Musk says if Tesla ships the promised affordable version of the Model 3 first it will “lose money and die.”
Two years ago, Elon Musk unveiled Tesla’s first mass-market vehicle — the Model 3, starting at $35,000 — inspiring hundreds of thousands to deposit $1,000 to get on the waiting list.
But the company still isn’t shipping those entry-level, $35,000 models en masse.
Over the weekend, Elon Musk tweeted that Tesla will be shipping a more expensive version of its Model 3 starting at $78,000 before it ships the affordable mass-market car the public was promised.
The CEO — who announced the specs of this luxury-priced vehicle on Twitter — said the company would “lose money and die” if it started by shipping the lower-priced Model 3 that starts at $35,000. He also said he would need three to six months after achieving a production rate of 5,000 cars a week to ship the Model 3 if the company wanted to survive. Cutting losses to become profitable recently became a priority for the wildly outspoken CEO.
For years, the cult of Musk persevered even as his electric vehicle company stuttered in its efforts to meet production and delivery deadlines for its limited-quantity luxury vehicles like the Model S and Model X. Now, as Tesla takes on its first mass-market vehicle, it’s facing the same difficulties it faced for previous vehicles — but with much more scrutiny than the company has ever faced before.
Part of that is because the Model 3 is an important marker for the electric vehicle manufacturer. According to Musk, his ultimate goal for Tesla is to aid in the transition from a carbon fuel economy to an electric one and in doing so help save the environment.
That can only be done if there is a wide swath of Tesla’s electric vehicles taking the place of combustion ones that are already on the road.
And achieving that rests heavily on making an affordable car. But the targets on the production and delivery of this electric vehicle for the masses are constantly shifting.
In addition to focusing on selling the higher-priced Model 3s, Tesla has pushed back deadline after deadline for the rate of production, causing many to question whether the company is capable of making the transition from being a limited-quantity luxury vehicle manufacturer to becoming one for the masses.
Originally, Musk aimed to produce 5,000 Model 3s a week by the end of 2017. He shifted that rate goal to 5,000 cars a week by the end of March 2018 and then later lowered it to 2,500. The company fell 250 short of that adjusted goal as of April, only producing 2,250 Model 3s a week.
Cost of all options, wheels, paint, etc is included (apart from Autopilot). Cost is $78k. About same as BMW M3, but 15% quicker & with better handling. Will beat anything in its class on the track.
— Elon Musk (@elonmusk) May 20, 2018
The company is now finally ramping up from the car of the few to the car of the many — the company delivered 8,180 of the Model 3 sedans in the first quarter — but that process has put a great deal of strain on the company’s business as well as staffers.
As Tesla continues to navigate a longer-than-expected production hell, it has posted another quarter of record losses.
And Musk has lost some of his top people:
- In the middle of what he called a critical moment in Tesla’s history, Doug Field, the SVP of engineering, took a leave of absence. Tesla says he is not leaving the company and is just taking time to “recharge.”
- As the company faces federal inquiries into the role its driver-assist feature, Autopilot, played in recent crashes, Tesla lost its main contact National Highway Traffic Safety Administration, Matthew Schwaller who was the director of field performance engineering. Schwaller has gone to a purported competitor, Waymo, to join its safety team.
- Before him, Jim Keller who led the software efforts of Autopilot, left to join Intel.
- Another senior Autopilot staffer, Sameer Qureshi, was hired by Lyft to work on the ride-hail company’s self-driving efforts earlier this month.
Now, there’s also been a shift in how the company is run. Musk said he is flattening the management of the company, meaning departments will report directly to him, in order to make it easier to communicate. Musk had already taken the reins of several departments — including Field’s, which was vehicle production. In February, Musk also took command of the Tesla’s sales and service arm after its head, Jon McNeil, left to be the COO of Lyft.
Confidence in Musk from Tesla’s following does not appear to be waning, however. As of the end of the first quarter of this year, Tesla still had more than 450,000 Model 3 reservations, and demand for the higher-priced vehicles, the Model S and Model X, reached record highs at the end of 2017, according to the company.
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