Tesla is finally ready to offer a version of its Model 3 sedan at a starting price of $ 35,000.
The company began Thursday to accept orders for the cheaper version, with delivery within two to four weeks. He said the base model 3 would have a range of 220 km before needing a charge and would come with a different interior than the more expensive versions of the car.
The new offering marks a milestone for Tesla, whose CEO, Elon Musk, has long promised a $ 35,000 model. But the company struggled to cut costs enough to sell such a car.
"We have been working in this direction since the beginning of the business," Musk said in a conference call with reporters. "It has been incredibly difficult."
The automaker also began selling a model 3 version with a range of 240 km and a starting price of $ 37,000. Previously, the cheapest model 3 was selling about $ 43,000 before tax incentives.
Tesla announced earnings in the third and fourth quarters of 2018 by increasing production of the Model 3, its most affordable car. But sales seem to have slowed this year. A $ 7,500 federal tax credit available on Tesla cars last year was halved on Jan. 1. It will be reduced to $ 1,875 in July and will be phased out next year.
Mr. Musk has long claimed that Tesla must offer a $ 35,000 car to attract big buyers who might be skeptical about electric vehicles for reasons of cost, loading time and other reasons. A broader customer base would also allow the company to realize the economies of scale that Tesla needs to generate consistent earnings.
Mr Musk declined to say what profit margin the company expected from Model 3 sales at $ 35,000, but said Tesla would not make money in the first quarter. "Given the fact that a lot of things are happening in the first quarter, we do not expect to be profitable in the first quarter," he said. But he added that the company is expected to return to profitability in the second quarter.
The company's shares fell more than 3% in prolonged trading on Thursday.
Mr Musk also said that the company was only taking orders online, that it would close some exhibition halls and reduce its workforce. "There is no other way for us to save money for this car to be financially viable," he said.
He declined to say how many bookings the company still had from customers who had shown interest in buying a model 3. Last summer, Tesla had more than 400,000 orders for the car. "The reservation list is not important," said Musk.
Musk also expressed uncertainty over the company's growing demand for Model 3. "I have intestines of 500,000 people a year," he said. But he added, "I do not know what the demand is. We will see."
In order to reassure buyers about major Internet purchases, he said, customers will be allowed to return their cars for a full refund within seven days, provided the cars have not traveled more than 1,000 kilometers.
"It will be very easy to get a refund," he said. "People should not worry about placing an order."
Model 3, valued at $ 35,000, is expected to attract more customers to Tesla at a time when it is struggling to serve wealthy buyers already purchased, said Karl Brauer, executive editor of Cox Automotive. Some Tesla owners have complained about the long wait for car repairs.
"Tesla's biggest challenge in the future will be to meet production and demand volumes while maintaining fast service for a rapidly expanding customer base," said Mr. Brauer.
Customers and reviewers also asked about the quality and reliability of Model 3. Consumer Reports said last week that he could no longer recommend the car after readers reported cracks on windows, peeling paint and problems with the touch screen display of the car.
The latest news comes as Tesla faces several challenges. On Friday, the company is expected to pay $ 920 million to bondholders, an amount that would represent a quarter of its available cash.
To save money, Tesla laid off last month 7% of his workforce, his second major layoff in the last eight months. It had $ 3.7 billion in cash at the end of December. In total, Tesla has a debt of about $ 11 billion. The company is expected to repay $ 566 million in notes in November and a $ 1.1 billion line of credit in June 2020.
The company hopes to build a plant in Shanghai but still needs funding.
Mr. Musk also created more legal problems for himself. On Monday, the Securities and Exchange Commission asked a federal court to convict him of contempt for violating a settlement he and Tesla had reached with the commission last year.
The commission stated that Musk did not seek the approval of the company's lawyers, as required by the agreement, before making a Twitter sales forecast last week, which differed from previous announcements.
Musk and Tesla reached a deal with the USC after the commission accused Musk of violating the securities law with a Twitter post. In this message, sent in August, he claimed to have secured "secured financing" to take the company at $ 420 per share. It was revealed later that he was referring to a much more embryonic proposition than he had supposed.