Analyst Predicts Model 3 Production To Be Much Lower Than Tesla Says

8 months ago by Steven Loveday 100

Tesla Model 3

Tesla Model 3

According to a video posted by Bloomberg this week, Morgan Stanley analyst, Adam Jonas, is in in disbelief regarding Tesla’s Model 3 production estimates and the $35,000 starting price.

Tesla Model 3 Interior

Jonas told Bloomberg:

“Our forecasts are much more conservative than the company’s forecast both this year and next. We expect this vehicle to go into a kind of soft launch mode into the fourth quarter this year and our forecast is for 2,000. Not 20,000. Not tens of thousands…delivered at the end of this year.

The point of this is just to have those initial deliveries done to get the data and the initial feedback from the community. Next year, we’re at about 80,000 units. Yes, they’ve talked about 400,000…that kind of pace of production. We are nowhere near that. Even if you go out a few more years to 2020, our numbers are less than half, maybe a third of what management is implying that they can do. In spite of that, we are constructive on the investment.”

At Tesla’s recent Q4 2016 earnings call, the electric automaker cleared the air about its Model 3 production timeline. The company stated:

“Our Model 3 program is on track to start limited vehicle production in July and to steadily ramp production to exceed 5,000 vehicles per week at some point in the fourth quarter and 10,000 vehicles per week at some point in 2018.”

This is quite a contrast from the words and opinions of Jonas. The analyst didn’t stop there, however. He believes that the Model 3 will have an average transaction price around $60,000. This would be much closer to that of a base Model S, which doesn’t make a whole lot of sense, since the models were supposed to appeal to different markets, and come at markedly-spaced price points. Tesla just dropped the ~$68,000 Model S 60 from its lineup, seemingly to further separate the two vehicles, though the company claims that it was an effort to simplify the ordering process.

Jonas, speaking of the Model 3, shared:

“[It will have] an average transaction price of $60,000. We think that the kind of people that will put in an order for that car…they won’t want the $35,000 version. While they technically could deliver that, we think once it’s spec’d up with the range and performance and safety capabilities that the average customer will activate, very few customers will actually walk out the door at that entry level price. It’s more of an advertisement. We think it’s going to transact more like 60 [$60,000].”

Tesla has asserted from the beginning that the Model 3 will start at $35,000, prior to the federal rebate . The company has been abundantly clear over this, but has never spoken directly about the top end (although we should note that the base model will not be available out of the gate). Elon Musk did agree that the average transaction price will likely be closer to $42,000, since most people that are seeking a Tesla vehicle will expect certain options. The whole premise behind the Model 3 was to offer a Tesla product that could be mass-marketed to the public as an “affordable” option.

If ~400,000 people put a deposit on the Model 3 believing that it would be in their possession by, perhaps 2018 or so, and they have to wait until 2020 or beyond, Tesla will lose much credibility. On top of this, if they can’t get their ~$35,000 vehicle – or at least a $40,000+ minimally optioned vehicle – and the only option is around $60,000, we can’t imagine that too many of them will be very pleased.

Source: Forbes

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100 responses to "Analyst Predicts Model 3 Production To Be Much Lower Than Tesla Says"

  1. Nemo says:

    So, what exactly is the basis for Jonas’ forecast?

    1. Mister G says:

      Fossil fuel payola

      1. realistic says:

        “Fossil fuel payola”

        Really? Is this associated with the 100mpg carburetor that was bought up by Standard Oil and sits gathering dust in a box next to the crate holding the Ark of the Covenant?

        So is it also your theory that fossil fuel payola funded MS’s role as an underwriter in Tesla’s latest share issuance and Bond offering?

        Seriously you need to find a new conspiracy to obsess over.

        1. Mister G says:

          After living through 2008 Great Recession I do not believe anything coming from Wall Street cronies, but there are plenty of suckers in the world that Wall Street can target lol

        2. paul smith says:

          Do you mean like your’s?

          1. Mister G says:

            Fool me once…you know the cliche lol listen if wall Street were to slowly disappear from this earth we wouldn’t miss it because local banks and local credit unions would fill in the gaps.

    2. Toni says:

      He missed the time to buy TSLA and is now hoping to get at least a dip. I too thought that there would be a slight delay in the M3 schedule and it would be a good time to buy…

      1. realistic says:

        No; MS was an Underwriter for $127M in Convertibles and 200,000+ shares of the equity offering AND exercised their 15% over-allotment. Plus Jonas has been pushing a $300+ or higher price target for months.

        1. Pushmi-Pullyu says:

          Just because Morgan Stanley helped underwrite one or more previous Tesla stock offerings doesn’t stop them from, perhaps, seeing a financial gain from a short-term drop in Tesla’s stock, nor possibly an advantage in trying to push up the stock price of a company which would gain from a perceived delay in Model S production. Possibly oil futures?

          And I don’t know that MS playing to a short-term goal which involves depressing Tesla’s stock price would necessarily cause Tesla to take their business elsewhere, either. After all, all the large investment firms routinely practice manipulation of stock prices. A number of market manipulation techniques are available to large powerful financial institutions, techniques (for example, high frequency trading) which aren’t available to individual investors or to small firms, aren’t illegal or even considered especially unethical, despite the way they rig the system in favor of taking money from the small investor and giving it to the super-rich.

      2. Chris O says:

        If somebody purports to be bullish about Tesla stock yet disseminates numbers that are both questionable and should make investors run for the exits it definitely looks like he is playing some kind of game.

      3. Anti-Lord Kelvin says:

        At least he is a little more “optimistic” with admitting that the Model 3 could be there at the end of this year. So, his wild guess Model 3 time-line have improved “one year” from this other analyse from him: https://electrek.co/2016/11/23/tesla-model-3-late-adam-jonas-morgan-stanley/

    3. zzzzzzzzzz says:

      He is major TSLA pumper. His job is to pump and allow to sell the shares at secondary share sales to gullible investors and get commission. Just read his whole so called analysis pieces with company “value” from imaginary mobility dreams, sorry future services.
      When even he doesn’t support BS delivery numbers, you can know for sure that it is complete BS.

      1. ffbj says:

        You would have your cake and eat it too.

    4. G. Richard Raab says:

      Simple:
      The past.
      Jonas thinks that Tesla has learned nothing.
      Yet, they are throwing their entire production line UPSIDE DOWN.
      In this case, the final line will be 100% automated and will be designed so that a building designed for 250K cars / year, will now produce 500K model 3, AND another 100-150K M[SX].

      THen you can figure that by middle of 2018, that Tesla will have picked a new manufacturing site and will have things move RAPIDLY so that by end of 2019, they are producing at 100-500K at the new site.

    5. Pushmi-Pullyu says:

      “So, what exactly is the basis for Jonas’ forecast?”

      As with any time a self-appointed “analyst” gives you a financial prediction for free, the basis is that he thinks saying that will help promote whatever stocks his company is buying and/or selling this week or this month.

      As with most things, financial advice is worth what you pay to get it. Good financial advice from a professional will be tailored to the individual, and you’ll need to pay for it. Free financial advice from a professional means worthless advice.

  2. kotlet says:

    Tea leaves.

  3. JR says:

    This must be april fool
    Specialy the last line, and the only option is 60.000$ For model 3, ofcource the first delivery will be the top models fully loaded, simply to show off, but he forget this car is optioned as order, so everybody gets just what they want, and there is a line of order that will be respected to

  4. georgeS says:

    I used options prices for model S and added onto 35K and came out at 60K. Not hard to do at 5K$ per option.

    ….and 2000 by end of this year is a real possibility IMO.

    Don’t forget that prod parts arrive in July and cars go down the line in July assuming no suppliers miss their target and what are the chances of that

    Zero

    Not to mention all the testing that the employees have to do on these early cars.

    1. Pushmi-Pullyu says:

      “I used options prices for model S and added onto 35K and came out at 60K. Not hard to do at 5K$ per option.”

      Then that’s an excellent indication that the car you want would cost rather less. If you reduced the price of options by ~25% from their prices for the Model S, you’d be likely to come a lot nearer what Tesla’s prices for Model 3 options will actually be.

  5. EV4Life says:

    Adam Jonas is usually better than this. We already know from the last Must tweet storm that the most expensive versions will not be available for a while, so no P model, no dual motor until at least next year. That makes the $60K suggestion pretty tenuous.

    1. ffbj says:

      I think that he is a bit off for those reasons, at least in the first six months of production. Overall after a year of production I think around 50k on average for the M3.

      I also think they will produce closer to 20k, this year, which is still far under what Musk has envisioned.

  6. Eco says:

    Does anybody actually believe what ‘analysts’ like Jonas say?

    More fake news!

    1. Thomas says:

      Let’s wait for Enron 2.0

      1. super390 says:

        Maybe Exxon is Enron 2.0.

    2. Pushmi-Pullyu says:

      “Does anybody actually believe what ‘analysts’ like Jonas say?”

      I certainly hope not!

      When reading a financial “analysis” from a self-described “analyst”, my first question isn’t “Can this be true?”, but rather “What strategy is this guy pursuing which he thinks will be helped by persuading people to believe this?”

      When a self-appointed financial analyst says something in a free, online article or blog post, then he’s quite literally trying to sell you something.

      When actual, professional financial analysts have something worth telling you, they’ll charge you for it. They aren’t gonna give that away for free online.

  7. Chris O says:

    Jones doesn’t deny Model 3 will start at $35K but suggests people will spec it up to an average transaction price of $60K. Well, in Tesla’s dreams I’m sure but the average transaction price of a BMW 3 series is below $50K so I wonder where Jones gets his “optimism” (though I expect these numbers are fabricated to daunt investors).

    1. Stevie K says:

      Complete speculation. Evidence is sketchy at best. I’m not completely sold on Elon’s stated production timetable but he has more credibility than Jonas. My money is on Elon. That’s my $1K deposit.

      1. realistic says:

        It is complete speculation, but so have been the “authoritative” rumors of HUD, stunning new battery chemistries, hundreds of test vehicles running in secret, etc.

        While his valuation calcs have been bizarre from time to time, Jonas’ calls on the strategy and direction of the comapny have been remarkably (and sometimes suspiciously) prescient.

        I think a higher-than-expected ASP would be a GOOD thing and is exactly what Tesla needs to be doing, although $60k is a bit steep.

        1. ffbj says:

          A realistic view.

        2. Chris O says:

          We’ll see. Let’s mark this story and look at the production count at the end of this year. If it’s more like 20K rather than Jonas’ 2K let’s agree never to take anything this guy says seriously again ever.

          It’s probably a wise strategy anyway for dealing with the stories of people who have money riding on them.

        3. Nix says:

          Realistic — Actually, from what I’ve seen he looks like plays both ends. When it is expensive to borrow TSLA shares, and they can make a ton of money off of lending to shorters, he plays one end.

          Then as it is profitable to sell TSLA shares to investors, he plays the other end.

      2. zzzzzzzzzz says:

        Elon certainly is very credible guy and everything he says comes true. Now can you tell me please where can I buy that 2014 model year Model 3 for less than $30,000???

        “Relying in part on the fact that the storage density of lithium-ion batteries is increasing about eight per cent a year, and costs are dropping correspondingly, Musk recently vowed that Tesla will offer a third-generation car for less than thirty thousand dollars by 2014. ”
        http://www.newyorker.com/magazine/2009/08/24/plugged-in

        1. Anti-Lord Kelvin says:

          to be fair, being optimistic in five years forward it’s different than be non-sense three months before things happened.
          And sure, 2014, was a bit optimistic, but a lot of people will be able to have a third generation Tesla at $27.500…this year, but the also announced in 2009 Audi R8 e-tron for 2012 and the also announced in 2011 Audi Q6 for 2014, have yet to be seen in Audi dealerships…

          1. super390 says:

            To zzzzzzzz, only Tesla being late proves that it is a fraud, not any other carmaker. I’m still waiting for that Wankel that GM swore up and down it was introducing in 1973.

        2. Nix says:

          zzzzzzzzzzzzzzzzzz

          $30,000 in 2009 dollars equals $34,452.88 in 2017 after accounting for inflation.

          If you are using dollars from a 2009 interview, you have to adjust for inflation to get today’s dollars.

          Oh, and I guess you missed this big massive global recession that happened in 2008/9 that ended up slowing down pretty much every company in the world for longer than was expected. But in your mind, since the global economy was much slower to recover than expected, that makes Elon a “liar” in your words you use so often.

        3. Pushmi-Pullyu says:

          Given all of zzzzzzzzz’s science-denying “fool cell” fanboy posts, which are nothing but Big Oil propaganda, his complaint about Elon being overly optimistic about a model years in the future is like the mountain complaining that the molehill is too tall!

  8. Analysts should not try to participate in April fool’s day jokes. It’s just not funny!!!

  9. Rich says:

    I’m a pre-reveal Model 3 reservation holder and Tesla supporter. I hope Tesla continues to achieve amazing success. With that said, I don’t ignore information from analysts like Jonas just because the information doesn’t align with information coming from Tesla.

    Setting aside the Model 3 manufacturing ramp rate and 10yr pent up demand for an “affordable” long range BEV (400K reservation holders), look at total addressable market size for entry level premium priced vehicles in the USA.

    2016 BMW 3-series – 70K units
    2016 MB C-class – 77K units
    2016 Audi A3 & S3 – 31K units
    2016 Audi A4 & S4 – 34K units
    2016 Lexus IS – 37K units
    2016 Lexus ES – 58K units

    Once the reservation holder demand is satisfied, Tesla will have to take 25% of sales from each of the top 4 brands above to sell a mere ~70K Model 3 a year in the USA. Not to say Tesla can’t do it, but this will be no small feat. To sell 250K Model 3 in the USA, 1/2 the 500K / yr Tesla is planning for in 2020, Tesla will have to take ~80% of sales from the top sellers and a huge chunk of the lower selling premium brands as well. This is highly unlikely.

    Given this information, IMO the only way the Model 3 achieves 500K sales / yr is for the Model 3 to compete in much larger market segments like the Toyota Camry. Tesla employs smart people and I don’t doubt their 500K sales projections for 2019/2020. I keep circling back to the conclusion that the Model 3 cannot be priced like entry level premium brands or they cannot achieve their projected sales numbers. I’m not ignoring worldwide sales. Current sales for Tesla are about 50% USA / 50% abroad. Another major factor is current sales trends of SUVs increasing and sedans decreasing. What am I missing?

    Reference:
    BMW started breaking out sales numbers between 3 series and 4 series in 2016 allowing us to see that BMW sells 70K 3-series per year in the USA.
    http://www.goodcarbadcar.net/2011/01/bmw-3-series-sales-figures.html

    For the rest of the numbers, select the make/model on the page
    http://carsalesbase.com/us-car-sales-data/

    1. realistic says:

      Well-done, Rich.

      Even a skeptical read of your projection doesn’t mean the Model 3 is a “failure” at considerably fewer units built than predicted by wild-eyed enthusiasts. In fact, with respect to the GIGANTIC working capital challenges of the Musk-projected totals, something along the lines of Jonas’ outlook is much less risky.

      Be assured your analysis is going to plagiarized elsewhere, both by optimists and pessimists.

      1. Rich says:

        Watching this play out is going to be interesting. I wouldn’t bet against Elon Musk. Either the option pricing will be lower than most are projecting or there’s a unrevealed feature that’s going to make it more desirable than it already is or nothing else is needed and Tesla will become the next iPhone.

        I remain excited to see the final reveal. Even if nothing else is revealed and option pricing isn’t bargain pricing, I look forward to receiving my Model 3.

        1. M3-reserved says:

          Exactly the reason why Tesla needs to push the envelope on the pricing while keeping the cache of Tesla.

          It wants to be the next Camry–delivering cars en masse. The base can do that and he’ll always have the lux level to buy his loaded P+D models with all the bells and whistles.

          His main thrust to date is fund his projects through S and X models margins to get to the 3.

          It’s squarely aimed at BMW 3 segment and hopes to dominate there for continued margins, but the ultimate goal is to get the $35,000 buyer off the loaded camry/lexus and buy a Tesla.

          1. Rich says:

            Agreed
            “but the ultimate goal is to get the $35,000 buyer off the loaded camry/lexus and buy a Tesla.”

            1. Nix says:

              Rich – Please redo your numbers correctly. You’ve made these two fatal errors:

              1) The 500K sales target is COMBINED sales among all models. Not just Model 3 sales. Please help kill that false meme that refuses to die. Continuing to spread it will crush your credibility.

              2) Please compare global with global, and US with US sales. Mixing the two is a massive distortion which might make an easy shortcut, it also undermines your argument.

              As for whether or not stealing 25% of the market share is realistic or not, it has already happened. That is what the Model S did to the EPA Large Luxury Sedan market sector that the Model S is categorized in by the EPA. Not acknowledging that seems like a substantial oversight on your behalf.

              It would be interesting to see what you come up with if you actually did the numbers properly.

              1. Rich says:

                Nix
                1) That’s fair, but the analysis stands even at 400K Model 3s globally.
                2) Re-read my post. I didn’t mix the two.

                “As for whether or not stealing 25% of the market share is realistic or not, it has already happened. ”

                Again, slow down and re-read my post. Tesla achieving a 25% market grab isn’t the issue. Tesla achieving a much larger percentage market grab is what’s in question. This is specific to the entry premium market. If Tesla can achieve lower option prices and/or a small decrease in base price, that would put them in a larger market segment and set them up for large sales numbers.

                1. Nix says:

                  Rich, you are mixing US and global numbers incorrectly. For example, you fabricate a 50% ratio between US and global sales, as if US sales were the base. But no such relationship exists. Not for BMW, not for MB, not for Audi, etc. It is a mistake to try and translate by an arbitrary ratio between US and global sales, just because it was easy for you to find the US sales numbers.

                  Instead, it is much more accurate to simply use global sales numbers without the arbitrary 1/2 conversion into a comparison to US sales numbers.

                  Even the 100K number for Model S/X combined sales is highly arbitrary, since it basically assumes long term 0% growth rate for Model S and X combined sales.

                  Like I said, it would be interesting to see you do this exercise correctly, with purely global numbers to global numbers (no arbitrary 50% translation to US numbers) and with proper Model S/X sales projections.

                  1. Rich says:

                    “Rich, you are mixing US and global numbers incorrectly. For example, you fabricate a 50% ratio between US and global sales, as if US sales were the base.”

                    Tell me, what’s the ratio of Tesla sales between US and EU + China.

                    “Even the 100K number for Model S/X combined sales is highly arbitrary, since it basically assumes long term 0% growth rate for Model S and X combined sales.”

                    Please provide the global growth rate forecast for the Model S and X.

                2. Nix says:

                  As for the 25% issue, my point is that I think if you redid your numbers, that they are much closer to the 25% than your initial numbers would lead you to believe.

                  1. Rich says:

                    Nix,
                    You believe ~400K Model 3 globally is based on a 25% market penetration globally? You may be right.

                    I’m not an automotive industry analyst. I don’t have the information readily available to me that Jonas does. Are you an automotive industry analyst? Tesla employee?

                3. Nix says:

                  Rich, you also have made a mistake here too:

                  “look at total addressable market size for entry level premium priced vehicles in the USA.

                  2016 BMW 3-series – 70K units
                  2016 MB C-class – 77K units
                  2016 Audi A3 & S3 – 31K units
                  2016 Audi A4 & S4 – 34K units
                  2016 Lexus IS – 37K units
                  2016 Lexus ES – 58K units”

                  This simply leaves out a huge number of other cars. One thing to keep in mind is that we don’t even know what EPA class the M3 will be in. I’m guessing it will straddle the small and midsize classes, being just barely big enough to be a midsize, so it will compete with both small and midsize cars. That makes this the “total addressable market size”. Note way more models, from way more car makers. And this is just US sales. To do it right, you would need to add in car makers from other markets that don’t sell in the United States, like in China and EU. So here is the sub-list of competitors the TM3 will likely steal sales from, with just US sold cars in the small and midsize luxury class (per goodcarbadcar):

                  Acura ILX
                  Acura TLX
                  Acura TSX
                  Alfa Romeo Giulia
                  Audi A3
                  Audi A4
                  Audi A5
                  BMW 2-Series
                  BMW 3-Series
                  BMW 4-Series
                  BMW i3
                  Cadillac ATS
                  Infiniti Q40
                  Infiniti Q50
                  Infiniti Q60
                  Jaguar XE
                  Lexus CT200h
                  Lexus IS
                  Lexus RC
                  Mercedes-Benz B-Class
                  Mercedes-Benz C-Class
                  Mercedes-Benz CLA-Class
                  Volvo S60
                  Volvo S60 Cross Country
                  Volvo V60
                  Volvo V60 Cross Country
                  Acura RLX
                  Acura TL
                  Audi A6
                  Audi A7
                  BMW 5-Series
                  Cadillac CTS
                  Cadillac XTS
                  Genesis G80
                  Hyundai Equus
                  Infiniti Q70
                  Jaguar XF
                  Kia K900
                  Lexus ES
                  Lexus GS
                  Lincoln Continental
                  Lincoln MKS
                  Lincoln MKZ
                  Maserati Ghibli
                  Mercedes-Benz E-Class & CLS-Class
                  Volvo S80
                  Volvo S90
                  Volvo XC70

                  To this list, you would need to add in EU-only makes/models, and China-only makes/models. Then you would have the actual numbers for calculating that 25% market takeover. Your sample set is too limited in make, model, and too US-centric when trying to compare Tesla’s global sales target.

                  1. Rich says:

                    Hey Nix,
                    Instead of spending your time telling me how wrong I am, why don’t you take the time to do the analysis yourself and share with the rest of us.

                  2. Rich says:

                    Nix,
                    Again, you seem to have a problem understanding what I wrote. If english is a second language, that’s cool.

                    This reply left out that I clearly identify my list of brands as … read below:

                    “Tesla will have to take 25% of sales from each of the top 4 brands above to sell a mere ~70K Model 3 a year in the USA.”

                  3. Rich says:

                    Nix,
                    Let me first state, I’m NOT an Automotive Industry Analyst. In my original post, I asked what I’m missing and you’re providing some insights into what I missed.

                    You’re correct. I made some assumptions in my post.

                    1) Tesla USA sales are roughly 50% of total sales. You’re right. This may be a flawed assumption. If you have better info, please share it
                    2) I did not calculate the numbers for the entire global entry premium market. I looked at the top 4 and took a SWAG. If you have the global premium market sales/unit numbers, please share with us.
                    3a) I used the 500K number as Model 3 numbers. You’ve suggested he 500K number should include Model S and X number. This may be correct, I don’t know. If so, you’re correct and this would change the market penetration numbers.
                    3b) If Model S & X numbers are to be used in the 500K total number, then using ~400K for Model 3 indicates a flat growth rate for Model S & X. If you have the forecast growth rate for Model S & X over the next 3 years, please share it with us.

                    1. Nix says:

                      Rich — Perhaps my posts sounded too harsh. I think your basic methodology is likely correct, it is just your assumptions that are incorrect. It seems we both agree that your numbers are based on some broad guesses that aren’t actually based on evidence, but on what you had available at the time you formulated your post. It is what is commonly called “back of the napkin” math. It usually is subject to being re-worked once the real numbers are available. There is nothing wrong with that, as long as everybody knows the limitations.

                      I actually get the feeling that the self-professed Tesla analysts are pretty much doing the same thing you are….

                      As to what I know off the top of my head, I will share what I know.

                      1) It is more of a question of what all other car companies do in US sales vs. global sales. I don’t have those numbers, and it would take a LOT of footwork to put them together for all the car companies. Which is why it is much simpler to simply use global numbers for everything, and forget trying to translate to US market numbers.
                      2) I don’t have total global numbers, but that is what would need to be calculated to make an accurate comparison to Tesla global numbers. Unfortunately there isn’t a way to go from back of the napkin math to an accurate picture without this math. It would take significant research to get to the total. Sorry, again that’ why I kicked it back to you to fill out your math.
                      3a) Tesla stated this in their SEC documents. I’ve posted the link before. When I get a chance I will repost. Sorry for the lazy response, I do actually have this information, just not at my fingertips right now. But I do have the line handy, just not the source:

                      “We expect our production will increase considerably each year for the next several years, and are targeting an overall vehicle production level of 500,000 vehicles, including Model S, Model X and Model 3”
                      3b) I do not have projected growth rates for the Model S and X. That’s one of the flaws of the math. It was just reported today that S/X growth rates are higher than expected for Q1 2017 (see another story today right on this site) This is the hard part of trying to do the math you presented, and then try to come to any sort of conclusion. It would take much more work to take your back of the napkin work and turn it into something more meaningful than the junk coming from the pros who call themselves analysts.

                      I hope you do put the effort into it and expand on your back of the napkin work by filling in the missing data. I don’t actually have it in me this week to do it myself, so I’m encouraging you to double down on where you started, and simply assemble all the relevant numbers.

                      Then we would have all the numbers we need to have to do your original post justice.

                      A) Correct market totals for small/midsize luxury cars.
                      B) Total actual TM3 sales comprared to projected S/X sales to hit the 500K number total.

    2. ffbj says:

      True, because you have to figure out much there is there.
      Also the fact that the love affair with the personal car is taking hits from a number of directions. In that more people are opting for SUV’s & trucks, millennials are more inclined to look for alternative means of transportation, Uber, Lyft.
      In the U.S. an aging population will drive less, and less inclined to chose an ev.
      So the trend is for the potential market for these M3 is likely to fall.

      On the other hand it could be such a great car that it will, in essence, take over the mid-sized premium vehicle transportation market.

      They have already taken 25% of the luxury market from established makers, so with M3 I think that would be the base line. So 50%, once they are in full production, of the current market, I think, would not be out of the question.
      Maybe. That’s if they come close to getting some vehicles out on the schedule they have set.
      Also on a positive note is the fact that inventories of new/used cars are at 13 year highs. I speculate that one of the reasons for this is that about 350k so have decided to delay purchase, because they are waiting for the M3.

      1. Rich says:

        Taking 50% of the entry premium market would be amazing. I’d love to see this happen.

      2. super390 says:

        I read in Car & Driver that the bad car loans are proliferating again. Looks like a general slowdown is hitting the industry and they’re resorting to the old gimmicks.

        1. Mister G says:

          Yes they are, I personally know of a hotel room cleaner that earns about $350 per week and bought a brand new 2015 Toyota corolla at an interest rate of 19%, monthly payment of $500 for 72 months…I was shocked at the amount of money a Toyota corolla will cost at the end of the loan. There will be many defaults in the future. Sub prime auto loans on the way.

    3. Chris O says:

      Did you know Tesla only ever had 12K reservations for Model S and many people like your self showed up saying that was largely the scope of (pent up)Model S demand?

      1. Rich says:

        You may have missed this part of my message “Tesla employs smart people and I don’t doubt their 500K sales projections for 2019/2020”.

        I didn’t say this in jest. Once the Model 3 deploys nationwide in large numbers, it will generate even more demand. People (neighbors, friends, family, co-workers) who have never been exposed to a cool BEV will finally see just how cool BEVs are. More specifically, how cool the Model 3 is. With that said, price will govern the size of the market. Not everyone can afford a $42K vehicle.

        1. Chris O says:

          Keep in mind the 500K projection is for global sales and similar to for instance BMW 3 Series production. I do think Model 3 would have to branch out into a range of products (including Model Y) for such sales numbers to be sustainable at that price level. Or Tesla could follow the Model T strategy: Ford kept lowering prices as increasing production numbers kept lowering cost.

          1. Rich says:

            Agreed
            Tesla should have no problem with the 500K number if it includes the Model Y and possibly other models on the same Model 3 platform

          2. Jason says:

            Price reduction based on increased manufacturing and reduced costs don’t seem to be happening with Model S, indeed that vehicle appears to be getting more expensive.

        2. Big Show says:

          I disagree with your comment that Model 3 needs to be as cheap as a Camry. Considering rebates and gas savings, 35K is easily affordable for most people in the market for a new car.

          1. Rich says:

            Keep in mind, we’re talking about 2020 sales. Federal rebates will most likely be gone, unless we think Trump will extend the rebates.

            1. Anti-Lord Kelvin says:

              I think Trump could extend the EV rebates but at one condition that he will turn to be mandatory…”every EV owners will have to feed its car with 100% electricity coming from…coal plants!”

              1. philip d says:

                Not just regular coal though. The most clean, fantastic, superior brand of coal that is in a league of its own, Trump brand coal.

                Trump’s sons, who are in no way coordinating with Donald, will just happen to buy out the nation’s largest major coal company and claim that in no way were they coordinating with their dad. It was just a good deal.

                And we will just all shrug our shoulders.

                1. Bill Howland says:

                  George “Save the Planet” Soros is currently the world’s largest Coal Owner. They’d likely have to buy something from him. (That is not his real name, btw).

                  As regards the Model 3 – a higher transaction price is at least expected by people who put in a reservation. It might cancel some, but the faithful will still buy.

                  Musk raised the price of the Roadster by $20,000 and Yours truly and a few thousand others still paid it.

            2. Nix says:

              Rich said “Keep in mind, we’re talking about 2020 sales. Federal rebates will most likely be gone, unless we think Trump will extend the rebates.”

              Rich, the $35K base price you have been talking about is BEFORE rebates. You are again crossing your numbers incorrectly. The pre-rebate price is $35K. After Fed+State rebate it is as low as $22,500.

              You can’t go back and forth talking like the pre-rebate price is the post-rebate price, as if the pre-rebate price will go up once the rebates are gone.

              1. Rich says:

                Nix,
                At this point it’s clear you’re trying discredit anything I’ve posted. However, you’re starting to sound like you’re rambling. My comment made no reference to price. Only that the federal tax credits would expire for Tesla by 2020. You’re reply below doesn’t even make sense in context to my comment.

                “Rich, the $35K base price you have been talking about is BEFORE rebates. You are again crossing your numbers incorrectly. The pre-rebate price is $35K. After Fed+State rebate it is as low as $22,500.

                You can’t go back and forth talking like the pre-rebate price is the post-rebate price, as if the pre-rebate price will go up once the rebates are gone.”

                1. Nix says:

                  Rich, you were talking pre-incentive prices right here:

                  “Not everyone can afford a $42K vehicle”

                  This is in the directly previous post to where you talked about the rebates going away.

    4. Josh Bryant says:

      You are mixing worldwide sales and US sales. BMW 3 series sells about 300k per year by itself.

      1. Rich says:

        Where did I mix US and worldwide numbers at?

        1. Josh Bryant says:

          70k 3 series is US. Real sales goals (250k/500k) are worldwide.

          No way Tesla can sell that many Model 3s without EU and China.

          1. Josh Bryant says:

            *autocorrect. Poor phone typing.

            Tesla sales goals are for world not US.

          2. Josh Bryant says:

            Nevermind, I read to fast. You are splitting the 500k for half US. But the 500k includes S and X. So let’s say 100k S and X, so 400k 3 worldwide is doable with pent up demand.

            Remember 3 series gets 300k by iteself, and Tesla cuts through market segments with other products. Stealing sales not just for luxury.

            Not sure how they get to 1 million sales without Model Y.

    5. Pushmi-Pullyu says:

      Rich said:

      “Once the reservation holder demand is satisfied, Tesla will have to take 25% of sales from each of the top 4 brands above to sell a mere ~70K Model 3 a year in the USA. Not to say Tesla can’t do it, but this will be no small feat.”

      Even aside from your rather questionable use of figures here (as Nix outlines in his response), there’s a pretty obvious fallacy here: your premise that the Model 3 will tend to attract only those buyers who are currently driving a handful of models from BMW, Mercedes-Benz, Audi, and Lexus. This is rather sharply refuted by one recent poll which indicated more Model 3 owners will come from current Prius owners than any other family of cars.

      “I keep circling back to the conclusion that the Model 3 cannot be priced like entry level premium brands or they cannot achieve their projected sales numbers.”

      If it wasn’t for the fact that an unprecedented 375,000+ people ponied up $1000 apiece for a reservation for the Model 3, sight unseen, then I would agree that Tesla’s projected sales seem overly optimistic. As it is, if anything I think they’re lowballing the market potential.

      The number of Model S drivers who say they spent considerably more on the MS than they ever did on any previous car is far beyond any mere anecdotal evidence; it’s a substantial number of MS owners. Given the astoundingly high number of paid M3 reservations, I think it’s nearly a lead-pipe certainty that the same will be true of M3 drivers. Certainly the Prius is far less expensive than an estimated average sale price $42k Model 3!

      Rich, let’s look at this from the other end of the telescope: Worldwide light vehicle (cars and light trucks) sales for 2016 were 88.1 million vehicles. Tesla would only have to capture 0.57% — less than one percent — of that market in order to sell 500,000 cars annually, as total sales for all three of Tesla’s models. Now, perhaps they won’t manage to do that. Contrariwise, it may be that the M3 will sell considerably more than that. It all depends on how well the M3 is received.

      But to suggest the potential market doesn’t exist… well, the numbers I’ve given just don’t support any such conclusion on your part.

  10. JBA says:

    I really wish Inside EV’s would stop reporting this type of wall street junk. Just leave to Bloomberg and the massive number of “analyst” sites and blogs. None this is really about EV’s it is strictly about the investment industry trying to pump the stock market

    1. Chris O says:

      +1! Not for the “stop reporting” though,these reports offer interesting insight into the zoo that is Wallstreet and since finance is an important part of the car industry it’s interesting to learn how these games are played.

  11. Mil says:

    Really wonder why analysts are paid given these kind of wild guesses.

    1. Anti-Lord Kelvin says:

      I think a lot of us could do a far better guess at less than the half he is paying for doing this bulls*** “analyse”.

      1. super390 says:

        Actually, we EV enthusiasts are making better predictions than them and not getting paid at all.

  12. Josh Bryant says:

    ” and the only option is around $60,000″

    Remember Model S starts around $70k and has an average selling price of $100k.

    So Model 3 starting at $35k and average selling price of $60k isn’t that much of a stretch. My guess is average selling price of $50-$55k, but that was assuming AWD and P models available from the start.

    1. needa says:

      I think 60k is a bit of a stretch. The options will be cheaper on the 3. Likely to only have one battery option. Dual motor is likely to be less powerful. Economies of scale and smaller size for everything will allow for cheaper options. etc. i suspect the Mod3 will be maxing out at 60k. But I also think that Musk’s 42k average is a bit low.

      1. Nom de Plume says:

        Likely to only have one battery option.

        Actually, Musk has already stated that it will have a 75 kWh battery option.

        1. Pushmi-Pullyu says:

          Yes, but a recent tweet from Elon indicated that only the base battery pack will be available initially, which suggests the bigger (perhaps 75 kWh) pack won’t be available until 2018, or at least not until very late 2017.

          But let me emphasize the word suggests here. What Tesla will or won’t be able to get into production this year, with the Model 3, is still very much up in the air. Elon knows what he plans, but he can’t predict the future.

        2. needa says:

          I was thinking of added options. 60kw standard. maybe 55. Then 75 kWh upgrade. But it could be 55 65 75

    2. V2 says:

      70k becoming 100k is same as 35k becoming 50k

      1. Pushmi-Pullyu says:

        $50k as the average sale price over the first several months of M3 production appears to be a reasonable estimate. Tesla will give production priority to higher trim level cars, so the average price during the first 3-4 quarters of production will likely be noticeably higher, perhaps substantially higher, than Elon’s estimate of a $42k average sale price.

        I don’t think Jonas’s figure of $60k is a reasonable estimate for average sale price, not even over the first 3 quarters or so.

    3. Josh Bryant says:

      Is everyone forgetting that autopilot is a $8k option? That is $43k before leather seats, bigger battery, paint, upgraded sound, glass roof, etc.

      Many people with a 3 reservation (including me) are planning on a least a few of those items.

      1. Nix says:

        We actually don’t know the price of that option for the Model 3 yet. Or the prices of any options at all. Or the price of the car…..

      2. Pushmi-Pullyu says:

        Josh Bryant said:

        “Is everyone forgetting that autopilot is a $8k option?”

        Is everyone forgetting that the same option on a lower-priced car will almost certainly come at a lower price?

        Even if it’s exactly the same hardware and software, Tesla has said they expect to make only ~15% profit on the M3, as compared to ~25% profit on the MS. That alone would, at least in theory, reduce an $8000 price significantly. If Tesla is making a 25% profit ($2000) on the Autopilot option for the MS, then in theory, even if Tesla’s cost was exactly the same (unlikely) and only the profit margin was reduced, the price would be $7200 for the M3. More realistically, a higher volume of production would mean a lower per-unit cost for Autopilot hardware, so likely the price will come down even more.

  13. Ocean Railroader says:

    I think Tesla should be able to make 20,000 to 40,000 this year. Or even if they are making 500 to 1,000 Model 3 cars a week that would be a good start for 2017.

  14. przemo_li says:

    Average price is complete bonkers.

    Yet another amateur claiming that Tesla will copy paste options from S line, and then everybody will take 100% more in options.

    There is not a single competitor for whom it’s true, but hey, Tesla is miracle company right?

    /end of sarcasm

    What is stopping Tesla from ramping up production like they said they would in 2018? I see issues that may happen in 2017 but 2018 is the year when Tesla will have parts and assembly lines ironed out, so why not add more of the same fast?

  15. Jason says:

    Wow, 10k per week, or roughly 1 car every minute, that’s mind boggling to me.

    Ok, this report is either April’s Fool or just rubbish. US$60k would be unreasonably given Elon already started only RWD will be delivered initially. So either this analyst thinks the options will be really expensive (which I don’t doubt) or the base US$35k will not happen.
    You would expect deliveries of AP vehicles first to recoup those costs. Larger battery option too.

    People buying base MS will probably opt for the fully loaded M3. People who want a Tesla but just can’t afford it might opt for the base M3 rather than a fully loaded Camry (or whatever). But you also have to wait to see what the M3 base has. High spec Camry (or whatever) will have leather, heated seats, you know the drill. So you either really want a Tesla and forgo these options, or you will stick with your Camry.

    And M3 plain Jane interior will not be to many liking,I think. People get a new car and show off all their gadgets, buttons, screens, etc. People get their M3 and show off their… Bland screen! MS/X has not gotten people ready for this, they have arguable very bling instruments, probably one of the first vehicles with LCD screen for main instrument cluster. It’s going to take a long time for Joe Average to think less is more, IMO.

    Every EV manufacturer has projected their volumes and been so wrong it isn’t funny. Just accept this could be the same for Tesla. If they do manage 25% of current target market it is a long way short of 250k per year.

    How many will be like me? Interested in the Tesla, but realistically can only afford the base model (and maybe one option), definitely can’t afford the higher spec variants. So will I pick AWD or bigger battery, or maybe AP, hard time ahead for me personally.

    No doubt if their production runs go smoothly, Tesla will easily make the numbers they project initially, but longer term it will be very interesting if they can capture 250k+ units per year.

  16. Ron M says:

    Ex CEO of GM Bob Lutz was critizing the electric car saying It’s not profitable. Why would anyone care what Bob Lutz has to say. He never built a company from scratch, but he was successful at putting one into bankruptcy. He failed at getting the electric car going at GM.

    Bob Lutz your not Elon Musk. Bob Lutz you are a loser.

    1. Pushmi-Pullyu says:

      Bob Lutz’s recent comments certainly do call into question whether anyone should bother listening to him anymore when he talks about the future of EVs (or lack thereof), but certainly he did succeed in getting GM to put the Volt into production. That car remains the most advanced PHEV sold today, with outstanding Voltec engineering (and Voltec 1.0 reliability) from GM.

  17. Nix says:

    “While they technically could deliver that, we think once it’s spec’d up with the range and performance and safety capabilities that the average customer will activate, very few customers will actually walk out the door at that entry level price. It’s more of an advertisement.”

    Wow, Captain Obvious informs us that very few people buy base models with zero options. Gee, it is like he’s never looked at ICE sales ever in his life. Base car sales with no options has NEVER been the majority of any car company’s ICE sales.

    In fact, for some cars the only way you will ever see a base model with no options for sale, would be to either special order one from the factory, or fly half way across the country to find one in dealer stock.

    Of course base prices are advertisements. They have been forever. You list a base price, then get car buyers in to up-sell them on cars with options. That is how the automotive industry has operated for decades and decades.

    Has this guy ever actually bought a brand new car? Besides maybe a cheap Neon or Geo?

  18. Nix says:

    To get to 60K average price, the level of options chosen would have to hit Model S/X levels. But that happens nowhere in the automotive world.

    ICE car makers could only dream of getting their entry-level luxury customers to buy as many options as their EPA categorized Large Luxury Sedans. ICE car dealerships would trade their 1st born sons to sell as many high profit margin options to the masses as they typically sell in their lower volume top of the line cars.

    BMW doesn’t sell the majority of their 3/4 Series as M cars. Same with Mercedes and AMG. Same goes right down the line with smaller engines, etc.

  19. Pushmi-Pullyu says:

    “We expect this vehicle to go into a kind of soft launch mode into the fourth quarter this year and our forecast is for 2,000. Not 20,000. Not tens of thousands…delivered at the end of this year.”

    Given Tesla’s history, that seems entirely possible, even if that’s not what we ardent Tesla fans want to hear. In fact, it hasn’t been that long since I was predicting even less by the end of 2017.

    “[It will have] an average transaction price of $60,000. We think that the kind of people that will put in an order for that car…they won’t want the $35,000 version.”

    Well now, here I think the self-described “analyst” is trying to sell us a bill of goods. Elon estimated an average sale price of $42k, and while it seems reasonable to think the average will exceed that for the first few months, since Tesla says it will be giving production priority to higher trim versions of the Model 3, at the same time it seems highly unlikely the average price will be some $18,000 higher than Elon’s estimate!

  20. Terawatt says:

    Financial analysts are a special breed, it seems. On the one hand he believes the company can deliver about a tenth of what its own management says it will. On the other hand he is “still constructive”.

    How is this possible? To my mind, if you think the gap between reality and management’s projections is this huge, you are forced to conclude either that management is utterly incompetent, or utterly dishonest. Either way you should run away screaming, not maintain a positive outlook.

    There’s always a third possibility: the analyst could be utterly incompetent or utterly dishonest…

    But somebody is clearly very very wrong. I can’t wait to see who.