“Will Tesla be the next Apple … or will Apple be the next Tesla?” I asked back In September. For now it’s clear Tesla has pulled off an Apple-style product launch with the remarkable pre-sales success of their Model 3 electric car.
Demand for the Model 3 was so great that Tesla’s $1000 pre-sales downpayment brought the company $276 million in its first weekend. That’s bigger than the mere $248 million in sales brought in by “Star Wars: The Force Awakens” in its opening weekend!
The staggering pre-sales of the Tesla Model 3 electric car seems to have caught everyone by surprise, including CEO Elon Musk, who arguably should have asked for more than $1000 down — especially since that money is refundable until Tesla starts building your car.
“Tesla’s Model 3 Preorder Numbers Are Way Bigger Than Anyone Expected,” explained Gizmodo, noting that one “survey said that conventional wisdom was on 55,000 pre-orders in the first 72 hours.” It was 276,000 — and Bloomberg reports that, ultimately, “reservations might exceed 500,000.”
Certainly those are amazing numbers for any car, let alone one that you can’t test drive, won’t be available for over a year, and is made by a start-up company that hasn’t even built 100,000 total vehicles yet. That’s clear from this chart of annual sales of the world’s top-selling cars:
The Model 3 could end up as the best-”selling” vehicle this year — or at least the most ordered.
Even so, it’s been obvious for a while that an affordable, long-range electric car would be a game-changer. As I discussed in February, for instance, analysis by Bloomberg New Energy Finance made clear that the key price point for a 200-mile range electric vehicle is to get it as far below $60,000 as possible:
And so both the Model 3 and the Chevy Bolt — 200+ mile range electric vehicles (EVs) priced respectively at $35,000 and $37,500 before tax incentives — were major game-changers of serious interest to perhaps one-third of new car buyers in this country alone.
As the first two affordable and practical (i.e. long-range) EVs ever brought to market, high demand should not have been a surprise — much as the remarkable success of the 2004 Prius should have been no surprise since, as I’ve written, it was “arguably the world’s first truly practical and affordable (i.e. mass market) green car.” Interestingly, Toyota famously “did not make enough Priuses because they simply underestimated the car’s appeal.”
The fact is any game-changing green product — one that is practical, truly green and affordable — is going to achieve huge marketplace success. That’s a major reason why rooftop solar exploded when “ferocious cost reductions” of that practical and super-green product made it cost competitive in a critical mass of markets, as Climate Progress explained in 2011.
Why didn’t the Chevy Bolt didn’t generate the excitement and pre-orders the Tesla Model 3 has? Well, aside from the fact it does not actually appear you can preorder the Bolt at the vast majority of dealers, you might as well ask why Samsung doesn’t generate the buzz Apple does.
In its Monday piece on the Tesla Model 3 rollout, Inc. magazine made “a direct comparison to Apple and how they market their products,” including the “veil of secrecy that is only partially obscured”:
We know the car will have a massive tablet that looks like an iPad (the bigger 12.9-inch version not the smaller one). It will go 0–60 in four seconds, or close to what you’d expect in a Corvette Stingray. It will support Autopilot for autonomous driving on the highway. And, it looks like a spaceship both inside and out. It screams Apple from every B-pillar.
There is another more mundane reason why no one should have been surprised pre-orders were going to go through the roof. The $7500 federal EV tax credit is supply-limited. It starts to phase out after an automaker hits 200,000 cumulative sales of all its EV models.
“Tesla crosses the 200,000 mark around June 2018, and the subsidy begins to decline in October 2018,” as Bloomberg estimated last week (based on a “sales growth rate of 50 percent for the projections”). Here’s the key chart:
Since current Tesla owners have first dibs on the Model 3 — and sales start with priority buyers in California and then go east — it doesn’t seem like many non-Tesla owners outside of California are going to be able to get the $7500 subsidy. That’s another reason Musk should have asked for a bigger downpayment.
NOTE to math geeks and would-be Tesla Model 3 buyers: You may wonder why 276,000 pre-orders times the listed price of $35,000 for the Model 3 does not result in $9.66 billion of cars for Tesla, but rather $12 billion. That’s because, as Elon Musk tweeted last week, Tesla expects that “selling price w avg option mix prob $42k.”
That means early buyers who get the full tax credit and want the stripped down version will be dishing out maybe as little as $27,500 — or even less in states like California with its own $2500 tax credit. Later buyers who want the average option mix will be paying a whole lot more.
Finally, I think one reason everyone underestimated the demand for the Model 3 is that the media had been focused on the fact that U.S. EV sales had appeared to stall in 2015. “Electric Cars are Losing the ‘Battle’ to Low Oil Prices,” as U.S News & World Report put in in December. The Washington Post has been predicting the demise of the EV industry for years, and was almost gleeful that 2015 sales had dipped slightly from 2014 levels.
But in fact while the EV market while did drop 3 percent in this country, it doubled in Europe and tripled in China.
So why did the EV market stall in the U.S. starting around January 2015? Certainly many in media believe it was low oil prices — and that no doubt has played a role especially since, with our low gas taxes, a drop in crude oil prices has a bigger impact on consumer preference here than it does in places like Europe.
Certainly everyone I knew interested in an EV was starting to realize that Tesla was for real and that the Model 3 was the long-range, affordable EV they should wait for. Coincidentally (or not), Chevy was also getting headlines in January 2015 like “The Chevy Bolt Promises 200 Miles EV Range For $30,000.”
So it is entirely possible that 2015 U.S. demand growth for EVs stalled in part because lots of people decided to put off their EV purchase until the Model 3 or Bolt were available — something that happens to sales at Apple and many other companies who announce a next-generation killer product.
Either way, the EV naysayers were wrong, and the electric vehicle revolution has finally begun in earnest. And this is a more evidence that oil demand will may well peak by 2030.