Model 3

Tesla founder and CEO Elon Musk has revealed that the electric vehicle manufacturer has not only turned a surprise profit – and expects to continue to do so – but is also exceeding all its previous sales records with its Model 3 mass-market electric car.

The main item of Tesla’s unexpectedly positive news was the performance of its Model 3 “mass market” vehicle, which has become the best selling car in the US in terms of revenue and the fifth best seller in terms of volume.

Better still, it is also delivering surprisingly high margins for Tesla – of more than 20 per cent – giving it the encouragement to predict that it can lower production costs enough to finally make it viable to product its long-promised “mass-market” version priced at $US35,000.

Musk said that version should be less than six months away, meaning that all going well it should be available when the Model 3 finally makes its debut in Australia, once the right-hand drive version goes into production.

In the meantime, Tesla is focusing on the European market, where it expects to start selling Model 3s at the end of the first quarter next year after an overwhelming response at the Paris Motor Show and elsewhere, and in China, where it will begin its first overseas manufacturing plan.

These new markets will offset potential road humps in the US markets, where it is facing the end of tax incentives and the impact of tariffs on China sourced components.

Tesla’s big boost in production of the Model 3 meant it delivered 84,000 vehicles globally in the last quarter alone – 80% of all the EVs the carmaker delivered in 2017, and more than all EVs sold in all of 2016.

The Model 3 recently gained a 5 star safety rating and proved to be ahead of all other 943 vehicles tested since 2011 in terms of chance of injury, from the US safety agency NHTSA.

Customers are trading up to get their hands on the Model 3, according to Musk and his team, who report that over half of the brands traded in were non-premium models priced below $35,000 when new.

“For many people it is the most expensive car they’ve ever bought, so they are clearly demonstrating with their money that they’re willing to spend extra money to get a Tesla,” Musk said.

During the call, amongst discussion of safety, autopilot and other topics, Musk fielded questions around production of the Model 3, and how Tesla intends to continue to ramp up production of the Model 3 and work towards its ultimate goal of the $US35,000 EV.

According to Musk and his team, achieving this largely hinges on faster deliveries – by improving production line efficiencies, and getting cars out of the factory door and to customers in as little time as possible, freeing up capital and lowering costs.

It’s something that is foremost on Musk’s mind: if he could bring out the $US35,000 Model 3 now, he would, he said.

“Our goal really is to make electric cars everyone can afford, not … to make high option value cars. If we could produce the 35,000 dollar car today, we would do it,” Musk said.

“There’s more to do… we’re probably less than 6 months from that, that’s our mission.”

In regards to the $US45,000 mid-range model made available on the US website late last week, he said it was an “intermediate step”.

Tesla’s bid to lower the price of the Model 3 will also see the EV maker accelerate plans to begin making the electric car in China, where Tesla has acquired land for its EV gigafactory.

“We are moving rapidly on that, we are aiming to have Model 3 production for the China market, or the Greater China market, active definitely next year…it will be done in a very capital efficient manner,” said Musk.

In the meantime, the carmaker is focusing on improving those delivery times – the average delivery time has already been whittled down from 30 days in August to 20, according to Musk, with a goal being to delivery in under 10 days in Q4.

“This is a giant improvement in the capital efficiency of the company,” he said.

Long-term, Musk hopes the get that number down to 7 days worldwide – which will be a mean feat if Tesla’s expected demand of half to one million cars globally is achieved.

Of course, to do that, the EV maker recognises that it logically follows that it must make its cars in the continent they are sold in – which brings us to Europe, where it intends to begin rolling out as early as late February 2019.

“We will also have a factory in Europe long term because it’s pretty silly to make cars in California and ship them all the way to Europe,” he said.

“It makes sense to make cars at least in the continent where they are consumed.”

Will this mean at some stage Aussies will be apply for jobs to produce an Australian-made Model 3?

It’s possible – in a submission to the Senate Elect committee The Driven reported on in August, Tesla senior manager Sam McLean said that the EV maker would consider it “if the opportunity arose”.

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