Model S and X have Paid for a Good New Affordable Sibling

First things – this industry is  now consistently witnessing a CEO who gets a rock star reception almost everywhere, stumbles and fumbles in his unprepared speech that is to the point unlike his counterparts and unveils new products that immediately sets off a chain reaction at other car companies. Welcome to the world of Elon Musk and Tesla’s newest accomplishment and unveil –the Model 3.  

Debates, reviews and bashing are going to start but to me the one thing that continues to impress is the pre-ordering trend that Tesla seems to be pulling off with as much ease as Apple does with a much lower priced product. One can attribute the pre-orders to lack of production volumes or lack of scale but the fact that Tesla has earned over a billion dollars in pre-orders for a product that will be delivered in late 2017 is a killing trend. For anyone trying to build a brand in this dated automotive industry that is used to doing hard selling with tons of incentives, the best example is Tesla that is so confident of its customer loyalty and building brand image that it brought the trend of pre-orders. And again the company defies conventions by still going with its no dealer approach. I wish some of these could have a positive ripple effect on automakers like GM who can benefit from this approach for a good product like the Bolt.

The fan boy and the analyst in me both had fun watching the Tesla unveil yesterday and yes I did take a ton of notes. The interesting ones first (and sorry if it is something you read already)

• Promising 5 star safety ratings across all variants of the Model 3 and most importantly 5 star everywhere (all relevant global standards) which is not an easy task.
• Even the base variant will do 0-60 Mph in less than 6 seconds. The bare minimum range will be 215 miles.
• The interesting part – all variants of the Model 3 will have autopilot hardware and safety features standard. This includes mono camera, radar and ultrasonic sensors with Tesla’s own geo-localized map. For a $35k car this is good and will make a few competitors rethink its feature portfolio. One can debate if Autopilot is more fluff than useful but despite all the craziness it is a semi-automated system that has been fine-tuned to serve the customer.
• Seats 5 adults comfortably and to achieve this Tesla has done a couple of interesting things – compressed the IP and moved the front seats a lot closer, in fact going by the unveil I don’t think the Model 3 even has a instrument panel. This allowed them to play with the leg room in the rear and the nice thing they added is a single continuous glass pane in the rear that offers roominess and a nice view.
• Supercharging is standard across all models. Quick update on superchargers – as of currently there is about 3608 superchargers worldwide and 3689 destination chargers and by 2017 the number is expected to double to 7200 superchargers and over 15,000 destination chargers. This level of commitment to building an infrastructure to support a specific technology is part reason for that glowing customer loyalty (besides the car of course).
• Gigafactory is up and running and ready to take on the challenges for the Model 3 production. And as of yesterday there were over 130,000 pre-orders for the Model 3.
• Delivery expected by end 2017 for those lucky initial few. Am sure there are going to be slippages.
• Pricing will be $35,000 and Mr. Musk promises that even the base version without any options will be well worth the money.
• Quick update on the Tesla stores- currently over 215 in EU, NA and APAC and expected to touch 441 by end of 2017.

All that data aside, let us look at the interesting takeaways

• Built on a completely new platform - My colleague and expert vehicle guy Vishwas Shankar tells me that the Model 3 is based on a completely new platform. Roadster was gen 1 and S was gen 2 but the 3 is based on a completely new vehicle platform, one that had some innovation done on the battery chemistry level that they could play around with the vehicle dimensions and still offer a front and rear trunk space.
• U-Turn on the HMI Side - The cockpit side is where Tesla has done a U-turn. The Model 3 has no 12 inch instrument panel, no 17 inch portrait mode display but sports a 15 inch landscape oriented screen (literally a mini TV). But the cool part is the lack of a single button or knob going with the touch philosophy of Tesla.
  • The UX strategy built around pillars like innovative, empowering, intelligent, and sophisticated and inspiring has once again shown a concept where everything resides within 1-2 clicks on the touch screen. And as confirmed by an article on Jalopnik, this is what Tesla intends to do in the production version of the Model 3 as well. Very recently I was questioned by a tier 1 supplier on whether other automakers will follow Tesla and go away with buttons and my answer was none as the closest one (some call it a rip off) Volvo still has a few buttons to do the mundane tasks of HVAC control.
• Entry/Mid Luxury Ideas? - An interesting analysis that I saw from Bloomberg and I recommend you all to read - https://cleantechnica.com/2016/03/24/tesla-model-3-primed-to-dominate-entry-level-luxury-car-market-bloomberg-reports/. Surprise one was the fact that Tesla Model S outsold the Mercedes and BMW and Audi’s in its class in 2015 and an interesting angle to pursue on the Model 3 is to pit it against the giants in the entry level luxury market. This is a market where BMW and Mercedes Benz dominate but with that price tag and customer loyalty there could be a few ripples in this segment. And remember this is a segment which many automakers want to win ranging from the Acura’s to Lexus to Infiniti to even Hyundai. Tesla has beyond doubt proved its worthiness as a luxury product but the Model 3 is something I believe will positioned as more regular mass market than luxury just to differentiate and not let any cannibalization happen in a limited line up.
• Bolt has an Upper Hand? – Chevrolet Bolt is going to retail at $30,000 post rebates, has some cool features like the rear view video mirror, trademarked features like regen on demand (regenerative braking), Bluetooth low energy, infotainment/digital cluster (From LG?) and a 200 mile range. From the face of it, Model 3 lacks the features that Bolt has but remember the fan base and loyalty that Tesla customers and intenders have are much higher than what GM had (For the Volt). The fact that the journey for Tesla’s mainstream focus started with the really high end Model S makes the 3 an ideal vehicle for aspirants looking for an affordable choice. As for the one year upper hand that GM has I don’t think that’s much of a factor because the pre-orders on the Model 3 will determine its fate in the longer run (Same story with the Model X where wait times was immense but still had satisfied customers). And the nationwide dealer network that GM claims it has is nothing compared with the direct OTA channel that Tesla has with its customers.

On the whole the Model 3 is a really important vehicle not just for the EV industry but for automakers who are struggling to place EV’s in the right place in their overall portfolio (and not make it seem like a toy option).  I have read stories on Carlos Ghosn and his turnaround of Nissan, Sergio Marchionne and his super efforts but what sets Mr. Musk apart (yes agreed he owns a much smaller entity than the others) is his approach to the automotive world, which in every way and with his every launch seems to point at one thing – defy the conventions in this dated industry. Yes Tesla is going to face a lot of issues in the coming years as it grapples with issues that other automakers do in the volume game (16% net margin anyone?) but the products that are coming out are for sure setting new standards in their respective class .