What Everyone Misses About The Tesla Model 3
This is a mortgage debt reduction site but I couldn’t ignore the huge popularity my last post, Tesla Model 3 – Australian Price, Range And Specs (Part 1) got. It very quickly rocketed to the top of the most viewed pages on this site and I really enjoyed writing it so I thought I’d come back for a second round now that we know even more about the Model 3 and Tesla. In the next few posts to come I will be covering much more traditional topics that directly relate to mortgages so don’t worry if you feel that I’m going off topic, critical mortgage advice is coming soon too!
So on May 31st Tesla announced a lot more details on the Model 3 including an official website and ordering system. Some new info we got clarification on (besides the fantastic looks of it above) are:
- 345km range (minimum)
- 0-100km/h in under 6 seconds for the base model
- 5-Star safety rating in every category
- Supercharging (will expand on this later)
- Autopilot (will expand on this later)
- $35,000 USD starting price as per before (without incentives)
In Part 1 I also estimated the following extra bits of info that I think still stand:
- $55,000 AUD+ Drive Away (minus $2,500+ fuel/maintenance savings every year)
- Can charge up 250km’s of range in ~25 minutes at Superchargers
- 1.8m Wide And 4.5m Long
- Delivery Late 2018 / Early 2019
Tesla has since announced that they are increasing their roll out speed of the Model 3 due to the huge demand that was received. Elon stated that they were expecting in the vicinity of 60,000-100,000 pre-orders. They blasted past that mark before he had even announced the product!
After a week or so passing and Tesla having the chance to weed through all the pre-orders and screen them properly for duplicates from speculators and so on they cancelled 4,200 orders. They also had around 8,000 cancellations from customers but still ended up with a grand total of 373,000 representing around $15+ billion in sales in about a week making it the single biggest product launch ever on record.
Not too shabby!
The Different Models
So now that we know the base Model 3 is aiming for 345km’s range we can actually do some more extrapolation as to what the various models and levels will be. Just like with the Model S and Model X, Tesla usually has rear wheel drive and all wheel drive (dual motors) options along with performance and two different battery sized versions for you to mix and match.
Given the latest Model S can get 455 km from a 70kWh battery that equals 6.5km/kWh. Now the Model 3 will have a lower coefficient of drag and is reportedly 20% smaller (and thus a decent percentage lighter too) which means it should be able to get more km’s out of 1kWh of power. Combining this with better battery technology which means lighter batteries it’s quite possible the base Model 3 will be able to get around 7.5-8km/kWh. And given the range is supposed to be 345km that would make for a 46-43kWh battery.
Now based off these rough numbers I’d say that it’s a bit of an even chance that the Model 3 could be either a 40kWh or 50kWh car. If there’s been a bit more advancement in battery technologies or Tesla has managed to eek our just that bit more they could quite possibly get 345km’s out of a 40kWh battery according to the numbers. On the other side it could be that they’re not quite there yet and go for 50kWh batteries instead. The 40kWh battery is obviously better as it requires less cost, less weight, less room and also charges the car up quicker but I must admit I’m still leaning towards it most likely being a 50kWh battery so I’ll run with that for now.
There seems to be a general consensus that there will be four different versions of the Model 3:
- Model 3 50 – Base Battery
- Model 3 50D – Base Battery + Duel Motors
- Model 3 70D – Upgraded Battery + Duel Motors
- Model 3 P70D/L– Upgraded Battery + Duel Motors + Performance Edition / Ludicrous Mode
If you’re wondering where the “70” came from, it is just me assuming that the upgraded battery will be 20kWh’s on top of the base battery as this is what the Model S and X already do. As such it should have a higher range due to the dual motors and extra battery, likely in the vicinity of 500km’s+ I’d imagine.
In his unveiling speech, Elon specifically stated that “All Model 3’s will come with Supercharging standard“. This was of course met with a big roar from the cloud but Supercharging has historically had two parts.
There’s the actual hardware in the car so that the batteries can take the huge power that is outputted by the Supercharging stations and then there is also the right to use them. With old Model S cars, you actually had to buy an “upgrade package” to get Supercharging enabled however now it comes as standard on all Model S for free.
After the announcement Tesla actually changed their websites wording a bit prompting many to question exactly what was meant by “comes with Supercharging standard“. Did it just come with the hardware as standard? Or did it come with the hardware AND the right to use Superchargers as standard? After a lot more poking and prodding Elon answered this question at the 2016 Tesla’s annual shareholder’s conference meeting. A shareholder asked Elon directly about how Tesla is going to handle the huge new demand of Model 3’s and their usage at Supercharging stations.
Obviously, [Supercharging] fundamentally has a cost. The obvious thing to do is decouple that from the cost of the Model 3. So it will still be very cheap, and far cheaper than gasoline, to drive long-distance with the Model 3, but it will not be free long distance for life unless you purchase that package. I wish we could, but in order to achieve the economics, it has to be something like that. – Elon Musk
After hearing him speak at length about Tesla and the full reasons for making the Model 3, it’s clear that Elon would LOVE to include free Supercharging for life with the Model 3 but that it’s just not financially possible to do that which is unfortunate. The fact that Supercharging stations are there across the country and are even an option is still a huge part of what makes Tesla’s cars great though.
Similar to Supercharging, in the unveiling speech Elon stated that the Model 3 “will come standard with Autopilot Hardware” and that the “Autopilot Safety Features will come standard in every car, you won’t have to buy an extra add-on“.
Again most people don’t realise it, but there are in fact TWO types of Autopilot systems in the Tesla Model S. Taken directly from the Model S webpage:
Autopilot Safety Features (included):
- Daytime running lights
- Available Smart Air Suspension for raising and lowering ride height
- Six airbags: head and pelvis airbags in the front plus two side curtain airbags
- Electronic stability and traction control
- Four wheel antilock disc brakes with electronic parking brake
- Front and side collision avoidance
- Blind spot warning
- Lane departure warning
- Parking sensors
Autopilot Convenience Features (costs $3,800 to upgrade):
- Automatic steering
- Traffic-aware cruise control
- Automatic lane centering and changing
- Parking space detection
- Self parallel parking
- Automatic high/low beam headlights
Once you understand what the two different packages are it makes it quite clear that the Model 3 will most likely be structured the same way. You’ll have some quite advanced safety features thrown in for free plus all cars will be built with the convenience features in them, but they won’t have it software enabled. You’ll have to pay extra for that and judging from what Elon has said, it should be cheaper than what the Model S charges for the upgrade. My guess would be around the $2,500 mark for full Autopilot upgrades.
That might seem a decent amount, however given what you’ll be getting you’d be pretty crazy not to get it. The Model S has what’s called the EyeQ2 SoC inside it which is a specialised computer produced by the company Mobileye. This gives it the ability to drive autonomously on highways and it’s been doing a fantastic job given all the reports I’ve seen and read. People report being able to have the car drive itself on freeways for hundreds of kilometres without ever having to take over. The Model 3 however will most likely have the next version of this chip in it, the EyeQ3 system which according to Mobileye will enable it to not only autonomously drive in highway conditions, but on country roads as well as in city traffic.
Given that covers the vast majority of where people drive it sounds like it will be near on fully autonomous. You’ll likely have to keep an eye on the road/car at all times for now (at least until the regulations catch up and technology is proven a bit more) but I wouldn’t be surprised if it’ll be able to drive you directly from home to work without disengaging the autopilot once in most major cities and roads. Quite the next generation of cars!
Speaking of next generation electric cars, Tesla ones in particular aren’t just great due to their speed or autonomous features or even extra safety. They’re on a whole other level when it comes to ongoing costs like fuel and maintenance.
In Part 1 I mentioned that petrol cars commonly get anywhere from 6 to 15 litres per 100km. Given the Model 3 is supposed to compete with other small luxury cars, let’s have a look at the BMW 318i. It gets a combined fuel efficiency of 5.4L/100km which at say, $1.30/L would cost roughly $7.02/100km. Comparing that to a 50kWh Model 3 that gets 345km at say, $0.18c/kWh for electricity comes to $2.60/100km. Depending on how far you drive each year that’s a saving of:
|15,000km – $663/year|
|20,000km – $884/year|
|25,000km – $1,105/year|
Add onto this maintenance and it starts to make even more financial sense. Internal combustion cars have as many as 2,000+ moving parts vs the Tesla Model S which has 18. That’s a 100x reduction and as such you would expect a similar reduction in things that break and thus need repair. And that’s just the Model S, the Model 3 has been specifically built to be far less complex and easier to manufacture so one would imagine there’d be even fewer moving parts. In fact, the only real ongoing maintenance costs of Tesla’s cars are the tires and windscreen wiper blades. There’s no oil to change, no fluids to refresh, no spark plugs to replace, no fan belts that break, no coolant to replace and you don’t even have to replace the brakes as they are equipped with regenerative braking which allows the brakes to last almost as long as the car.
On top of that Tesla has already stated that they refuse to make a profit on service since that would be a conflict of interest. Yeah, you read that right. That is pretty much the complete opposite of what every other car manufacturer does! In a recent financial report they backed this statement up with their records showing that their services division only made a 1% profit on servicing. That’s a long way from how the other car manufacturers treat “services and parts”, often being one of, if not the biggest money maker for them.
So if you’re basically only buying tires every 5 or so years, it isn’t going to cost you much. Let’s estimate $300/tire for a decently good set so $1,200 all up or $240/year on average. Compare that to a yearly service fee of probably $500+ for the BMW on top of the tires and the overall ongoing extra costs of services and fuel are anywhere from $1,200/year – $1,600/year. When most people keep their cars for 5-10 years that’s an additional saving of $6,000 – $16,000 over the long haul.
What Everyone Seems To Miss
So above we’ve covered a number of separate features and benefits of the Model 3 and the media seems to report on them every now and then which is nice. However what I’d like to make clear today is that the sum are greater than the parts. Having cheaper running costs is great, but that alone isn’t going to cause a great change.
You see, there are new technologies that come along all the time. A new type of computer CPU that makes your laptop quicker. A new building material that is the same strength but more flexible. Not a great deal of them make the cut of being truly disruptive technologies though because to be something that fully disrupts and transforms the entire industry it has to be a complete no brainer.
For example CD’s vs MP3’s. No one in their right mind would opt to continuously buy, maintain and carry around with them everywhere a CD player and numerous CD’s when it’s actually cheaper to just pay $9.99/month and have unlimited access to virtually all music at a whim. You’d be crazy trying to argue that CD’s are “better” than MP3’s or that MP3’s will “never succeed” and for all the interest that the general media gives electric cars, people just don’t seem to realise just how disruptive they will be.
In a few years (2-3), you will have the choice between that same $60,000 BMW 318i or a $60,000 Tesla Model 3 (Australian prices). Assuming you’re someone who has that money and is wanting to buy a nice, smallish luxury sedan let’s have a quick look at how the two cars stack up against each other:
|Tesla Model 3||BMW 318i|
|Price:||$60,000 (including Autopilot)||$60,000|
$240/year for tires + $520/year for electricity @ 20,000km’s/year
$240/year for tires + $500/year for servicing + $1,404/year for fuel @ 20,000km’s/year
|0-100km/h:||Under 6 seconds (plus access to torque at all speed)||9.1 seconds|
|Autonomy:||Highly likely that it’s fully autonomous and should be able to drive itself almost anywhere while you relax||Currently only has “active cruise control” which keeps a safe distance from the car ahead, you still have to drive the car|
|Safety:||Without an engine in the front, it allows for more crumple zones which should give the Model 3 one of, if not the highest safety rating. Also assuming you use Autopilot often, that will also help prevent accidents||5 star safety rated|
It’s like comparing CD’s to iTunes.
The Model 3 mashes the BMW.
There are actually even more advantages but I think at that point, most people will have already made their mind up. They’ll be buying the Model 3 and not even considering the BMW, end of discussion. And while we have to wait a few years to see this particular case play out in the smaller luxury car segment, it’s already happening right now with the Model S and the larger luxury car segment. The Model S was the best-selling large luxury car in the United States in 2015 as the below numbers show.
Every single luxury car manufacturer took a HUGE hit and Tesla was the only one mopping it all up. They are now the number one large luxury car seller in the US with a share of more than 26% of the total market. That’s only after a couple of years and with most people still not even really knowing about Tesla.
This is what market disruption looks like!
Those numbers are just going to get bigger and bigger as the years pass by and BMW, Mercedes, Audi and Jaguar all do nothing as their current cars just cannot compete no matter what improvements they do to them. It’s like when Apple released the iPhone the rest of the smartphone industry continued on with producing the same old dumb phones year after year while Apple and then Android sucked up all the market:
Then you have the next step.
Once the Model 3 drops, you have the same huge disruption but at a different price point. Currently the disruption is happening at the very highly priced large luxury car area (around the $120K+ mark). In another 2-3 years it’ll be disrupting the $60K+ range. Looking towards 2023 or so, the disruption will be even lower, likely in the $25-30K range.
It will take time, but slowly prices will fall and at each new pricing level buyers will ask why they should pay more to own a petrol car that is wayyyy slower, less safe, less technologically advanced, costs more to run and maintain, doesn’t autonomously drive itself everywhere, is worse for the environment and handles worse.
And this is what I think most people don’t understand or see coming.
This devastating, continuous disruption to lower and lower priced cars that virtually no other auto maker is in the position to handle.
Furthermore there is the issue of resale value to consider. As the world progressively moves to electric cars, it’s going to be less and less desirable to own a petrol or diesel one. No one wants to be the last one holding the ball! In fact, Norway have reportedly already voted to entirely ban new fossil fuel cars from being sold come 2025! They’re not alone either, India and Netherlands are also looking into doing the same thing too. Personally from what I’m seeing in the industry I think by 2025 it’ll be a bit of a moot point. Sure it might be illegal to buy a petrol car but no one will care as no one will WANT to buy one for all of the above reasons!
To be honest I can’t wait to sit back and watch every existing car manufacturer get taken to school on how to build and support a proper car as they’re all either going backwards or just dabbling. Perhaps they will all go the way of Kodak, Blackberry and Nokia, once huge and powerful companies that we now all snigger at because they are completely obsolete. Or perhaps they will take a huge hit and jolt themselves back into supporting the new technology and survive. Either way, grab the popcorn!
So were you one of the ones that reserved a Model 3? Did you wait in line? And what are you the most excited about with regards to the Model 3?