Op-Ed: Tesla Model 3, Waiting To Open The Barn Door For EVs
Next month, Tesla intends to start delivering the long-awaited Model 3. Now, before I get started on the significance of this event I want to point out that I do not own a Tesla, and do not plan to buy one either. I might be interested in a Model 3 if it had an instrument cluster. I drove a Prius for years, and while I did get used to the lack of instrument cluster in front of me, I NEVER liked it.
So I just wanted to get it out of the way that I’m not a Tesla fanboy in that regard. I’m certainly capable of being critical of them. In fact, I’m actually a little bit concerned that their 400,000 reservations may evaporate when people see the car and notice that it has no instrument panel. I remember the Nissan Leaf had over 100,000 reservations in the USA. I was one of them. However, when the car became available, most of those people backed out for various reasons, including the range being less than was originally stated.
Being optimistic, however, let’s say that everything goes to plan. Tesla could start selling over 10,000 vehicles per month in the USA alone soon, as compared to the 3,100 per month they normally sell. In fact, by next year it could even be a great deal more than that. What could that mean for the industry? Much of what I’m about to say is speculation, but that’s part of what makes this coming year so exciting… we just don’t know.
I do tend to think Tesla will have a strong demand. I have encountered numerous people in the last few months that didn’t really know anything about EVs like the Volt, Leaf, or i3. But they told me they had a reservation down for a Model 3. A perfect example, I went to the local Firestone dealer to get some tires for my wife’s i3 and not a single employee there had ever heard of an i3 before. But one of them told me they had an reservation on a Tesla Model 3. So that’s the exact type of thing I tend to hear constantly.
I’ve heard the phrase used, “the rising tide lifts all boats.” Will that happen? I tend to think so. I’m pretty sure that the Chevy Volt has seen increased sales as of late due to the awareness of the Chevy Bolt EV and Prius Prime, and people cross-shopping and doing their research. The only vehicles that stand to lose are the ones that are simply not competitive offerings, *cough* i-Miev, *cough* B250e.
In fact, the Prius Prime is still not fully stocked and we’ve yet to see how high the sales can go on that vehicle. Being how easily it displaces sales of the conventional Prius offering, I wouldn’t be shocked to see sales of that vehicle hit 10,000 or more per month. Realistically, I’m expecting more like 4,000 though or roughly double what it is currently selling.
And then there’s the new Nissan Leaf due out in a few months. It’s really hard to predict anything about that vehicle since Nissan has been so tight lipped. And we’ve yet to see what kind of real demand there is for the Pacifica Hybrid or the Hyundai Ionic, since supply is still so low on both vehicles.
Anyway, the point I’m getting at is there is a lot of sales potential in these new models and all of these will likely raise awareness of the EV segment and propel us to some percentage greater than the 1% EV sales are currently at. I also think there are a lot of people waiting for the Model 3, and once they drive one, they may change their mind and buy some other EV like a Bolt. So either way around, there are a lot of people sitting behind a barn door right now, just waiting for that door to be opened.
One sore point that many people have heard me groan on about is the horrible charging infrastructure in most of the country. But I think there is good news ahead for that. Once that sales percentage starts growing to 2%, then 3%, and onwards very rapidly, businesses will finally start investing more in charging infrastructure. Suddenly it will be a business that makes sense. Right now it’s a hard pill to swallow to invest in a station that costs $10,000 to install (or 10x that much for a DC fast charger) if it only gets used once per week. Then there’s all the ones from Volkswagen that should be getting built eventually.
I think a lot of auto-makers are watching too. If Tesla opens the barn door and the demand turns out to be less than expected, you can bet some of their electric projects will be shelved or scaled back. But if the sales are anywhere close to what Tesla has been forecasting, then other auto-makers will have no choice but to create competitive offerings.
Right now, there isn’t a lot of competition in the price/performance area of the Model-3 beside the Bolt EV. And that vehicle doesn’t seem to be selling as hot as many believed (although it seems to be pretty close to what GM forecast) Premium car companies like BMW, Audi, Lexus, and Mercedes will be the hardest hit. And while BMW has quite a few weak PHEV products, they don’t really have an EV or even a strong PHEV to compete with Tesla. So, you can bet they’ll introduce one as soon as possible if the Model 3 is a success.
A successful Model 3 will also have another added effect. It will give Tesla credibility. When they announced the Model 3, many car companies shrugged them off. Some of them may be regretting that soon. However, the risk to vehicles like the F-150, Silverado, Tahoe, and similar vehicles was negligible. But if the Model 3 is a big hit and then Elon starts talking more seriously about a Tesla pickup truck, then Ford and GM will have to get busy and start frantically working on an electric truck offering of their own. And that’s when the market will really start to see some big changes.
So are we about to hit that major growth area in the S-Curve? I hope so. I suspect once the market hits just 10% of electric vehicles, it will take less than one body-style generation for each and every vehicle on the market to become EV or PHEV. What I mean by that is, once we achieve a 10% market penetration, the other 90% will happen within 5-7 years. So the real question is, how long does it take to get to 10%?
So the whole point of this article? My opinion is that the next 6 months is going to tell us how the next decade is going to go. Will the transition to electric happen in 10 years, or 30 years? The answer will largely depend on the success or failure of the Model 3, and to a lesser extend the Prius Prime. So, even though I’m not a Tesla owner nor plan to be, more is riding on the success of their Model 3 than just Tesla itself. It’s an entire industry. So I’m going to be biting my nails for the next 6 months.