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Why is it called Model 3?

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The BMW 1 Series was not BMW's first car, and the 2 series was not their second.
Numbers, names and letters in model names have no correlation to the order of production.
It is purely a branding and marketing decision.
 
Model S
Model ☰
Model X

Thats what your missing ;)

+1

I'm also thinking about 3 as being read as E, as in 1337 (Leetspeak) (Elon's origin is the IT world of 1990s when leetspeak was established).

That would especially make sense after FORD intended to KILL SEX (S3×). Now T☰SLA SAVES S☰X (or: "T3S1@ S@\/3S S3× !") . But psssssttt, don't tell anyone it's supposed to be an E !!! ;-)
 
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Model 3 & Model 4 (former model y)
 
At least it wasn't Tesla, Tesla 2, "the new Tesla", and Tesla Air.

So true, thanks for the laugh!

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There needs to be some congruence between the naming of Tesla cars. Model 3 *kind of* makes sense although would have made more sense if Model S had been named Model 2? If Model 3 is for the 3rd platform, then Model X doesn't make any sense. It also seems that they don't leave themselves open for future models. BMW, Mercedes, Audi have clear(ish) naming conventions that give consumers clarity and make sense based on size and type of car. American cars tend to give random "names" to each vehicle and phase them in/out as needed. Tesla could use some consistency - for example:

Model R = Roadster
Model S = Sedan
Model X = SUV (BMW has already done the legwork on this one branding x-drive and X models for SUV's)
Model C = Compact car
Model L = Luxury GT (future model?)
Model V = Van (cargo or mini?)

etc... Of course being such a common name, it must be a challenge with copyright issues to develop new naming conventions for new vehicles. Bottom line is that mixing letters and numbers (along with full words like "roadster") is confusing to the consumers and lacks congruence in my opinion.