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It took a while, but Tesla Inc. (TSLA) finally unveiled a more affordable version of Model 3, with its midrange offering. The shares were initially in the headlines, but have since plunged from about 2.6% to $ 257 about an hour before closing. The reasons for the fall vary.
President and CEO Elon Musk is about to make his dream come true, as it revolutionizes the world of the automobile and drives it toward a clean energy future. Although there are still questions about the vehicle, it is definitely a victory for Tesla and Musk.
Basic model of Tesla 3
Thursday night, musk tweeted base model 3 "costs $ 35,000 after the federal and state tax cuts in California, but the actual cost of ownership is closer to $ 31,000 after fuel savings".
That may be the case in California, but in reality, the initial cost is actually $ 45,000 before federal and state incentives. With only the $ 7,500 federal tax credit for electric vehicles, the price is reduced to $ 37,500. However, this tax credit will increase to $ 3,750 for the first half of 2019 and will be further reduced by 50% in the second half of 2019. It will then be removed for Tesla vehicles now that the company has delivered more than 200,000 electric vehicles.
The website states that delivery times are estimated within 6 to 10 weeks, which would allow current buyers to acquire a mid-range Tesla just before the end of the year. Assuming that the majority of drivers take delivery after January 1, the cost for those buying in states without other incentives is actually $ 41,250. Tesla is caught in a situation where he wants to offer an all-electric vehicle at low cost, while reflecting on profitability.
For clarity, TheStreet spoke with a Tesla representative who said that the standard battery was still in four or six months (as shown on the website). The standard battery will have an even shorter battery life than the 260 kilometers of mid-range model 3. It will probably cost less, perhaps allowing Tesla to benefit from a $ 35,000 no-incentive award.
Can not satisfy the bears
Musk said its goal was to market a $ 35,000 all-electric vehicle. Why did that mean had to where he was a fraud, I do not really know. Mary Barra of General Motors (GM) or Jim Hackett of Ford (F) would not have problems if they were slightly below the mark. Of course, mid-range model 3, valued at $ 45,000 (before the incentive), is not this not close either, but there is still a model 3 to come. At $ 36,000 or $ 37,000, it's pretty close to Musk's original goal.
Management teams set goals and sometimes go short. This is the case of Tesla Model 3, we do not know yet. Many bears have stated that the basic model 3, worth $ 35,000, would never come and yet, we are progressing towards that goal.
So now, the argument goes to profitability, gross margins, production problems and anything that may interest them. I do not try to take sides with Tesla here. Its finances are one thing – a mess, certainly – but why can not we credit credit?
On the one hand, Tesla's vehicles are the safest on the road, according to NHTSA. Secondly, the S and X models are all-electric luxury offers. Even after being on the market for years, the competition can not catch up. With the electric debut of Porsche, Audi, Mercedes-Benz and BMW in 2019, 2020 and beyond, even these builders simply can not beat Tesla.
They have had years to catch up, much more access to R & D capital and decades of experience in automotive development. Yet even in this case, future vehicles have, at best, features comparable to those of the current Tesla range.
So, why not give credit when credit is due: Tesla makes amazing products and continues to improve its methods. If she did not have a sub-optimal financial situation – to put it mildly – this business would be a slacker. That said, we must also pay attention to its weaknesses, but it is a positive step in the development of society.
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