The big unknown: Will gen 3 be delivered on time?

No, it won't.

Nope and it will be 40k not 35k like they said. If Tesla is really good at something its not making deadlines.

Job 1 will happen in 2017 and base price sans any incentives will be no more than $35k.

But they are extraordinary at doing what it takes to keep the company viable and releasing products that exceed most people's expectations and the imaginations of many.

It might be a little late, but not drastically late. Elon knows he has a problem with setting timing expectations, and micro-managing. I think he understands what is at stake here and will reign in his perfectionism and rely on people like Chris Porritt to deliver the car at spec and mostly on time.

daniel Ox9EFD said:

Well then, if it's really late, as in 2019-2020 they are still making ~100k a year from models S and X, they could go bankrupt (right?).

But a year or so delay, how could they handle that?

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Tesla could go bankrupt if it has significant competition that hurts its sales. While I don't expect Tesla to deliver on time, I think it'll deliver the vehicle early enough that it's just the competition that matters.

One thing that makes me positive about Tesla is its process of continuous improvement. Some of it is the need to catch up with other manufacturers, but I don't think they're ever going to stop, because it provides a competitive advantage over manufacturers who operate on multi-year cycles. (It's worth noting that GM's approach to the Volt has also seen hardware changes every year).

I believe that the Model 3 will come out either right at the end of 2017 or in the first half of 2018. Here are my thoughts as to why:
I am going to start by talking about goal setting. I was taught that a goal is not a goal unless to has a date on it. If you do not have a deadline to work to then the motivation is not there and execute. Goals should be realistic; what you are trying to achieve should be attainable and it should be able to be achieved within that time-frame. It should challenge you but it should be realistic.
Elon doesn’t work like that. Whether his idea of realistic is different from everyone else’s or he wants to push his teams is another question, but Tesla and get more done with less resources than anyone. Some would argue that this is not true; all they see is dead-lines being pushed back. When all this is ancient history, people will look back a wonder how such a small company with limited resources achieved so much and grew so fast.
It could be argued to set the time-line goal internally and not announce it to the public; to announce a more realistic goal to the public so as not to offend anyone. They could do that, but then the internally set goal becomes less important; It doesn’t matter if we don’t have the car ready by 2017 as we told everyone the end of 2018 and we know we can do that. It is a cop out and not the way Elon thinks (this is just my opinion of course).

I do think that as Tesla get bigger and become more mainstream the delays will be minimal, Elon will still want to push the boundaries but he will realise the need to satisfy perceived expectations. They will still miss deadlines but not by lots.

There is also the point that Tesla will have put a lot of investment into the Giga-factory so they possibly can not afford to delay the Model 3 launch more than 6 months, depending on how strong demand is for the S and X by then (they could soak up some of the early battery production).

As for the price; my prediction is that the base price of the Model 3 with a base range of no less than the 60 kwh Model S will be $34,000.

daniel Ox9EFD said:

Well then, if it's really late, as in 2019-2020 they are still making ~100k a year from models S and X, they could go bankrupt (right?).

But a year or so delay, how could they handle that?

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If it were as late as never happening (which I think is under 1% probable) I think it's quite unlikely Tesla would go bankrupt. In the extremely unlikely event there is no Model 3, I would think it would mean revolving a couple billion in debt an extra three or four years.

I think they will begin deliveries anywhere from on time to a year late. I don't think any of that impacts the long-term value of the company. The key to Tesla's long term success is whether EVs become obviously better than gasoline cars at a mass market price point. I think that is close to inevitable. Unless they shoot themselves in the foot by somehow delivering a terrible product, or massively overextending themselves on growth (way more than current aspirations through 2020), I see Tesla's success as close to inevitable.

It will. Stock options depend on it.

it will be on time, and on price.

the meaning of on time is that first deliveries to Signature class customers will begin when Tesla states start of production begins

The meaning of on price is that the $35k in 2012 dollars will be offered to customers and deposits accepted. It guarantees that the price is more than $35k in 2017 currency.
The liklihood of on price is that the base model is not likely to be available for delivery until after the USA federal vehicle rebate has expired, Those buying more expensive Tesla 3 need to be prioritized for their willingness to assist Tesla in having good margins.

Tesla's post rebate $49k Tesla model S was a real vehicle, and people did buy it, and the Tesla model S did start production before Jul 1 2012. Tesla kept their promise. But those promises were discharged at a specific point in time, they are not open ended.

I think they will very easily hit the goal.

It's just a matter of what's included baseline in the Model III.

ItsNotAboutTheMoney said:

Tesla could go bankrupt if it has significant competition that hurts its sales. While I don't expect Tesla to deliver on time, I think it'll deliver the vehicle early enough that it's just the competition that matters.

One thing that makes me positive about Tesla is its process of continuous improvement. Some of it is the need to catch up with other manufacturers, but I don't think they're ever going to stop, because it provides a competitive advantage over manufacturers who operate on multi-year cycles. (It's worth noting that GM's approach to the Volt has also seen hardware changes every year).

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I think competition is a non-issue for the Model III, even if the Volt is remotely competitive. No one besides has answered the nationwide, fast, consistent charging problem. They could deliver the car two years late and they'll still be fine, because no way a Toyota, GM, Ford, BMW, or MB are building their own network in that time frame. Nissan's Chademo dealer network doesn't count either. It's been proven over and over again that a intracity true EV is going to be a big seller, no matter the price point and features.

Vger said:

But they are extraordinary at doing what it takes to keep the company viable and releasing products that exceed most people's expectations and the imaginations of many.

It might be a little late, but not drastically late. Elon knows he has a problem with setting timing expectations, and micro-managing. I think he understands what is at stake here and will reign in his perfectionism and rely on people like Chris Porritt to deliver the car at spec and mostly on time.

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...they've done that precisely once.

anyways, elon's latest comments indicate he knows he has flaws as a CEO, and hopefully he reigns himself before he causes more damage. im confident the 3 will start production. but the timing will probably be early 2018 or so.

Originally Posted by Vger

But they are extraordinary at doing what it takes to keep the company viable and releasing products that exceed most people's expectations and the imaginations of many.

...

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bluenation said:

...they've done that precisely once.

....

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I count Tesla as 2 for 2 on released products (Roadster, Model S), or possibly 3 for 3 if you count the P85D as a different product from the original Model S (I think that's where I count it), that are extraordinary at keeping the company viable and that exceed people's imaginations and the imaginations of many. Heck - the Roadster is 7 years old now, and it still exceeds the imaginations of many I also realize that this admittedly subjective evaluation by Vger (and that I agree with), is subjective and reflects personal opinion - you might evaluate Tesla's product offerings differently.

Model X and Model 3 are both unknowns on this scale. Yes Model X is late relative to what they said and what many of us wanted, but it doesn't yet have a rating on this scale (will it be extraordinary at keeping the company viable while exceeding people's imagination of what an SUV can be?). I'm one of the reservation holders that is thinking yes - it's going to be the same kind of a hit and transformation as Roadster, Model S, and dual motor Model S have been so far.

Model 3 will be on time, and you will be able to buy a base model for $34,999. Average ASP will be about $55k if I had to guess. here is why:

1) Battery output should be online in 2016. They are accountable to panasonic to have their investment producing and using the batteries. They can soak up some extra production, probably, but they risk idling their expensive signature plant.
2) GM has threatened to produce the Bolt in that timeframe. Of course it won't be in volume, and they dont have a charging network, but I really think they will want to be seen as the innovator. If GM sells 10 Bolts before the model 3 is released, the press will refer to the Model 3 as the car that came after the Bolt and that is a bitter pill. In fact, I have to think that is main motivator for GM: to steal some spotlight.
3) The Model X release isn't a good comparison. Model X is late because it can be late. Model S was only a little late and it came out because they simplified where they needed to, and shipped with incomplete software (ahem, sorry, i mean they keep improving it). With Model X, they have the opportunity to get it just right, and they have a signature feature (the door) which is probably a giant PITA. With X, the priority is getting it right, not getting it on time. With Model 3 they are signalling it will be less ambitious, with no equivalent to the falcon door, which I applaud.
4) The internal deadline is probably much, much earlier. Much of the staff could already be on model 3. They are working out the details with manufacturing the X at this point. The designers are on the model 3 right now.

In short, model 3 is less ambitious, more critical, and they have adequate time to go do it.

Edit: I should add they have a much larger team too, though I worry they will run into Brook's law (larger team could slow them down instead)

My guess - Model 3 will not be on time. Starting 2018, only Signature versions at priced at >=$75k will get delivered for at least one year because of unprecedented demand and the 35k car will get delivered no earlier than 2019.

dalalsid said:

My guess - Model 3 will not be on time. Starting 2018, only Signature versions at priced at >=$75k will get delivered for at least one year because of unprecedented demand and the 35k car will get delivered no earlier than 2019.

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While I think some model 3's will be delivered on time in 2017, I do agree that the super loaded versions will occupy the production for a long time, maybe years. They will probably make a point of delivering a few hundred cheap ones so it isn't perceived as a fiction, but they have stuck to their policy of prioritizing high end orders. 75k strikes me as high too, but who knows.

austinEV said:

While I think some model 3's will be delivered on time in 2017, I do agree that the super loaded versions will occupy the production for a long time, maybe years. They will probably make a point of delivering a few hundred cheap ones so it isn't perceived as a fiction, but they have stuck to their policy of prioritizing high end orders. 75k strikes me as high too, but who knows.

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Good observations, @austinEV. I think most of us doing financial modeling on TSLA are using too low a figure for the ASP on the M3. I'm not sure that the $75k estimate from @dalasid is really that far off the mark. Why?

The P85D is about $35k above the base model; add in some other options likely to be similarly available on the M3, and you're at a $58k premium. Now, let's assume for discussion sake that all the options on the M3 are 2/3 of the cost as on the MS; that's $39k of goodies on a fully loaded M3, giving a price of $74k. Add S&H and prep, and you're over $75k. QED

For the record, the $75k version of the M3 is going to be an a kickass car, outperforming the BMW M3 easily. Demand for this top model will be huge, so we'll probably see the average ASP above $70k for the first two quarters of production before a gradual taper down to $60k average for another year. I'd model these top models as retaining at least a 20% slot in the factory production even as production scales into six figures.

I'm far more optimistic than @dalasid about the M3 timing. Tesla has already bought new factory space nearby, which I'm guessing is for the new M3 lines. Getting that equipment ordered is the next critical step.

renim said:

Tesla's post rebate $49k Tesla model S was a real vehicle, and people did buy it, and the Tesla model S did start production before Jul 1 2012. Tesla kept their promise. But those promises were discharged at a specific point in time, they are not open ended.

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People always complain about Tesla and deadlines, but I was surprised when I was listening to a mid 2010 Quarter Earnings call yesterday and Elon said the Model S would be ready by summer 2012. That was 2 years into the future and they absolutely made it on time