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Thursday, Tesla finally delivered the ultimate promise of CEO Elon Musk: a $ 35,000 electric car.
However, the company has managed to achieve this triumph in the least inspiring way possible – with a special announcement including layoffs, store closings and financial alarms. Friday morning, the shares of the company had dropped 8%.
The new base, model 3, will be offered with less range and a less elegant interior than previous versions. It will only be available in black. A supercar is not the case, although the performance remains impressive for a vehicle of its price. Be that as it may, it meets the minimum requirements of Tesla's long-standing commitment to build a fully electric, family-friendly family sedan with good battery life for low-income people. You can order one right now on Tesla.com, and it will arrive in two to four weeks.
Of all the concrete ambitions that Musk has defined for Tesla, it has proved elusive even if it has broken expectations in other respects. Since the launch of the Model S in 2012, I harassed the company on this goal. At the time, a representative of Tesla had announced that the affordable sedan would probably be delivered in 2015. Over the years, this date has been postponed several times. Tesla started taking orders for Model 3 in 2016, but only for the more expensive versions, which began to produce in a limited way the following year. Asked again about the $ 35,000 version in May, Musk said that a drop in price at that time would "make Tesla lose money and cause her to die." Until this week, the cheapest model 3 cost $ 42,900.
Four years after its announcement, the $ 35,000 model 3 has finally arrived. (The question of whether this is really "affordable" is another debate, but it is the reference that the company has been setting for a long time.)
However, if the cost to consumers is reasonable, the price has hurt Tesla, its workers and shareholders – not to mention Musk's mental health.
The company has already gone through a "production hell" to meet the milestones, asking questions about worker safety and the reliability of the car. Now, to make ends meet, Musk said Tesla will have to close physical stores across the country, firing many sellers because it will start selling cars only online. It will keep a relatively small number of showrooms in prestigious locations. At the same time, Musk has moved from a profitable one-quarter forecast to another loss, scary investors.
In a call to reporters on Thursday, Musk did not even try to claim that the move to fully online sales was a kind of strategic master shot. He said that there was "no solution" and that this would save the company 6% on the cost of each car. "It's extremely difficult to make this car for $ 35,000," said Musk, according to The Verge.
As Edward Niedermeyer from the Drive pointed out, this is a radical change: since last December, Tesla boasted of opening of 11 new retail storesand he was still pressuring New Jersey in January to open more. Now, Tesla will reduce its physical presence at a time when it is struggling with reliability issues, which has recently cost Model 3 its much-coveted Consumer Reports recommendations. Despite the store closures, Tesla announced Thursday that it would increase investment in services, with most services now being done by sending Tesla representatives to drivers, instead of having them bring their cars to the store. In addition, with fewer stores offering driving tests, the company will now allow drivers to return a vehicle within seven days or benefit from 1,000 miles for a full refund.
For investors, these operations are full of despair. In addition to the base model 3, Tesla lowered prices on other versions and models on Thursday. CNBC's analysis of analysts' responses suggests that many fear that reductions will be a sign of reduced demand, which would be worrisome: for all of Tesla's other problems, extremely strong demand has been the constant who kept society afloat. Musk did not quell these fears Thursday: he said his company was able to sell 500,000 Model 3 a year, which would be pretty strong, but he added, "I do not know what the demand is. We will see."
It's hard for me to imagine that demand will weaken. Over the years, many potential buyers of Tesla have said that they were looking for one, but that they were looking for the $ 35,000 version. A bigger concern might be profit margins: Musk categorically refused to answer a question about the benefits that Tesla would achieve on each model.
The disappointment caused by the news of Thursday would have been hard to imagine until recently. If you had told Tesla fans a decade, a half-decade or even three years ago that the company would eventually offer a fully electric four-door family sedan with 220-kilometer range, sports car acceleration and a charging network that covers a large part of the country, they would have been amazed and delighted. Instead, the news is hidden in darkness and darkened by Musk's clash with the Securities and Exchange Commission.
But the turmoil and financial difficulties of society must not completely obscure what it has accomplished here. Musk, despite all his warnings, showed once again that he cared more about Tesla's initial mission to make the electric car a priority than to earn money or soften investors. While deadlines and broken promises took precedence over Tesla's story, Musk and his company remained remarkably faithful to the long-term master plan that he had developed in 2006. And the fact is that that other companies have beaten Tesla his goal of building an electric car for the masses testifies to the power of Musk's vision: these companies had no such plans until Tesla shows that he is possible to do it.
In other words: even though the $ 35,000 3 model turns out to be a Pyrrhic victory for Tesla, the victory of electric vehicles – and potentially the environment – is real.
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