One of the most exciting companies right now is Tesla Motors Inc, an American automotive and energy storage company founded by Elon Musk, most famous for its highly rated electric cars. On Thursday night, Musk unveiled a smaller, more affordable sedan, the Model 3. The Model 3 is aptly named as the third car that Tesla will produce, joining the Model S and the Model X.
The Model S is the first car that Tesla produced. It is a sedan that has the capability of going zero to 60 mph in 2.8 seconds and has a range of around 250 miles on a single charge. The one downside to the Model S is its lofty price tag. Pricing starts at slightly less than $70,000 and can reach over $100,000 depending on the individual specs.
The Model 3 is a smaller version of the Model S with a lower price tag. According to the Tesla website, the Model 3 starts at $35,000 “before incentives.” CEO Elon Musk has stated that although $35,000 is the base price, an average car will end up selling for around $42,000. This puts the Model 3 in the same price range as the Audi a4, BMW 3 series and Mercedes-Benz C class.
The difference between the Model 3 and its competitors is the “incentives” that the Tesla site mentions. These incentives are mainly federal tax breaks for being environmentally friendly. According to a recent Reuters article, customers who buy electric cars can receive a $7,500 tax credit. Unfortunately, this does not last for everyone who buys a Tesla, as the credit begins to phase out once the manufacturer has sold more than 200,000 cars. This mark will most likely be reached almost immediately – in the first 36 hours after the prototype was revealed, orders topped 253,000 according to the company.
This massive surge in orders for the Model 3 has thrown Tesla’s manufacturing capability into question. Some analysts have projected that Tesla will not able to fill all of the orders for the Model 3 until 2020 – on the heels of finishing the expansion to their Fremont, California factory.
This possible problem with production may be cause for an equity offering from Tesla, according to a CNBC article, to raise additional capital for new U.S. factories and further product development. The new model release and increased signs towards profitability has done wonders for the Tesla stock, as it has risen 60 percent since February and closed at $237.59 on Friday, April 1.
If Tesla can speed up production, fulfilling orders sooner than projected, and if the Model 3 gets reviews similar to the Model S (99/100 on Consumer Reports – the highest ever), I can see the Tesla stock moving even higher than it is currently.