Tesla Motors just made a big announcement as it is now offering a variant of the Model 3 at a retail price of $35,000 (before tax credits). This has been a long time coming as CEO Elon Musk has been pushing for this price point for one of Tesla’s vehicles for years.
On a call with reporters, Musk said that “this is something we’ve been working towards” since the company was created. Deliveries for the $35,000 version of the Model 3 will start happening for some customers within two to four weeks.
To bring down the cost of the Model 3, Tesla also said that it is going to be closing most of its 129 stores and sell its cars online only. Going forward, Tesla may face legal challenges because some states have laws that require a company to have dealerships to sell cars. And Tesla is also changing the return policy as it will now allow customers to bring back a car within 7 days or a 1,000 miles for a full refund.
The stores do not service Tesla vehicles so it will not affect how cars get repaired. Currently, Tesla has 79 service centers in 26 states. And the company will be hiring more service technicians.
Model 3 was originally introduced in 2016 at a price range of $43,000 to $58,000. And Tesla saw more than 500,000 reservations with refundable cash deposits of $1,000 each in 2017.
Electric vehicles being offered by some of the largest manufacturers are eligible for the full $7,500 federal tax credit. But Tesla buyers are eligible for a partial tax credit since federal law phases out the subsidy after a manufacturer surpasses 200,000 electric vehicles. Tesla hit this number last year. So Tesla vehicles bought between now and June 30 will be eligible for a $3,750 tax credit. And Tesla vehicles purchased between July 1 and December 31 of this year will be eligible for a $1,875 tax credit. Starting January 1, 2020, new Tesla vehicles will not be eligible for any federal tax credit.
The specifications of the $35,000 Model 3 includes 220 miles of range and a 0-60 MPH acceleration of up to 5.6 seconds. And the top speed is 130 MPH. However, there is a “Standard Range Plus” with 240 miles of range, faster acceleration, and a 140 MPH top speed starting at $37,000. And the $35,000 version also requires black paint for the exterior, 18-inch wheels, and has to skip Autopilot (automated speed and steering control) and Full Self-Driving capability.
IHS Markit principal automotive analyst Stephanie Brinley pointed out (via Consumer Reports) that Model 3 has the advantage of being backed by the Tesla brand. Tesla buyers have been a loyal fan base and are vocal about it. Due to the word-of-mouth endorsements, many Tesla buyers do not mind putting down cash deposits and waiting long periods of time for the vehicles to arrive.
Recently, Consumer Reports pulled its recommendation for Model 3 due to reliability issues. Model 3 owners have been reporting problems with the paint, trim, and electronics. There were also suspension problems, especially with the 2017 model year.
“In most cases, reliability issues will undermine satisfaction,” said Consumer Reports’ senior director of auto testing Jake Fisher in the report. “But when a vehicle has an enthusiastic following, like with Tesla, owners may overlook some issues. We’ve seen this with other vehicles such as the Jeep Wrangler and Chevrolet Corvette.”
To counter this report, Tesla pointed to the overall customer satisfaction rating from Consumer Reports. And Tesla said that it takes feedback from customers seriously and is quickly implementing improvements any time issues are heard about. As a result, significant improvements are being seen in field data.
The cheaper Model 3 will soon see competition from electric vehicles from rivals with more than a 200-mile range on a single charge. For example, Hyundai and Kia both announced EVs that will have a starting price of $35,000.