretty much anyone who is currently driving a sedan priced over $25k is an addressable market for the Model 3. This is not some low cost metro car for millenials who don't have moneymaking careers or kids yet. This is much more broad in every demographic dimension. This market is huge with lots of established car owners to win over. The important thing is not targeted a particular demographic segment, but simply delivering a wonderful car, a car that any Camry driver would be happy to own.

 

[SteveG3]

I think it is far too early for Tesla to be worried about narrow demographic segments to try to maximize their addressable market. Pretty much anyone who is currently driving a sedan priced over $25k is an addressable market for the Model 3. This is not some low cost metro car for millenials who don't have moneymaking careers or kids yet. This is much more broad in every demographic dimension. This market is huge with lots of established car owners to win over. The important thing is not targeted a particular demographic segment, but simply delivering a wonderful car, a car that any Camry driver would be happy to own.

Precisely. What's more, while it's conceivable this will change, in the past Tesla described the Gen 3 platform as having a sedan and a crossover vehicle. Given that there will be roughly 100K Model S and Model X sales per year when Fremont reaches full capacity around the year 2020 (I suspect more than that actually), this means Tesla needs demand of merely 200K Model 3 sedans worldwide and 200K Model 3 CUVs worldwide to reach 500K vehicles per year. While I don't think Tesla should ignore the need for charging in urban areas, I see that as a challenge to the adoption of EVs over ICE, but not a challenge to Tesla finding a market for it's cars. I would be very surprised if the world is not hungering for far more Gen 3 vehicles than Tesla will be able to produce.

 

[JohnSnowNW]

Some food for thought:

1. Not everyone in the US live in urban areas, in fact 20% or roughly 60,000,000 live in rural areas. Of this population 70% of them are home-owners...that's a whole lot of people that have access to power 24/7.

AND

In urban areas homeownership is almost 50%, and Suburban-Exurban ownership is 73%. So, as above...that's a lot of people with outlet access.


2. In urban areas there are many businesses that offer charging to employees...and this number will only increase.

3. Traveling is being made easier with hotels opting to install charging stations, not going to fit every need...but it's there.

4. Most people don't travel outside of 200 miles (round trip) on a regular basis, and if EV owners need to go somewhere that's more troublesome they can just rent a car.

 

[Quant]

Thanks eloader, Jhm, Steve, and John for your feedback and other thoughts.

1. I agree about the millennials and environmental considerations and caring decisions, and I am fully aware of the demo numbers in the USA, having been a analytics based global business manager for a long time. So, I agree with many of the points that were made.

2. However, I am not entirely sold on TSLA not having to think about all demographics very carefully upfront now, and developing a bottoms up approach to demand forecasting along with psychographics of each of the demos. For example, I think many women would have second and third thoughts about being caught ( whether that is a legitimate concern or not) somewhere without being able to go someplace and recharge or get a gas fillup in a few minutes, or at least under 10 minutes.

So, I think I broad market strategy for the model 3 , IMO, would need to come close to what gas cars currently can do, go anywhere, any time, without having to think about refueling or reenergizing their cars at all!!!

It really does not matter that most people may only have to deal with this just a few times a year, but it is , and will always be , a factor holding them back.

I believe this is why Elon is thinking about the battery swap program and has hired Kenny Handkammer of the former Red Bull F1 team. I believe they are gonna try to get what Elon said currently takes about 3 minutes for the battery swap to perhaps under 1 minute. The idea as articulated by Elon is to offer Both Free superchargers AND a Paid battery swap alternative that is both speedy, and available pretty much everywhere.

Given Kenny's mechanic and pit stop expertise, I expect Tesla will quickly fine tune the undercarriage battery mount and swap techniques with a view to doing a major deal that makes this paid alternative available nationwide within 6 months.

I would think Tesla would partner with the likes of a Jiffy Lube or a Midas to offer a nationwide network of battery swap programs for about $30 a pop, with 'in and out' in under 10-12 minutes, ' end to end' , including intake data input, quality control checks, and final payment and exit of the car, after a battery swap.

I think such a program would be wise to consider on a nationwide rollout basis, with maybe 2-3 chargers included ( not supermchargers) , at each of ( say ) 2000 Jiffy Lube and/or Midas locations.

I think such a deal with also go to providing some kind of answer to the dealers that Elon kinda referred to in his last Conf Call.

If I were to structure such a deal I would dream up something like $10k per location payment, upfront, to such a partner( say Jiffy Lube), and also finance 3-5 battery packs per location to start off the swap program. The locations would then recharge the incoming battery pack and use the replaced on Tesla vehicles the next day or later, after charging it up fully.

The service charge of (say) $30 would go fully to the partner for the service, and TSLA would get nothing other than to make the upfront car or SUV purchase decision that much of a no brainier, for anyone concerned about going anywhere , at any time , as it would be an alternative of going to a gas station with a gas car.

This is would instantly and strategically differentiate TSLA and move electric cars as a category, into a more mainstream frame of mind, in terms of a mainstream purchasing decisions.

For 2,000 ( say) jiffy lube locations, there would be training, battery inventory, a couple of regular charging units per location, and upfront payment of say $10 K per location, or about $ 20 million per year, as an incentive, up until TSLA has over 500,000 in total units sold, when that incentive would be phased out and the service provider would just get the $30 or so, per car for each battery swap.

Short of having chargers at each gas station ( which I seriously oil companies will agree to do), this may be a creative , though certainly not optimal alternative, to ease the minds of any potential customer for a Model 3 purchase in the $35-$45 K range, in addition to a range of say 250 miles per charge for whatever K battery pack a Model 3 is equipped with from the get go.....

This is all wild speculation guys, I am just trying to figure out diferent ways TSLA could potentially skin the cat of ubiquitous gas charging .......this may be just one option worthy of consideration. The car dealers would never agree to this, the gas stations will not either , but outfits like Jiffy Lube or Midas ( even though they are franschised) may be independent enough to sign on the dotted line to allow something like this.....versus having to spends $250 K per supercharger station and add another 2000 stations over say another 5 years, for a total cost of $500 Million.

 

[eloder]

2. However, I am not entirely sold on TSLA not having to think about all demographics very carefully upfront now, and developing a bottoms up approach to demand forecasting along with psychographics of each of the demos. For example, I think many women would have second and third thoughts about being caught ( whether that is a legitimate concern or not) somewhere without being able to go someplace and recharge or get a gas fillup in a few minutes, or at least under 10 minutes.

To expand on the others points, I believe Elon mentioned somewhere that an eventual "Model 4" or successor to the Model 3 was eventually going to be in the works, to provide a very affordable entry EV. This also will be a car much more appealing to millennials than the Model 3, though there are plenty of millenials (like me) who would more than eager to jump into the Model 3 segment and have the means to do so.

Honestly, I imagine millenials are far more comfortable with the prospect of range anxiety and not having "gas" at any one point. There were a number of times that I had missed a bus late at night, didn't have a car2go functioning, or otherwise was in a place without immediate transportation in my city center days. I don't forsee the supercharger requirement of being in an accessible, welcoming, and friendly location to be changing anytime soon. If you are very concerned about charging in a location, and unexpectedly find yourself out of range, I imagine you're also in a situation where you could just spend 5-10 minutes charging (just like a gas station) and have enough to get you back home or to another charging location.

 

[daniel Ox9EFD]

I expect the model 3's 35k$ option to be like the model S60 or even S40 are for the S/X platform. That is, a low selling and eventually discontinues entry level car. The high end option 300+ mi range will make most of the sales. It will take another design iteration and a few more battery breakthroughs for the true Camry-ish EV car for the masses.
In short, perhaps buy a Prius and wait for ~2025.

 

[RyanT]

Just to add to this I lived in an apartment in downtown Portland that had outlets for ev's in some of the assigned underground parking spaces. This was a new construction lux high rise building from 2009 or so. Portland is mandating that any new apartment buildings that have over 50 units also have parking. Plugs are going to be common for new construction. Some of the older apartments don't have parking but you probably don't want a car in those situations. Parking in downtown on the streets is a nightmare.

 

[Quant]

I expect the model 3's 35k$ option to be like the model S60 or even S40 are for the S/X platform. That is, a low selling and eventually discontinues entry level car. The high end option 300+ mi range will make most of the sales. It will take another design iteration and a few more battery breakthroughs for the true Camry-ish EV car for the masses.
In short, perhaps buy a Prius and wait for ~2025.[/QUOTE

Thanks but no Prius for me!

I will stick with MB until I get the X once a nationwide paid battery swap program is in place, or they have increased Superchargers in TX to 20-25 from current 5, and it includes Supercharger locations in the top 5 cities of TX and cities in NM LA AZ etc

I just wanna be sure I can use it whenever and wherever I wanna go. Just like in my Mercedes .... I no longer have multiple cars and only spend 2/3 of time in the USA. I don't want my 2/3 time here to be limiting in any way...