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Tesla's new $78,000 Model 3 is incredibly overpriced (TSLA)

Matthew DeBord
Tesla Model 3

Hollis Johnson/Business Insider


  • Elon Musk took to Twitter on Saturday to announce a $78,000 version of the Tesla  Model 3.
  • The Tesla Model 3 was originally revealed in 2016 as a $35,000 mass-market vehicle.
  • Tesla needs an influx of revenue, and a very expensive trim level of the Model 3 will help.

Tesla CEO Elon Musk wasn't sufficiently distracted over this past weekend by the royal union of Meghan and Harry to avoid tweeting out some illuminating news about his carmaker's newest effort to arrest a stock slide.

Say hello to the performance-spec of the Model 3, a vehicle that was revealed amid considerable hoopla back in 2016 and promises that it would sell for $35,000. At launch last July, Tesla announced that only a premium version would initially go on sale, priced at $44,000. 

In 2017, when we got to check out the Model 3, we enjoyed a nearly $60,000 version.

Now Tesla will add some performance goodies, longer range (310 miles on a charge), and a second motor, delivering all-wheel-drive. But not Autopilot semi-self-driving tech (another $5,000).

"Cost of all options, wheels, paint, etc is included (apart from Autopilot)," Musk tweeted. "Cost is $78k. About same as BMW M3, but 15% quicker & with better handling. Will beat anything in its class on the track."

The M3 taunt is barely worth touching, given that Tesla has spent exactly zero time in motorsports and to the best of my knowledge has never in its history actually hosted a formal event where its cars could be evaluated on a track. And for the record, the M3-beating Model 3 might be able to outrun the bimmer in a straight line — for a while, until the M3's 450-plus horsepower chased the Model 3 down and roared past it in a fugue of German engineering and fully developed torque. I'd also take the M3 any day if I had to go around corners or actually run at speed for longer than what the Model 3's battery is capable of delivering.

What's more interesting, if that's the word, is the staggeringly high sticker price for what is the all-electric automotive equivalent of a Toyota Corolla, build-wise. 

BMW M3

Matthew DeBord/BI

The very expensive Model 3 trumps the very affordable Tesla

OK, Musk says it will do 0-60 mph in 3.5 seconds, but really, who cares? Opportunities to tackle that level off-the-line giddyup will be few and far between for drivers, and in any case, bonkers Tesla acceleration can get old fast, once you realize that you have to tie everything down before you step on the, um, gas. A top speed of 155 mph also looks good on paper, but the legal speed limit in most of the USA is 65 mph.

Having experienced the Model 3 firsthand and been impressed by its presentation, I'd still have to say I'm hard-pressed to figure out how another motor and some tweaks to the battery and powertrain add $20,000 to the price. 

However, if some of Tesla's 400,000-ish reservation holders configure their Model 3's based on this hot new spec, that equals a revenue surge for Tesla at a time when the company desperately needs it. I also think, based on back-of-the-envelope math, that if the carmaker is promising a 20% net profit margin on what amounts to a pretty basic four-door, then this is the trim level that could get it done.

Tesla Model 3

AP Photo/Justin Pritchard

But if you thought that you might see your $35,000 stripped-down Model 3 in 2018, Musk just told you to take a hike. 

For what it's worth, this type of pricing strategy (and I'm using that term charitably) is an unfortunate consequence of Tesla's lack of a product portfolio. The company's Model S and Model X sedans are produced in various configurations, but the platforms have to be stretched from what might be termed "entry level" luxury all the way up to Mercedes-Benz S-Class territory.

In this framework, the Model 3 has been asked to do some very heavy lifting: it has to be everything from a Chevy to an allegedly racetrack-primed BMW M car. 

Except that the Chevy part is increasingly being left out. 

Hey, it's Tesla and Musk's prerogative to sell whatever vehicles they want. A superfast Model 3 will get a narrow and well-heeled slice of the Teslerati excited and will probably cheer up the Wall Street bulls who have been suffering a crisis of faith.

But if the everyman Tesla was what you were hoping for, it had definitely been pushed over the horizon.

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