Why this Tesla car shopper sped away from the Model 3


I put a $1,000 deposit on a Tesla Model 3 the day it was announced. At the time I thought of the Model 3 as a smaller, cheaper version of the Model S. So a few days ago I stopped by a Tesla store to check out the Model 3. I was at the store not as an investor evaluating Tesla’s latest product but as a buyer, ready to buy.

The shopping experience ended up being quite odd. Tesla’s Denver store did not have a Model 3 in the showroom or available for a test drive. I was told they will not get one for several months — the Model 3 is infamously behind  schedule. But still, Tesla is producing thousands of cars: Why not send 100 to their stores so people can see and drive before they buy?

I thought it was also odd that when I asked a salesman to show me pictures of the Model 3, he did a Google search. He did not even have pictures of the car on Tesla’s internal site (the one he used to show me pricing options). Tesla’s external site also doesn’t have photos of the Model 3, just a few videos.

When in you are in a showroom that has only the Model S and Model X on display, it is easy to imagine that the Model 3 is just a smaller version of the Model S. It is not. In all fairness, Tesla CEO Elon Musk was clear about that when he expressed the concern that the Model 3 would hurt Model S sales. The Model S is a luxury car with a soft suspension; the Model 3 is a smaller, utilitarian car with a hard suspension.

Also, at $35,000, the basic Model 3 is truly basic. If you want a semi-decent car with leather seats and safety sensors, the price quickly jumps to $55,000 (all-wheel drive won’t be available until late 2018). If you order a Model 3 today, there is a chance you may get tax credits (which could be as high as $12,000 between federal and state), but this completely depends on Tesla’s production schedule, which so far has been disappointing. If your car is delivered after June, the tax credits rapidly decline and then disappear.

When I put down the $1,000 refundable deposit, I was making an emotional but semi-rational decision: I gave Tesla an interest-free loan to reserve my place so that in the future I could make a rational decision to buy the Model 3 or not. As that time approaches, it’s clear that it’s hard to commit $50,000 to a car that is unseen and undriven.

Also, as much as I’d like to buy an electric car, it is difficult not to compare the Model 3 to internal combustion engine cars. For instance, at $35,000 the Model 3 competes with a fully equipped, roomier hybrid Honda Accord. By the way, when I say “fully equipped”, I mean everything from the leather and safety sensors to premium packages. At $55,000 the Model 3 is competing with real luxury cars like the Lexus ES, which comes with all the bells and whistles for $44,000.

To be sure, comparing an electric car to its gasoline-powered peers is not fair. But in the end, a car should get you from point A to point B. Yes, the Model 3 saves money on gas, but I don’t see how rational people (outside of some enthusiasts) will pay $11,000 more for a utilitarian car than, for example, they would pay for a roomier, fully equipped Lexus ES — which has been stably in production for a long time and doesn’t have any of the software and hardware bugs that are crawling all over the Model 3. (And unlike with models S and X, Model 3 owners don’t get to use Tesla’s supercharger network for free.)

As I was contemplating writing a check for $55,000, the Model 3 started to feel less and less appealing. I started thinking about a three-year-old Model S instead (plus, I’d get to use Tesla superchargers for free). Or maybe I should wait for electric cars from other automakers.

I share this experience because I’m probably not the only one thinking this way. As the dollar meets the road and a lot of Model 3 depositors visit Tesla showrooms, they will likely have similar second thoughts. Consequently, Tesla may discover that lower Model 3 production levels will be sufficient to meet declining demand after a raft of deposit cancellations.

I am not short-selling Tesla stock, and outside of my $1,000 unsecured loan (my deposit) neither my firm or I have a position in Tesla. But it is becoming difficult to see how the Model 3 will be the car that leads Tesla to profitability. As for my deposit, I’ll be getting it back before it’s too late.



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