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.”

 

[SO16]

Nonetheless, $54,000 is not mass market. Moreover, I don't know where you get your $36k or your resale value; but according to Consumer Reports, the Accord is a much better car.

Depends on how one defines “better”.

 

[SO16]

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.

I charge typically to 80% and then only fully charge for a road trip. If in storage, I set it to 50% and leave it plugged in.

 

[Dr. J]

Traditional manufacturers must produce compact cars because they have to for corporate average fuel economy.

Fixed that for you.

 

[TintDepot.com]

So, rather than producing a pickup, why would Tesla not offer a compact car with 300+ mile range?

Because the US market has shifted to pickups. Pickup trucks are over 50% of the market (when you include SUV's).

 

[spectrum1337]

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.

Yes. Musk tweeted (a reply to someone) saying either 70% or 80%, I can't remember, several months ago. But he also has an incentive to make this % be higher than it actually would be.

 

[Lasairfion]

Do you think there'll become a class divide between EV and ICE, as the "haves" and "have nots"... whereby using gasoline will be a sign of (relative) poverty? Those poor polluting people stuck on the fossil juice.

Are gas prices going to fall as more people leave ICE behind for good, or will consumption just shift as more people find old gas cars now to be within reach and become drivers, adding more clog to the road?

Speaking of roads, for the most part it's a tax on gasoline at the pump that pays for infrastructure improvements. What happens if that source dries up? With the generous tax credits for EV in some states be replaced by EV tax on car purchases or license plate registrations to pay for infrastructure?

1. Yes - I think driving a combustion engine will become the norm for those who cannot afford a new car. A lot of people cannot afford a new vehicle and many in the UK are running very cheap vehicles. Drivable cars with less than 150,000 miles can be picked up here for under £500 (over 900 currently on autotrader.co.uk).

2. I think the opposite. The price of heating oil (common in rural areas) has already tripled here in the last 10 years or so. I'm concerned that the rise in EVs will see my heating bills soar unless I can convert the system over to something different. Petrol prices will rise as demand falls, much how developing 35mm film costs a lot now because everyone went digital. This will make things even harder for those who struggle to run a car already.

I think we will see a bump as people switch to EV for their new car leaving cheap, well maintained nice combustion engined cars available for the second hand market; up until a second hand EV becomes affordable (which is debatable without some sort of extended warranty). But I don't foresee huge numbers of drivers suddenly getting cars. Insurance for new drivers is prohibitive, fuel costs are already high, and the Millennials and Generation Z are not that interested in owning a vehicle.

3. I expect the licensing rate/tax will increase on vehicles to cover road infrastructure costs. Already in the UK an electric vehicle with a list price of over £40k has to pay £310 a year 'annual vehicle licensing tax' for the first 5 years.

 

[SkagitDoug]

Even though it’s only a US market, it still is a big one. And since pickups have heavy pollution, I’m all for getting the ICE pickups off the road.

Ah, but just you wait; The Donald will soon have cars polluting as much as any truck you've even seen!

 

[Dr. J]

Ah, but just you wait; The Donald will soon have cars polluting as much as any truck you've even seen!

On cue: Trump EPA will revise Obama fuel efficiency, greenhouse gas emissions rules for autos

Didn't have to wait long for that!

I'm encouraged that EVs will over the medium term make CAFE moot.

 

[Vancity-Tes1a]

I think many people will go for the dual motor. At the conference call, they said half of the orders are dual motor. This means higher profit for Tesla, with a father sight of the base price TM3. Eventually, everything will work out for Tesla and the customer. We just need to wait only a bit more

 

[jboy210]

Michigan charges a higher registration fee to EV owners to cover the road maintenance. And there are no state incentives to buy an EV.

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.

 

[SO16]

Ah, but just you wait; The Donald will soon have cars polluting as much as any truck you've even seen!

Well I’m hoping Tesla is around long after Trump.

 

[SO16]

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.

I actually don’t have a problem getting charged more for registration and no EV state incentive. It is fair this way.

 

[T34ME]

So, rather than producing a pickup, why would Tesla not offer a compact car with 300+ mile range?

1. Because Tesla is still working on the backlog for 500K reservations for the model 3 and demand will increase once more are on the road.
2. Because Wall Street is demanding that Tesla be profitable and that would be more difficult with a $20K compact car
3. Because Tesla doesn't want to be all things to all people. Elon hopes someone else jumps in with a $20K compact car, like the Chinese.
4. The Tesla pickup is last in priority following the model 3 Short Range, model Y, Semi, and new Roadster. Their plate is pretty full right now.

 

[roblab]

Michigan charges a higher registration fee to EV owners to cover the road maintenance. And there are no state incentives to buy an EV.

Electrics should pay their fair share of road maintenance and building. Gas tax would cost the average driver around $75 a year or so (Heck, I haven't bought gas in years), so driving an EV that weighs twice as much, it's only right. Most states are thinking of charging road use tax on EVs.

 

[SO16]

Electrics should pay their fair share of road maintenance and building. Gas tax would cost the average driver around $75 a year or so (Heck, I haven't bought gas in years), so driving an EV that weighs twice as much, it's only right. Most states are thinking of charging road use tax on EVs.

I wasn’t knocking it. Just pointing out that Michigan does it based on who I was quoting. I agree it is the right thing to do.

 

[chipsajoy]

I can attest to this. I traded in my BMW 328i for a Model 3. Model 3 is twice as much as my old Beamer but I had 2 years to save up and do not regret my decision to shell out so much money for the Model 3.

 

[gregd]

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.

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.

 

[nuclearfusion]

Electrics should pay their fair share of road maintenance and building. Gas tax would cost the average driver around $75 a year or so (Heck, I haven't bought gas in years), so driving an EV that weighs twice as much, it's only right. Most states are thinking of charging road use tax on EVs.

Yes. Just as gasoline users should (but in the US don't) contribute to the costs associated with gas - to pick a couple of examples; extra health costs, higher defence costs.

 

[SO16]

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.

The vehicles that actually do the major damage to the roads are heavy trucks and semis.

 

[beachbum77]

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...
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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.