Tesla announces $35,000 Model 3, move to online sales

Keith Laing
The Detroit News
Tesla says base-model $35,000 versions of its Model 3 will go on sale.

Tesla Inc. is finally taking orders for the long-awaited $35,000 base model of its electric Model 3 sedan.

Until now, the least expensive Model 3 started at $42,900.

To stay profitable at that lower price, Tesla said Thursday is shifting all sales to online from its stores, although some busy locations will stay open.

CEO Elon Musk said Tesla is moving to an online-only sales model as part of its effort to mass-produce the Model 3. The company said the move will allow it to lower vehicle prices by about 6 percent, which allowed Tesla to achieve the $35,000 Model 3 price-point earlier than it says was expected.

“I think this really substantially opens up our ability to sell the cars,” Musk said. “It’s 2019, people just want to buy things online...There’s no other way for us to achieve the savings and be able to provide this car and be financially responsible."

Musk estimated there will be enough demand for Tesla to sell about 500,000 Model 3s per year. 

He said the new version of the Model 3, which has been touted as the key to Tesla's ability to reach into the mass auto market, will have a 220-mile driving range (the long-range battery will now have a range of 325 miles) and come with equipment that will allow it to be upgraded to be compatible with Tesla's semi-autonomous Autopilot driver-assistance system.   

"It will have all the equipment to upgrade to Autopilot for full self-driving," Musk said in a call with reporters. "It’s sort of future-proof in that sense."

A $37,000 Standard Range Plus version of the Model 3 will have an upgraded interior, offer 240 miles of range and a higher top speed.

Michael Harley, executive editor at Kelley Blue Book, noted it has taken Tesla three years to make a $35,000 Model 3 available. 

“At first glance, it sounds like a lot of bang for the buck," he said. "Performance, range and safety of the new entry-level Model 3 appear strong and price-point competitive, but the EV automaker must address its most conspicuous difficulties – maintaining and servicing all of its vehicle while keeping its owners satisfied."

Eliminating the stores, he said, "removes another layer of badly needed face-to-face customer care – time will tell if customers are consoled or dissuaded by these cost-cutting changes.”

The announcement of the availability of the base Model 3 comes on the heels of confirmation that the company lost nearly $1 billion last year despite a $139 million profit in the final quarter of the year. 

After posting two consecutive profitable quarters to close 2018, Tesla cut its losses from $1.9 billion in 2017 to $976 million. Musk said Thursday that expects the company's streak of profitable quarters to end in the first quarter of 2019, but he said it's a return to profitability in the second quarter of the year will be probable. 

Thursday's announcement came after markets closed. Tesla stock fell 3.2 percent to $309.71 in after-hours trading.


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Twitter: @Keith_Laing