Our passion for technology keeps us up-to-date on the latest industry developments. So of course we follow brands like Tesla, the electric car company that is not only using technology to innovate automobiles, but also its entire business model.
Tesla Motors has been in the news a lot lately. In the past weeks, Tesla opened its Gigafactory, they shortened their website name to Tesla.com and updated the mission statement.
Also, CEO Elon Musk announced part two of the company’s master plan. Currently in the final phase of part one, we're witnessing Tesla democratize the electric car that reminds us of how Ford brought the Model T to the masses.
On March 31, amid little fanfare, Tesla announced its fourth car, the Model 3. Like all Teslas, the Model 3 is electric. It achieves 215 miles of range per charge and starts at $35,000.
If you’re lucky, subtract $7,500 at tax time for federal and more if you live in a state that offers environmental incentives. But chances are, you missed your chance. Because in the first 24 hours, without any advertising, 115,000 people put down a thousand bucks to reserve the new Model 3.
And after a week, Tesla released a statement that it had an overwhelming amount of reservations: 325,000 and climbing, or about $14 billion in implied future sales, making it the single biggest one-week launch of any product ever. By April 21, Tesla received about 400,000 orders for a product that doesn’t even exist.
Elon Musk is now saying that his company will rethink production. To do so, shares have been sold, yet the waiting list for Tesla’s “most affordable car yet” remains open.
The Roll Model
The first affordable car was the Ford Model T. When it appeared in 1908, a lot of excitement surrounded the event. Almost 15 million “Tin Lizzies,” as they were called, were produced over 20 years. Ford changed the way Americans got around.
Henry Ford didn’t invent the car or the assembly line, but by combining the two, he invented the affordable automobile. Tesla’s trying to do the same with the electric car.
Ford was a tinkerer who worked at Thomas Edison’s electric company before leaving to start his car biz. Ford and Edison remained close over the years and even talked about making an electric car together. Unfortunately, Henry Ford’s electric car never came to be.
The Model T was a success because it was a dream for the masses. Advertised as a car for ordinary people, it cost $825 or $18,000 today—about as much as a Ford Fiesta. The price dropped to less than $300 in 1925 or $4,000 today, and not because demand was low. The comes-in-only-one-color Model T was 40 percent of the car market. Ford had democratized the automobile.
Democratizing the Electric Car
Elon Musk didn’t invent the electric car but he’s democratizing it in roughly the same way that Ford did the gas powered one. Just as Henry Ford originally made the Model T affordable to the workers of his factory, Musk is trying to sell us all on his electric car.
Meant for masses, the Tesla Model 3 will be made in America but not in Detroit like the Model T. Tesla is a product of Silicon Valley. Its car facility in Fremont, Calif. has an assembly line made up of robots named after X-Men characters. And, that 5-billion dollar Gigafacory in Sparks, Nevada you keep reading about? Well, that’s where Tesla is figuring out how to make a more affordable lithium-ion battery, the largest cost for any electric vehicle.
Tesla is made possible by early adopters. Without them buying the most expensive model: Roadster ($100,000), the less expensive but still expensive Model X ($80,000) and still-expensive Model S ($70,000), Tesla couldn’t have arrived at the Model 3.
The Model 3 is the final piece to part one of a master plan laid out ten years ago. And it’s reminiscent of what Ford did 100 years ago, making cars affordable by scaling up. For Tesla, scaling is only the beginning. They’ve merely scratched the surface, shifting the way we’ll drive for generations.
Written by Carson Smith, Writer at Instrument.
Illustrated by Todd Quakenbush, Senior Designer at Instrument.