Tesla pre-orders exceed expectations


Demand for Tesla's mass market electric car has far exceeded expectations, with pre-orders from around the world now totalling 250,000.

The Model 3 will sell in the United States for $35,000 (NZ$50,000).

A tax-credit will lower that price to US$27,500 in the United States. But once you add on some special features Tesla estimates that average price will be US$42,000.

Each customer who has pre-ordered has paid a deposit of US$1,000 (NZ$1450).

It means Tesla can brag about total sales of over US$10 billion.

But the reality is that the customers have only paid the $1,000 deposit. It is refundable if they change their minds.

So what they have really done is give Tesla a US$250 million interest free loan.

Still, there is no denying this is a huge triumph for Elon Musk and his company. The launch event -- and the lines of people waiting to pre-order the Model 3 -- were reminiscent of Apple's biggest product launches.

Tesla could claim to be the new Apple and it certainly has staged the biggest tech event of the year.

Tesla pre-orders exceed expectations

Tesla is going to have ramp up production if it wants the Model 3 to start rolling off the assembly line by the end of next year.

Last year it produced 50,000 cars (the more expensive S and X models). It wants to reach 100,000 this year and then double its production run again next year.

But Tesla has a record of production delays and even if everything goes to plan most customers will have to wait until 2018 or even later to drive their Model 3.

Among the people who will have to wait until at least 2018 will be New Zealand customers. That is because Tesla has decided right-hand drive cars will be the last to go into production.

The more expensive Model S and Model X vehicles are also being released in New Zealand.

The Model 3 can go from 0 to 100 kilometres in less than six seconds and has a range of 215 miles (346 kilometres) per charge.

Tesla pre-orders exceed expectations

With a starting price of around US$35,000 (NZ$50,000) the Model 3 is about half the price of Tesla's previous models.

But some analysts on Wall Street question whether Tesla can make money selling the car for below around US$50,000.

In the meantime while customers wait for their cars there will be the temptation for many of them to opt for a rival offering like Chevrolet's Bolt. Other car makers are also planning to launch fully electric vehicles.

Part of the reason that US customers rushed to order the car is they are eligible for the $7,500 tax credit. But there is a limit of 200,000 per company before the credits start to be withdrawn. Many of Tesla's credits have already been claimed by buyers of the more expensive S and X models.

Tesla will also need to increase its retail outlets. The plan is to double that number to 440 by the end of next year.

Tesla is also planning to double its network of supercharger stations from the current 3,600.

All this will cost money, which is why it is likely Tesla will have to go back to its investors for another capital raising. Still, given investors' enthusiasm for the stock it is likely that Elon Musk would have few problems on that front.

There is another challenge for Tesla and the entire industry. Compatibility of the charging stations.

Here in New Zealand the first charging stations are designed for US and Japanese cars, but not for European ones.