The first Model 3 cars will roll out of the factory in H2 2016, they will already be designed and built with one-off prototype battery packs.
Tesla needs to figure out the production issues for such a large production car. 500,000 cars per year is actually a not insignificant number of cars per year even for Ford, Chevy etc., and Tesla is planning to get to that level. They will do this during 2016.
Volume production won't be until 2017, but you will see plenty of Model 3 cars before that. Personally, I expect we will see Model 3 revealed in 2015, as Model X will be rolling out to real owners during that time and become a "current model" - so Tesla will want to put their "next model" on the horizon.
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And yes... that KTLA clip was extremely disappointing.