Tesla's Model 3 launch 'Just Phase 1,' Elon Musk says

Tesla is set to unveil its latest vehicle today, a $35,000 electric car aimed at mass market consumers who've never owned a luxury or electric vehicle — and likely thought they never would.

New $35,000 model may make inroads with car buyers it never used to reach

Tesla CEO Elon Musk tweeted today the unveiling of Model 3 is just the start. (Ng Han Guan/Associated Press)

It is a make or break moment for Tesla. At 8:30 p.m. PT tonight, the revolutionary electric car maker will unveil its newest offering, the Model 3.

But chief executive Elon Musk is selling more than just a car. Musk hopes to usher in the age of affordable, mass market electric cars. 

Here's what we know.

$35,000 for 320 km of range

The Model 3 is expected to sell for $35,000 US (before government incentives) and have a range of about 320 kilometres before recharging.

It's expected to be a four-door sedan — essentially, a smaller version of the $101,000 US Model S without all the bells and whistles. 

The features may turn out to be basic, but expectations are anything but.

It's going to be viewed as a $150,000 car on sale.-Ophir Gotlieb, Capital Market Labs

"This will be a success, even larger than what Elon Musk is talking about," says Ophir Gotlieb, CEO of Capital Market Labs.

He wrote a report predicting Tesla's "colossal success" this week. Musk has said he hopes to sell 500,000 vehicles a year by 2020, a figure Gotlieb says Tesla could easily surpass.

"That opinion is based on every market survey I've seen, which is absolutely staggering with respect to how many people desperately want a Tesla, whether they own an electric vehicle or not."

A luxury car — on sale

Gotlieb says Tesla is seen as a luxury brand, competing with Audi, BMW and Mercedes. And even when they introduce a cheaper model, that luxury brand remains intact.

"This $35,000 car isn't going to be viewed as a $35,000 car: it's going to be viewed as a $150,000 car on sale," he says.

The Model 3 has been cloaked in secrecy. The German edition of Wired magazine published a photo this week that could be the first glimpse at the offering, but it only showed the silhouette of a car under a large black cloth.

Tesla initially announced the car by tweet. Last year, Musk spoke to Tesla owners, but gave only scant details of what was to come.

"We're sort of having this debate of how adventurous do we want to be with the Model 3," Musk said at the time. "The simplest thing to do would be to make it a smaller version of the Model S but then we could also try to do something more radical. I think we're going to try to do something more radical."

Electric vehicles in age of cheap oil

Market appeal for electric vehicles is understandable when gas prices are skyrocketing. But with low oil prices seemingly in place for at least the medium term, can EVs really expect to compete?

In 2013, electric vehicles made up a lowly two per cent of the total passenger vehicle market.

The cost of the newest Tesla model has come down dramatically, in large part because of economies of scale from its $5-billion US battery factory in Nevada. That alone is expected to reduce the cost of battery packs by 30 per cent.

The company has also built a network of superchargers across North America. As costs come down, many analysts are betting Tesla has timed this just right.

"With increasing government incentives and a focus on low emission vehicles, we expect electric vehicles to see tremendous growth," a report from the research firm TREFIS said recently.

What's in a name?

Tesla reportedly wanted to call the Model 3 the Model E. It would fit perfectly between the existing Model S and the Model X (spelling out Models S-E-X). But Ford holds the trademark on the name "Model E" and Musk was forced to come up with a new name.

Whatever it's called, we'll get more details tonight as Tesla starts taking orders. A $1,000 down payment reserves your spot in line, and there are already people lining up outside Tesla stores to get their name on the list. 

All this for a car that won't ship until 2017 at the earliest, and may not hit the pavement until 2019, according to some reports.

But Musk is an indisputable champ at creating hype. He's already looking past today's announcement.

So, what new elements are going to be added? And which will evolve?

Tesla's "Autopilot" option is near the top of every list of features being asked about. The option allows drivers to hand control of the car over to the on-board computer in some circumstances. Many analysts assume the Model 3 will eventually include the autopilot option at an extra cost.

Tesla is already the only company that currently has a fleet of cars that are capable of driving themselves, capable of communicating with other cars in the fleet and able to learn on the go, via software updates. That potential saw at least one analyst dramatically hike his target price for Tesla shares.

Morgan Stanley analyst Adam Jonas says Tesla is disrupting a "100-year-old business model of human-driven, privately owned, internal combustion vehicles." In a 2015 report, he predicted the world will move away from that model, and says Tesla is uniquely positioned to take advantage of that shift.

Instead of selling cars to ride-hailing companies like Uber or Lyft, Jonas says Tesla could begin offering those kinds of services directly to consumers — a move that he says could see Tesla shares soar to nearly twice their current value.

But all that's still the stuff of speculation. 


Senior Business reporter for CBC News. A former host of On the Money and World Report on CBC Radio, Peter Armstrong has been a foreign correspondent and parliamentary reporter for CBC. Subscribe to Peter's newsletter here: Twitter: @armstrongcbc


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