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(Bloomberg) – For Earl Banning, getting behind the wheel of a Tesla meant spending more than he had ever spent on a car.
The 43-year-old Air Force neuropsychologist from Dayton, Ohio, paid $ 54,000 for the purchase of a model 3, saying he would save gasoline and would keep his car for a long time. That was almost double what he had already paid for a Honda Accord at full load.
"I call it Tesla Stretch – all the people I've met and owned a model 3 are willing to spend more to switch to a model 3," he said.
When the CEO, Elon Musk, unveiled the Model 3 for the first time at a party held in March 2016, the vehicle had to compete in the market for luxury sedans from brands like Audi, BMW, Lexus and Mercedes. Instead, mainstream car owners like the Honda Accord and Toyota Prius open their portfolios to the sedan, signaling that the vehicle is pushing Tesla beyond its luxury niche and further into the mainstream.
Model 3 is the key to Musk's goal of improving the profitability of this 15-year-old company, grappling with production problems and self-inflicted controversy. The car is particularly popular among young shoppers, and Musk highlighted the fact that customers pay for it, as proof that the Tesla brand still has a strong consumer appeal.
"Tesla has captured lightning in a bottle," said Jeremy Acevedo, head of sectoral analyzes at researcher Edmunds, during a phone interview. "It's hard to compare model 3 to other cars because it breaks the mold in many ways."
Tesla recently said that more than half of the trade for Model 3 came from vehicles priced below $ 35,000. In addition, there are signs that the popularity of the sedan is putting additional pressure on rival automakers, who are already fearful of the US move for trucks and SUVs. In October, sales of cars such as the Accord and the Prius continued to decline, as model 3 shipments increased. Banning, the Air Force psychologist, earned $ 16,000 from Tesla to exchange his Prius, an offer slightly higher than the value of Kelley Blue Book.
The cheapest 3 model currently available starts at $ 46,000 before any tax credit, and features such as the $ 5,000 Enhanced Autopilot can increase costs.
Eric Snapat, 36, from Burleson, Texas, said it was "a little scary" to spend nearly $ 60,000 on a Tesla. He used to drive a Nissan Altima, but he now holds a six-year loan on a 3-model, an expense that he can justify because he and his wife did not have any money. # 39; children.
Model rental 3
Other factors find ways to offset costs. Turo, a car-sharing market, has more than 4,000 Tesla vehicles, including about 1,000 models 3, listed on the platform. In 2014, there were only 67 Tesla offered.
Robert Preston, 26, bought a model 3 at the end of July for $ 56,000 and asks renters $ 155 per day to use the vehicle. It is popular with locals traveling, travelers and potential customers who want to take an extended test drive.
"Every weekend, someone praises him," Preston said.
From the beginning, model 3 had to be more affordable. Musk first said that it would cost $ 35,000 before options or incentives. But this version is not expected to come into production until next year, and the polarizing CEO has made it clear that Tesla should focus on selling high-end versions primarily for the survival of the company.
"I think they will continue to produce a $ 35,000 version, but they will configure it in such a way that no one will want it," said Loup Ventures analyst Gene Munster.
One also wonders if the demand for the car will be as strong when a federal tax credit for electric vehicles will be halved next year, to reach $ 3,750.
Nevertheless, some potential customers are hoping for a cheaper model. Ray Nash woke up at 2:30 pm to be one of the first to make a reservation for a Model 3 at the Tesla store in Santa Monica, California. It was in March 2016 and he is still waiting.
"I'm keeping Elon's promise," said Nash. "It's really bittersweet to see all the 3 models ride in town when I was one of the first to file a deposit. But I still love what the company does and I fully support the mission. "
To contact the reporter about this story: Dana Hull in San Francisco at [email protected]
To contact the editors in charge of this story: Craig Trudell at [email protected], Craig Giammona, Kevin Miller
For more articles like this, go to bloomberg.com
© 2018 Bloomberg L.P.
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