Electric Vehicles

Tesla Delivers on $35K Model 3, Teases Model Y

Last month, Elon Musk made good on his long-standing goal: an electric car for the masses.

Though the Model 3 has been on the market (with limited availability) since mid-2017, it’s now available at the $35,000 price point. It comes with a standard interior. And the battery range is a modest 220 miles.

The Model 3 Performance version boasts dual-motor, all-wheel drive. It comes with a premium interior and starts at $47,450.

That extra cash will get you from zero to 60 miles per hour in just 3.2 seconds. And you can drive for 325 miles between charges.

It all sounds great. But the company is not without its problems. It recently laid off 7% of its workforce.

And Tesla is closing most of its galleries and stores, moving its entire ordering process online.

Musk said this move was necessary in order to sell the Model 3 at a profit.

Some industry execs are saying this will never work. Prospective buyers want to touch and feel the product; they want to sit in the car.

But Tesla’s buyers are a different breed – and I count myself among them. In 2018, 78% of Model 3 sales were conducted online. And 82% of Model 3 buyers so far have bought the car without a test drive.

Plus, Tesla is offering something unheard of in the auto industry. Buyers can take delivery of the car and drive it for seven days or 1,000 miles. If they don’t like it, they can return it for a full refund.

What’s Next?

The base model of the Model 3 is just the latest release from this fast-moving company. In fact, while I was penning this article, Musk tweeted…

The Model Y is Tesla’s long-awaited SUV crossover. The newest EV will be the company’s fifth since it was founded back in 2003.

Roughly 75% of the Model Y’s parts are identical to those in the Model 3. The Model Y will be built at Tesla’s Gigafactory in Reno, Nevada, and the first car should roll off the production line in 2020.

So what does the Model Y look like? So far, the only image Tesla has made available is a teaser…

My guess is the Model Y will look like a smaller version of the Model X.

This could be another big hit for Tesla. Today, 38% of all cars sold in the U.S. are crossovers. So Musk is hoping to scoop up a big portion of the would-be crossover buyers.

Pricing will be crucial to the Model Y’s success. But this EV is just the beginning of Tesla’s new models.

Its Semi 18-wheeler truck will be a game changer. And its electric pickup truck will surely garner a sizable portion of the American pickup market.

To Buy or Not to Buy (the Stock)

I first recommended Tesla shares to my readers when they were selling for just $37.

If you believe in the company – and in Musk – you probably want to own the shares. Analyst recommendations come down just about equally in “Buy” and “Sell” ratings.

However, Tesla’s current short position is $8.22 billion. That’s the third-largest among all U.S. companies.

Right now those short sellers are the only ones making money on Tesla. Shares are down roughly 22% over the last three months.

But I personally wouldn’t short the stock today. Here are a few arguments for owning it:

  • Tesla spends next to nothing on marketing, yet it receives a ridiculous amount of free media exposure. Elon Musk has 25.1 million Twitter followers.
  • Most customers are incredibly loyal. Tesla ranked at the top of Consumer Reports’ owner satisfaction survey three years running.
  • Its CEO is all-in. Musk owns 22% of the company’s outstanding shares. And his reputation and compensation are tied to Tesla’s performance.
  • Right now Tesla dominates the EV market. I don’t see that changing in the near term, even with competitors popping up right and left. It also sells the Powerwall home battery and the Solar Roof tiles.
  • Tesla drivers have access to a global network of Superchargers. The Tesla Supercharger reduces charging time by 50%.
  • Tesla has 100% control over the customer buying and ownership experience. This is something other carmakers have yet to match.

You can read more about Tesla and what I believe is the coming disruption in energy in my new book, The Energy Disruption Triangle, now available online.

Good investing,

Dave