Model 3 Reservation Holder Survey Underlines Tesla’s Mass Market Challenge

 

They waited for reservations… will they also wait for service? (image courtesy Investors Business Daily)

Much of the critical coverage of Tesla Motors, both here at Daily Kanban and elsewhere, has focused on issues that Tesla is able to get away with as a small-volume manufacturer serving an affluent, early-adopter market segment. From manufacturing bottlenecks to quality control problems, from inconsistent, hype-happy communication to poor service, Tesla has been able to weather a storm of problems because its customers and fans are so patient with and passionate about the company. But as Tesla moves from expensive, low-volume cars to the mass market Model 3 these problems are taking on a new significance. In part this is because higher volumes increase the likelihood of quality and service problems, and in part it is because mass market customers who depend on a single car for their daily routine are more demanding than luxury car buyers who can always take the Lexus to work if their Tesla is broken.

Given Tesla’s pattern of releasing cars with insufficient testing as well as its chronic quality problems, it’s safe to assume that the Model 3 will face its fair share of issues. Thus, investing in service infrastructure that will allow Tesla to promptly and affordably repair and upgrade high volumes of Model 3 is extremely important. As Bertel has written about at Forbes, Tesla is behind the curve on those investments and it will cost billions to catch them up. Just yesterday a piece by former Tesla employee Evan Niu dramatically illustrated just how far Tesla has to go to improve its service time, which has dragged on for 8 long months in Niu’s case. Now an exclusive study of about 800 Tesla Model 3 reservation holders, EV owners and luxury brand car owners conducted last year on behalf of a major automaker and provided to Daily Kanban by an industry source, reveals why Tesla’s quality and service woes are so critical to the success or failure of the Model 3.

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CAEATFA Approves 48% Of Record Tesla Model 3 STE Request

Since 2009, the California Alternative Energy And Advanced Transportation Financing Authority (CAEATFA) has handed out more than $100 million in sales tax exemption (STE) tax relief to Tesla Motors, the main beneficiary of the state government program.  Tesla’s latest application, which requested about $100 million in STE on the purchase of more than a billion dollars worth of equipment that the automaker will use to develop and build its Model 3 sedan [previous coverage here], was by far the biggest application in the program’s history and comes as the program faces record demand for tax relief. As a result of this high demand and Tesla’s historical domination of the program, CAEATFA approved just 48% of Tesla’s massive Model 3 request at its December 13 meeting, leaving more than half of its latest request unfunded.

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Tesla Model 3 Development Work Constrained By Tax Relief Program

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Sketchy…

Documents filed by Tesla with the California Alternative Energy and Advanced Transportation Financing Authority and obtained exclusively by Daily Kanban have provided unique perspective on the electric automaker’s ramp-up to production of the Model 3. But there’s more to the story than the production side: Tesla’s equipment purchases are split between production equipment and tooling for the development and prototyping of Model 3, new versions of the Gen 2 vehicles and possibly even other vehicles hinted at in Tesla’s Master Plan Part Deux. This helps explain why the production volume increase from Tesla’s $1.2b investment in Model 3 is so modest, but what does it say about the state of the Model 3’s development?

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10 True Facts From Tesla’s Model 3 CAEATFA Application

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When we get our hands on an exclusive document here at the Daily Kanban, we tend to write long and in-depth analyses. It’s just what we do. But because our latest document haul contains some cool facts that didn’t make it into our story and because we’re eager to show off our fun-loving, light-hearted sides we thought we would put together a listicle. Yes, like Buzzfeed. Just a good, old-fashioned list of things you might not have known, presented in a way that won’t take long to read and will hopefully make you smile. Because here at the Daily Kanban, learning can be fun!

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Documents Show Tesla Expanding Annual Production To About Half Of 500K Goal

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The Daily Kanban has obtained Tesla’s application [PDF here] to the California Alternative Energy and Advanced Transportation Financing Authority (CAEATFA) for about $100m worth of Sales and Use Tax Exclusion (STE) on its purchase of about $1.2 billion worth of production equipment to be used to produce its affordable Model 3. An analysis of key unredacted portions of this CAEATFA application shows that this massive investment –along with CAEATFA documents related to Tesla’s expansion of Model S and Model X vehicle production— will only increase the electric automaker’s annual production to between 230,000 and 300,000 units per year, well short of the firm’s 500,000 unit per year goal for 2018.

Though Tesla could reach its much-discussed half-million per year production goal through other means, these CAEATFA documents appear to validate Daily Kanban‘s analysis of air quality permits at Tesla’s Fremont plant which indicates a current production limit of about 230,000 units per year.  Tesla has yet to publicize any plans to apply for the new permits or make the new investments required to bring its production rate beyond these limits and towards its planned 2018 rate of 500,000 units per year.

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Tesla’s Model 3 Is A Challenge That Has Only Just Begun

Here we are now, entertain us

Way back in 2006, Tesla Motors CEO Elon Musk laid out his vision for his electric-car company in a blog post promising that its six-figure luxury cars would be succeeded by increasingly affordable vehicles. Ten years later, it’s here in the form of the Model 3.

Musk described the vehicle at its unveiling in California on Thursday night as “the final step in the master plan, which is a mass-market, affordable car.” Already, 115,000 people have plunked down $1,000 deposits to order the car two years before it’s available.

Public enthusiasm and anticipation are once again being driven up to levels the rest of the auto industry could only hope to generate.

Beyond the hype there are a number of warning signs that indicate this intense excitement may ultimately lead to disappointment and even Tesla’s ruin.

Read more at The Daily Beast