Blog Tesla’s Pricier Model 3 Already Converting Owners of Mass Market Cars

Tesla noted on its earnings call Wednesday that new customers willing to shell out $50,000 for the Model 3 aren’t swapping out a luxury car in the same price range, instead they’re trading in cars that cost half as much.

Chief Executive Elon Musk said the top five cars traded for a Model 3 are the Toyota Prius, BMW 3-Series, Honda Accord, Honda Civic, and Nissan Leaf.

Each of those cars are among the most popular across categories. The Honda Civic is the best-selling compact sedan, the Accord is the second best selling mid-size sedan, the Prius is the best selling hybrid, the Nissan Leaf has been the best selling EV, and the BMW 3-series has been one of the most popular mid-size premium cars.

It’s a good sign that there’s real market demand for EVs. What’s more, consumers want style and performance and are willing to pay up for it.

Tesla’s earnings report also claimed that the Model 3 is already the best-selling premium mid-sized sedan in the U.S., a segment that includes the BMW 3-series, Audi A4, Mercedes C-class, Lexus IS, and Jaguar XE.

“In July 2018, Model 3 not only had the #1 market share position in its segment in the US, it outsold all other mid-sized premium sedans combined, accounting for 52% of the segment overall,” the report said. “The popularity of Model 3 is a true testament to the product. Based on trade-ins that we’ve received so far, we can see that the total addressable market for Model 3 is much larger than mid-sized premium sedans. We are drawing customers from many other segments, including non-premiums sedans and hatchbacks.”

 

[Riggald]

EVs do tend to weigh more, but they don't drip oil on the road. Besides the toxic runoff that the oil causes, and the road safety issues it causes after the first rain, oil also helps break down the binders that keep asphalt solid. One bit of "urban legend" attributed to person who repairs potholes was that they would drip a bit of kerosene on the ground before they left, so that they'd have assurance for new bit of work in a year or two.

I don't have the numbers, but a guess is that the relatively small additional wear caused by the EV weight would be more than offset by its cleanliness.

That said, EVs do need to pay their fair share for road and infrastructure upkeep. But I don't support paying more than that, when evaluated on a comprehensive basis.

Road damage is proportional to the cube of the axle weight - so a Model 3 does approx. ~40-45% more damage to the roadways than a BMW 3-Series (1611kg vs 1425kg)

 

[brianman]

Road damage is proportional to the cube of the axle weight - so a Model 3 does approx. ~40-45% more damage to the roadways than a BMW 3-Series (1611kg vs 1425kg)

Assuming that's true, what % of the overall roadway damage do the two vehicle models do in aggregate?

 

[gregd]

Road damage is proportional to the cube of the axle weight - so a Model 3 does approx. ~40-45% more damage to the roadways than a BMW 3-Series (1611kg vs 1425kg)

Ok, interesting. But I don't think that's the whole story. My point was that damage to the roadway by vehicle traffic is not only caused by weight (and, to be clear, it's not the weight, it's the weight per tire patch area, right? So, tire width matters too), but also by chemicals they drop. And the chemicals have other effects, such as the slick roads after a light rain, and the runoff poisoning the surrounding area and waterways down stream.

Also for completeness, what is the weight per axle for a loaded truck?

 

[SO16]

Road damage is proportional to the cube of the axle weight - so a Model 3 does approx. ~40-45% more damage to the roadways than a BMW 3-Series (1611kg vs 1425kg)

This is stil negligible compared to a big rig.

Chart of the Day: Vehicle Weight vs Road Damage Levels

 

[Lasairfion]

I do take issue with positing the Model 3 as a mass market car for a few reasons. I've put together a graphic to try to give an idea of why.

This is Stoke-on-Trent: a reasonably sized small city in the UK with a metro population of about 2/3 of a million. I would say that this is representative of how many people in the UK live in areas of say, Manchester, Birmingham, Liverpool etc too.

I think one of the most important things to understand in the UK is distances. People do not travel anywhere near as much as abroad, particularly the USA. People in Stoke might visit Manchester or Birmingham a couple of times a year for a big shopping day out, a football match, or to get to the airport for a holiday; if that. Many people commute within the city for work, and rarely have any reason to leave. Average daily commute is around 10-15 miles if using a car. Many travel by bus. It would not be reasonable to expect someone in Stoke to visit any of those 'next nearest' superchargers, probably ever. As an aside, the Keele services is actually a terrible location as that stretch of the M6 between J14 and J18 is commonly referred to as a car park due to heavy traffic, lots of roadworks and about 1 serious incident that closes several lanes of the motorway every week.

Stoke on Trent has a large housing stock of terraced houses (row houses). These have little on-street parking as it is, and certainly nowhere to park off the road. You couldn't run a cable from your house without tripping/garotting passing pedestrians. The government has suggested turning lamp-posts into chargers but as you can see, there's only one lamp-post in that picture for that entire part of the street and it's the wrong side of the pavement in a no parking zone. I can't see anyone paying for a powerwall for instance, and there's not enough room on the roof for much solar. Semi-detached and detached homes are more likely to have off-street parking but would only have standard 13amp 230V household plugs.

I can't see how any significant number of EVs owned in Stoke could possibly all try to use the motorway services as their weekly charge. We'd have to see a large number of charging stations within the city proper, and with fast charging times to allow for people to fill up as part of their trip home from work, much as you would use a petrol station.

Likewise having a single Service Centre over in the next city is also not really going to work. If they give you a loan car, then it's perhaps doable at a push, but getting back home without a car would be a hassle. 1 min walk from Service Centre (in Stockport) to bus stop. 10 stops on local bus service to Manchester Grand Central bus station. 4 minute walk to Manchester Piccadilly Railway Station. 2 stops on Cross-Country service to Stoke-on-Trent Railway Station. 7 minute walk to our pictured destination. [58 mins - two separate tickets for bus (£3.00) / rail (£4.80) services].

The distances to chargers and services is academic. Stoke is not wealthy. Average wage is just under £21.5k a year and that's for the skilled jobs (i.e. teacher). Many jobs fall around the £12-15k mark with the higher wages for management (£30-38k) and software development (£35k) pushing up the averages. A £27,000 base price Model 3 is likely still a large ask for the majority of the population of this city who on average spent about £16k on a new vehicle (which is of course still an average). Popular cars are brands such as Kia with starting prices at about £7,700 to £10,200.

Even though you can argue the decreased costs of EV cars for fuel and maintenance costs etc, it's the Vimes Boots theory all over again. People simply don't have the upfront cash to buy the long-term cheaper option.

Will Tesla actually make a cheap mass market EV at the sort of prices that those Kias start at? I'm not sure. I would imagine they'd prefer to keep their premium brand aesthetic and will leave the cheap compact market to Chinese or regular western auto manufacturers (as tied to Chinese manufacturers).

Will Tesla take their segment of the market? Likely. Is Tesla pushing the EV market and the likelihood of any of this happening at all? Yes. But will Tesla become the mass market car? I don't think so.

 

[jboy210]

Lasairfion. I would suspect at those numbers a Nissan Leaf or the small Kia EVs would be a better match.

Here in Northern California near the Tesla factory we see more BMW 3 series than we do Chevys. This is a large market and people buy new cars quite often. I suspect this has biased some of Tesla's thinking for what is "mass market". And I think it will be a long time, if ever, before Tesla targets the market segment occupied by Kia and other EVs. The margins are higher on the Model 3 and above, and as BMW and Mercedes have shown, you can make a money as an upscale car manufacturer.

Tesla is focused on the upscale buyer, or at least the buyer that aspirations of being upscale. And I suspect they will stick with this formula because of the larger margins rather than go after more price sensitive market. There are plenty of other EV makers that service the lower priced markets.

 

[Brando]

Toyota didn't build over 40,000,000 Corollas and lose money [proof: they'd be broke] . Same for the VW Beetle.
Total Profits = (profit) x (units sold)

Electrics ARE cheaper to build - fewer parts.
Electrics can be cheaper to make, depends on battery costs which are trending down.
Electrics total cost of ownership is less given enough time. Reliability & operating costs favor electrics.
Battery costs trend down. Oil costs trend up. Cost/Km: electricity cost about 1/4 of fossil fuel cost. Electrics are more efficient.

Electrification of transport will happen given enough time. It is simple economics. I hope we have enough time.

Tesla is the leader for sure. What other companies can/will join/follow Tesla example and how quickly?

 

[Dr. J]

Tesla is the leader for sure. What other companies can/will join/follow Tesla example and how quickly?

Lots of Chinese car companies, and they're real close or already there.

 

[MD70]

Lasairfion, That its a great post explaining the situation in the UK and parts of Europe as well.
I have been thinking about this also and would add the following:
For people living in terraced housing many charges would be needed in the city, where people go regularly. At supermarkets, shopping centers for example. This way people could charge the car maybe twice a week when they go to these places anyway and this would meet their normal driving needs.
For street parking, councils or the power companies would have to install chargers on the street, which will take time and cost a fair bit.
With regards to the cost,
Elon Musk has stated that in about 5 years they will make a compact car. If they could make one costing about £20,000 even with about a 200 mile range, after some time such a car would be worth less than £10,000 which will make it affordable to more people. Also I wonder what the price of a base model 3 will be after 8 years/over 100,000 miles?
Yes Tesla or any other company will eventually have to have a service center in every major town.
So in conclusion I think for many people in Europe it will take about 20/30 years for this sort of situation to come about. However for those who can charge at home and can afford to pay over £30,000 for a vehicle it will happen sooner.

 

[Brando]

Lasairfion, That its a great post explaining the situation in the UK and parts of Europe as well.
I have been thinking about this also and would add the following:
For people living in terraced housing many charges would be needed in the city, where people go regularly. At supermarkets, shopping centers for example. This way people could charge the car maybe twice a week when they go to these places anyway and this would meet their normal driving needs.
For street parking, councils or the power companies would have to install chargers on the street, which will take time and cost a fair bit.
With regards to the cost,
Elon Musk has stated that in about 5 years they will make a compact car. If they could make one costing about £20,000 even with about a 200 mile range, after some time such a car would be worth less than £10,000 which will make it affordable to more people. Also I wonder what the price of a base model 3 will be after 8 years/over 100,000 miles?
Yes Tesla or any other company will eventually have to have a service center in every major town.
So in conclusion I think for many people in Europe it will take about 20/30 years for this sort of situation to come about. However for those who can charge at home and can afford to pay over £30,000 for a vehicle it will happen sooner.

reminder: The order of efficient transportation might be something like
- foot
- bike
- electric personal transport; skateboard; bike; trike
- electric bus/trolley
- electric cars
- electric sub-ways and electric trains
- jet planes (electrified air lines??)
- Big Falcon Rocket

IF you can avoid owning a car you probably save a lot.
IF you can get your car to make you money - that would be the cats meow.

 

[Brando]

Lots of Chinese car companies, and they're real close or already there.

"already there?" such as? BYD buses I suppose. I guess if they don't import into US, I haven't heard of this competitor yet. you?
or even tell me of a really close one - can we even count the Chevy Bolt with limited production?
I don't even know of Model S nor Model X competitor. Jag i-Pace? will they match/beat Model X 50,000 in one year?
I'll believe it when I see it.

 

[Dr. J]

"already there?" such as? BYD buses I suppose. I guess if they don't import into US, I haven't heard of this competitor yet. you?
or even tell me of a really close one - can we even count the Chevy Bolt with limited production?
I don't even know of Model S nor Model X competitor. Jag i-Pace? will they match/beat Model X 50,000 in one year?
I'll believe it when I see it.

BYD is the one I've heard of. I'm expecting that while we blink our eyes, the Chinese will have something. But maybe I'm generalizing from lack of knowledge.

 

[roblab]

Road damage is proportional to the cube of the axle weight - so a Model 3 does approx. ~40-45% more damage to the roadways than a BMW 3-Series (1611kg vs 1425kg)

And a semi truck does thousands of percent more damage, but you see the disparity of road taxes.

 

[S'toon]

California is starting a similar program. $100 annual fee as part of the yearly registration. Seems reasonable to me since our EVs tend weight more (6000+ GVW on X), which does more damage to the roads.

But these extra taxes on EVs always seem to wind up being more than what'd they collect from gasoline taxes from an ICE car.

 

[Stiction]

As soon to be owner of M3, I'm confused re your statement re charging only to 50-80%, fully charging just once weekly to make battery last longer. Is that recommended by Tesla? Haven't seen/heard of this as yet.

Generally speaking it is a fact that the more you keep the charge / discharge limits between 20-80% the more totally kw you'll
get in/out of the battery during it's lifetime. That said, it looks like these batteries do quite well with bigger cycling.

It's also generally considered that supercharging all the time is not as good as low-rate charging for battery life. But there are people that do nothing but supercharging and seem to be doing ok.

It's considered bad to charge to 100% and leave that car in that state.

So, all that said, I nominally charge to 80% daily and when I know I need a bit extra will charge to 90%. If I need even more add
the last 10% just before use, if possible so that I drive it down right away. This is usually not that hard to do.

I have a 2015 S85D with 32K miles and basically see no degradation so far...maybe a mile or two less when going to 100%.

 

[Riggald]

Assuming that's true, what % of the overall roadway damage do the two vehicle models do in aggregate?

It depends on their aggregate sales, and their aggregate mileage driven.

Tbh, 38-ton artics do about 10 million times the damage as a bicycle, per mile.
My view - put all human transport on electric-assist velomobiles on dedicated bicycle ways. We'll save ourselves a fortune in road building and road repairs.

 

[Lasairfion]

But I don't like lycra!

How to use a bike - Scandinavia and the World

 

[onayragu]

I will trade my 3 serie with a new Tesla. For the price of a Model 3, I could get a brand new Bmw X5 or X6, no problem. But it seems so obsolete now to buy these kind of cars.

 

[Kandiru]

I am all for duallie pickup daily drivers for office workers You should see the Diesel Cummins clouds on my daily commute in Appalachia, only to watch some 4'8" pale office staffer dismount with difficulty. What? Global warming is a myth, it's true, they said that on Fox And we fund public education through gambling.

 

[docdeb27]

You need to be careful in not confusing the cars with the buyers. A lot of wealthy households keep a commuter type car in their fleet for running errands, etc. Look at the mileages on used luxury cars like the Model S and S-Class MBs. For many, these cars are not their daily drivers. and some are switching for something more fun and eco-friendly. While these may be mass-market trade-ins, the buyers are not. Mass-market buyers are not the $700 per mo or cash buyers that represent most Model 3 buyers so far.

The mass-market buyers are still waiting for the $35,000 Model 3.

He is correct for me. I am trading out a subaru forrester for my M3.