Tesla's (or rather CEO Elon Musk's) twitter machine was in full swing again, stating that the mass-market Model 3 sedan is still on track (we will only know by "late 2017", that is current promised release date) and available starting at only $35k (the base price before incentives, curiously that part was omitted in the latest tweet, we will also know by late 2017).
Reservations will start in March 2016 after the mule unveiling (that is the only date that will hold in my opinion).
I would like to once again outline the huge risks behind these repeated Model 3 promises below. I will focus on three areas:
1) Battery Technology Risks
A recent bullish TSLA article on SA stated concerning battery supply:
"...the likelihood of any such [battery] technology being lower cost than the Tesla approach is remote, once the Gigafactory [GF] is in full production."
Nobody knows in my opinion. The GF won't be in full output / production mode (estimated at around 500k cars/year or higher according to Tesla) until 2020.
That's a long five years when very bright people around the world work on better batteries for use in consumer electronics and cars every day.
There are a lot of competing battery projects and promising chemistries that may require Tesla to re-invest A LOT in the GF beyond 2020. I will just quote one recent PR piece:
"European Union Backs Development Of 500 Wh/kg Lithium Sulfur Batteries For Deployment By 2019"
EV batteries capable of 400-500 Wh/kg would make current Li-Ion batteries next to obsolete (needless to mention that resale values of all present EVs on the road would drop even steeper and faster).
Even if such new batteries/chemistry technology is only ready for production by 2021-2025, it doesn't take a lot of spreadsheet work to figure out the implications for giant battery plants built well before the end of this decade and based on current technology.
Tesla and other large Li-Ion battery makers would experience a huge write-down in this case - as Nissan already experienced with their three first-gen battery plants since 2011 (built for their LEAF EV), they had to write down billions!
The crucial difference: A large car maker like Nissan-Renault (with an output at about 8 million cars/year) can stomach these hits MUCH better than Tesla.
2) Current Market Cap vs Expectations and Execution Risks over 10+ years
Tesla's current market cap assumes/implies millions of cars sold per year within a decade, not being a small niche manufacturer for high-end Model S and X cars.
The car mass-market below $50k works very different and that will be Tesla's main Achilles hell in my opinion - also because margins in the car sector at $20-50k are much lower and there will be plenty of competition by 2018-2020 (for example the GM Bolt and Nissan Leaf version 2 could beat the Model 3 to market by 1-2 years).
On the upper end ($40-50K) of the mass market, there is upcoming EV competition from German car makers such as Daimler, BMW and Audi.
3) Margin/Delay Risks for Model 3 ($35k-50k price range)
Tesla has already stated that Model 3
- won't be just a scaled down Model S/X (because of cost issues)
- will use different materials (more steel etc., steep learning curve for Tesla to save costs)
With that in mind, there's no way I see the Model 3 on sale in late 2017 and at a base price of "just" $35k.
2018 (first US/NA deliveries?) to maybe 2019 (worldwide roll-out?) looks more realistic at the moment - and by that time there will be plenty of competition from large car makers.
Not just other EVs with the same 200-mile or more battery range, but also new PHEVs and EREVs - for example the new GM Volt with over 50 miles of pure EV range and no range issues because of its gas engine (kicks in beyond 50-55 miles when the battery is depleted, in most daily usage scenarios people will therefore use no gas - unless they have a really long commute).
That car is shipping in model version 2 (GM Volt 2016) later this year - the GM Bolt with batteries supplied by LG Chem (a company with EV supply contracts for many large car makers) will follow in late 2016 or early 2017 and offer an EV range of 200-miles or above.
The Model 3 on the other hand was once supposed to ship in 2014 (original "Bluestar" project), then by 2015, then by early 2017, now it's promised for "late 2017".
See a pattern here?
Tesla's clock is running out. MANY other mass-market PHEVs and pure EVs with range around 150-250 miles will entangle the Model 3 in a bloody price war in the mass-market segment by 2018-2020.
Summary:
Tesla has a long history of over-promising (especially on delivery dates and deadlines) and then under-delivering.
Tesla's current market cap already assumes/implies "millions of cars" sold per year within a decade (2025) with exceptional margins (unheard of for a volume car manufacturer) - not being/remaining a small niche manufacturer for high-end Model S and X cars.