Tesla Model 3 Goes Upscale, and Base-Price Buyers Must Wait

Posted May 21, 2018 9:19 p.m. EDT

Even as Tesla scrambles to master the production challenges of making its first mass-market electric car, the Model 3, the company is moving to add two high-end versions of the vehicle — versions that its chief, Elon Musk, said may be crucial to its profitability.

In fact, delivering the base-price model at this point would cause the company “to lose money & die,” he declared in a Twitter post over the weekend.

Tesla began producing the Model 3 last summer, and so far it has made only versions selling for $49,000 or more. The base model priced at $35,000 — meant to make the car broadly affordable — is not yet available.

In a series of tweets over the weekend, Musk suggested that the company would suffer significant losses on the $35,000 model at this stage. He said that Tesla must increase Model 3 production to 5,000 cars a week — and then keep up that pace for three to six months — before it could begin shipping the base version.

The company has said it expects to offer the standard model by the end of the year.

In the meantime, the company is moving to take the Model 3 farther upscale. Musk said two more variants were now available for order — an all-wheel-drive version starting at $54,000, and a high-performance model at $78,000.

Earlier this month Tesla said it was making about 2,000 Model 3s a week and was working to eliminate glitches and bottlenecks at its factory in Fremont, California, to lift that to 5,000 a week by the end of June. Last summer, Musk said he hoped Tesla would be making that many Model 3s by the end of 2017, but the streamlining work has proved more difficult than expected.

Toni Sacconaghi, an analyst at Sanford C. Bernstein & Co., said it was not unusual for companies to produce higher-priced, more profitable models when they start making a new vehicle. But Tesla risks frustrating its customers if the most affordable version isn’t available soon, he said.

The Model 3 “was dubbed the first mass-market car, and a year after launch, we’re getting more higher-priced versions and the $35,000 model isn’t out,” he said.

On Monday, the company faced a new setback with a critical Consumer Reports evaluation of the Model 3. While finding “exhilarating acceleration and handling,” the magazine reported “big flaws,” including difficult-to-use controls and long stopping distances when braking at high speeds. As a result, the magazine declined to recommend the Model 3 to its readers.

In a statement, Tesla said that the Model 3 performed well in its own braking tests, and that braking performance could be improved through software updates.

Tesla is counting on a rapid rise in Model 3 sales to increase revenue and generate profits. Musk has said that Tesla expects to become profitable in the third and fourth quarters of this year — if it can produce 5,000 or more Model 3s a week.

The company has taken orders for about 400,000 Model 3s — each secured with a $1,000 deposit.

Customers who put down deposits must wait until they are given clearance by Tesla to go online and place an order for their Model 3. Currently the lowest-priced model available is a $49,000 version, which features a longer-range battery than the basic version and a package of premium options.

A group of preferred customers was invited to order the $78,000 performance version of the car, the company said. It features a white interior and 20-inch wheels. Musk said on Twitter that the car could accelerate to 60 mph in 3.5 seconds, had a top speed of 155 mph and could go 310 miles on a single battery charge.

Delivery is likely to take 12-16 weeks, the company said.