The Key to Tesla’s Survival

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The International Energy Agency (IEA) announced in 2015, that the number of electric cars on the roads around the world had exceeded one million for the first time. And with many car manufactures trying to get in on the electric car action, Tesla’s competition has been increasing fast.


The number of electric car automakers globally has increased dramatically, especially in the past three years, averaging 3.2 million in the beginning of 2018. Even luxury car manufacturers, like Jaguar, want a piece of the electric car market and they have recently released their new all electric SUV: the I-pace. An astonishing number of new electric cars will be released in 2019 as well, including the Nissan LEAF, Hyundai Kona EV, Kia Niro EV and Audi eTron.


While Tesla has been working hard to meet their target of producing 5,000 Model 3 cars a week by the end of 2017, they still have been falling short. The competitors’ cheaper prices and some negative feedback on Model 3 are adding to Tesla’s problems. Consumer reports didn’t recommend Model 3 and said that the car had big flaws.


“This car has been surrounded by hype since it was announced that buyers could get 220 miles of range in the $35,000 base version or 310 miles in the more-expensive Long Range version. We bought a Model 3 with the long-range battery. Our testers found the Model 3 to be fun to drive, thanks to the superb handling and immediate thrust from the electric motor. However, the Model 3’s very long stopping distances, distracting controls, overly stiff ride, and uncomfortable rear seat count heavily against it.” https://www.consumerreports.org/cars/tesla/model-3/2018/overview


ConsumerReports noted that the biggest issue was the car’s stopping distance. Model 3’s stopping distance of 152 feet from a speed of 60 miles per hour is slower than most of its peers. The testers also complained that the controls were difficult to use. To make matters worse, on Monday, May 21, 2018, a man died after the Tesla S he was driving swerved off the road, crashed through a fence and into a pond in the San Francisco Bay area. Even though it is still unknown whether the car was in autopilot mode, it is still expected to generate bad publicity for Tesla’s semi-autonomous system.


According to Goldman Sachs, Tesla may need an additional capital of as much as $10 billion by 2020 to fund the company’s operations, Tesla disagrees though. Elon Musk was asked if he was thinking about a capital raise and he simply said “No.”

I specifically don’t want to.” he said on a conference call in the beginning of May, 2018, after Tesla posted their first-quarter earnings which were better than expected.


Musk has another plan for Tesla to survive: selling more expensive Model 3s. Tesla’s Model 3’s price starts at $35,000 but can reach up to $86,000. Yet Tesla hasn’t started the production of the cheapest $35,000 version because they make more money from the expensive versions which is what they need right now.


“Cost of all options, wheels, paint, etc is included (apart from Autopilot). Cost is $78k. About same as BMW M3, but 15% quicker & with better handling. Will beat anything in its class on the track.”



Like Model S and X, Model 3 has dual motors, one in the front and one in the rear so it can still drive even if one of the motors breaks down. In the Tweet above,  Musk says that the total cost of the most expensive version of the Model 3 is going to be $78,ooo, without autopilot. If they add Autopilot, the car’s price could go up to $86,000; a price too high considering that Model 3 is Tesla’s attempt at a mass market car that is supposed to be affordable. However, the first version of the Model 3 Tesla will be making is the one with the long range battery pack, which adds an extra $9,000 to the car’s price and the premium upgrades package; an extra $5,000, all-wheel drive is an additional $5,000, which means the new models will start at $54,000, still without the Autopilot feature.


Tesla has been making an increasing profit and the company has made the biggest leap up the 2018 Fortune 500 list, jumping an incredible 123 spots to the 260th place with $11.75 billion reported revenue. Meeting their production target of Model 3 will ensure a growing revenue for this year as well. With all the hype surrounding Tesla Model 3, it could be a make it or break it for Tesla; or as Musk has called it, the key to Tesla’s survival.


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