The myth of the $35,000 Tesla Model 3
John Goreham's picture

The Ongoing Myth of the $35,000 Tesla Model 3

The Tesla Model 3's price is not what it is made out to be.

Tesla and the media continue to claim that the "Tesla model 3 starts at $35,000." But does it really? Not according to window stickers posted by owners online. And not according to Tesla if you read closely into the Tesla launch plan.

A Tesla with the $35,000 MSRP has not yet been sold. The 2017 Model 3 "started" as a Tesla Model 3 Long-Range. The long range is the only Tesla that has an EPA listing at this time, and the only one being delivered to customers. That car costs $45,000 to buy. However, that is only if the car is black. If it is any other color, add another $1,000. Here's how we came to that figure:
Base Price = $35,000 + Mandatory $1,000 Destination and Regulatory Doc Fee = $36,000
Long Range = $9,000
Total price of starting Tesla Model 3 = $45,000

Eventually, Tesla claims it will roll out what we presume will be called the "Short Range" Model 3 or Base Model 3. But it has not done so. The media who claim that the Model 3 starts at $35,000 have never driven one. Never seen one. Yet they continue to pretend that it actually does exist. Tesla Model 3s that have been seen and driven by media outlets cost $57,500. At least in the case of Motor Trend, who were provided a car that they say had a $45,000 "base price" and a $57,500 "Price as tested."

The Verge overviewed the Tesla Model 3's pricing and said of the $35,000 price tag, "barely anyone will pay that price." They went on to say, "This may be a product of uncontrolled hype, Tesla not doing enough to clarify what the Model 3 would be, or the company going too far to meet that $35,000 benchmark, but it wouldn’t surprise me if regular people get sticker shock once Tesla publicly releases the Model 3 configurator online."

Jalopnik took a look at the Tesla Model 3's prices and said, "That much-vaunted $35,000 price tag is kind of a technicality more than anything else." They concluded that "Pretty much any option at all, including a color that isn’t black, gets you to $43,000 very fast."

Why does it matter? For a few reasons. First, the Model 3 was supposed to be "affordable" and "mainstream." Affordable cars that are mainstream are cars like the Honda Civic Hatchback (which is larger than the Tesla Model 3) and the Toyota Camry. They run in price from roughly $22K to roughly $35K in price. Including the destination fee. A car that costs $57,500 is not "affordable" and is unlikely to ever be "mainstream."

Unlike the Chevy Bolt, the Tesla Model 3 will not be discounted by the Tesla dealerships, or whatever Tesla prefers to name them. Elon Musk has been very clear on that point, saying that Tesla must "never discount a car."

The Tesla Model 3 launch has gone about as badly as any automotive launch in history. With sales of the Model 3 now about six months behind the promised schedule, the short-range Model 3s are being pushed into late 2018 or beyond. When those 2018 model year cars launch will they still cost $36,000, or will Tesla raise the price? Even more important, with the short-range $36,000 cars being pushed out, will the federal tax deduction even be available to those "mainstream owners" or will it have run its course by then?

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Lying to the public about pricing is now a Tesla tradition. Their Model S was advertised for over a year as a "$49,000" car. None were ever built that cost less than $60,00.
It was clear when they first announced the car that it would be $35,000 for the base model with "over 200 miles" per charge. They never said "over 300 miles per charge" for the base model. Long range version is an upgrade to that, so of course it would be more. Why would someone get sticker shock when the short range specs have always been $35,000, 200+ miles? Options cost more on ALL cars. I've never seen an option that is free on a car. Even parallel options will have one costing more. It was always known that employees, owners, and those on the west coast would get vehicles first, so they aren't 6 months behind schedule. They are currently delivering to them now. They have pushed my delivery date back only by a month, just as they did with those that are getting theirs this week. Also, my reservation says the standard range (220 miles) will be available in early 2018. So, how has this been the worst in history? I'd even say the Bolt was worse. They are just now getting vehicles to the entire nation, after starting in 2016 only in California. You said yourself that no one has seen the base version, but somehow The Verge proclaims that no one will buy it. People are buying the Bolt and it's, well, a Bolt, and it costs $2500 more than Model 3's base version, with only 18 more miles on a full charge. The Verge has no idea if people will buy it.
If you really want to be honest about this you would point out that every car commercial lists the base price of the vehicle and then a disclaimer that the car shown has upgrades that cost more at the bottom. So the whole idea that Tesla is lying in BS. Also, Tesla never said the Model 3 would be a Honda Civic competitor... Again and again they compare it to the BMW 3 series and Audi A4. If you compare it those it's very competitively priced.
Fair enough Serge. The difference being that commercials are generally for cars one can actually own at the time of the commercial. That have actually been built and sold to consumers. Tesla has not delivered a base Tesla for "$35,000." The car "starts" at $45K.
While Tesla is ALWAYS late in delivering on their promises they almost always do deliver. The Model S and the Model X were also delayed and had their issues at the beginning. This is all in Musk's management style make unrealistic pie in the sky timelines to push everyone as hard as possible and when they fail to meet those deadlines just move to do as well as they can. The Model X was a perfect example it was late to arrive and had tons of issues when it first released but I can tell you as an owner (bough it last summer). Today the Model X is a fantastic car. Yeah the Model 3 production ramp up will be 6-12 months late but if he used normal processes and schedules it would be 18 months from now. Also, Tesla tried to sell low range Model S and nobody wanted to buy them. I have a feeling you will see few "low range" Model 3's. I think that's more a success than a failure because I've never seen anyone try to push their stripped down cars.
1. You keep on calling stretch goals, "promises". Cheap shot. 2. Tesla has a history of adding content as battery prices fall, not raising the msrp. 3. Tesla was very clear that they would be delivering "high content" vehicles at the start, and lower cost versions would come over time. 4. A "high content" BMW 3 series goes for $44995 similarly equipped, (LED lights, seat warmers, GPS, etc.) and by the way anything but black will cost you approximately $700 more...not that far from the $1000 you snarked about. 5. You never, I repeat NEVER include any comments about running costs and maintenance savings. Perhaps you could benefit from watching Ben Sullins excellent deep-dive on running costs on You Tube. Your rants are ill-informed.
Good points Allan. I am ill0informed about one key point. The Tesla Model 3 complete maintenance charges from Tesla. Because Tesla has not posted them yet. The Model X and S are two of the most expensive vehicles to maintain according to the manufacturer's own recommendations in the world. Hopefully, the Model 3 will differ. We just don't know. All we can do is speculate. On a car that has been "for sale" since July. Here are two articles we have done on the costs of maintenance of EVs with Tesla as a focus. and Once Tesla sets its maintenance costs for the model 3, we will report them quickly. We have written dozens of stories about the energy costs of operating an EV vs. the costs of operating a comparable vehicle with a hybrid, diesel, or conventional gasoline engine. Here's a recent one reporting AAA's findings.
Serge, thanks for the opportunity to expand on the Civic Hatchback reference in the story. It is key to the point about pricing and volume. Tesla's Model 3 will be similar in many measurable ways to the BMW 3 Series (which has a huge range of performance). However, Tesla has not promised BMW 3 Series sales volumes. BMW only sells about 6,000 3 Series cars in the US each month. That would be great for an EV, but terrible for any "mainstream" volume car. Tesla has instead promised to ship 5,000 Model 3 cars per WEEK starting this month of December. There are only a handful of car models in the U.S. market that reach that massive volume. The Civic is one. And it has a similar size to a Model 3 and has similar performance in many ways to the proposed specifications of the Short-Range Tesla Model 3 Tesla has promised to someday build. If Tesla's Model 3 only reaches the sales volume of the BMW 3 Series it will be an utter failure by Tesla's own metrics. Tesla has promised to be delivering more Model 3 cars than the entire segment that BMW leads. The combined sales of the BMW 3 Series, Audi A4, Lexus IS, Mercedes C-Class, Infiniti Q whatever, and all the rest. So far it has not sold more than a few hundred in any given month. But Tesla does have a huge number of reservations. The problem, so far, is production.
I don't know how to respond to your contradictions. On one hand you say that they would have to outsell everyone in a segment and then you say they already have 500k reservations and all they have to do is make the car. I'm good with what you said.
Having a very large list of reservation holders and very low sales is not a contradiction, and is, in fact, the current reality. There is a big difference between a reservation and a sale. A reservation requires a small deposit ($1,000) from a customer who may later buy the vehicle. It is refundable. In return, the reservation holder gets very little. With Tesla, the reservation holder does not even get to configure their vehicle until shortly before delivery. A "sale" in any business is very different. A sale is a transaction in which a product of service is delivered, an invoice is generated, and a full payment shortly follows. Nobody disputes that the Model 3 will be a great car to drive, or that Tesla can build a following, or that the reservations list is unique and impressive. Tesla is bleeding cash and losing money. Actual sales would turn that around.