Elon Musk: Tesla’s Model 3 progression
Should we be switching to electric?
Hakim Khan, London 06.05.19
LSE SE Business and Finance Guild, London School of Economics
Elon Musk, the CEO of Tesla, announced on Friday the release of a “lower cost, mid-range Tesla Model 3.” Previously the cheapest version of the Model 3 available started at around £38k/$49k. This newer middle-range version of the Model 3 will have a starting price of approximately £34k/$45k. Now this price is still quite unaffordable for the typical British person with a £35k average salary (according to PayScale). However, the main point here is that Tesla’s car prices seem to be getting cheaper slowly and steadily over time perhaps allowing higher accessibility to the general population. The only real issue with the model is that the car has fewer options, for example its missing the “full self-driving” option and will only be a rear-wheel drive.
On the other hand, the mid-range battery of this Model 3 can only take the car 260 miles on a single charge. Despite a lower price for the Model 3, the issue is that when it comes to electric cars, battery range is a massive factor when it comes to price determination. For example, a long-range battery in a Tesla car would have a starting price at over around £40k/$54k. So, for those interested in buying a brand-new Model 3, the trade-off between battery range and price is an important one.
Looking into the further future, in the next 4-6 months, a standard battery model (with an even worse battery range of about 200 miles on a charge) at a starting price of around £27/$35k Will hopefully be available as well. If models do continue to become cheaper and more affordable, this is of course beneficial to society in the sense that electric cars charging costs are much lower than fuel costs, and of course Tesla’s Supercharger locations are continuing to expand rapidly making it easier than ever to use an electric car in the UK (there is also the option to get a Home Charger too).
To further emphasise the car savings Tesla supposedly brings: Tesla is promoting this new Model 3 to cost as little as $30,700/£23.5k by, factoring in “gas savings,” as well as the possible local electric vehicle tax incentives. For example, the UK Plug-in Car Grant, which is a purchase subsidy of up to £4,500 deducted from the purchase price of new Tesla vehicles, and Tesla vehicles are 100% electric with pretty much zero emissions which means that they care completely exempt from the London Congestion charge (apart from an initial £10 registration fee of course). From going on Tesla’s site, you can read about even more amazing savings buying a Tesla car can give, showing how much more affordable electric cars are today than say 5-10 years ago.
The only problem when looking towards electric cars in the UK specifically would be that realistically the UK would need at least a six fold increase in the number of electric vehicle charging points by 2020 to be able to provide adequate infrastructure for green motorists according to estimates of more than one million electric vehicles on UK roads within two years, requiring over 100,000 charging points as oppose to the current 18,439 current connectors available in the UK (according to Zap-Stats).
Overall, I think that Tesla has a positive outlook in terms of their car affordability, as it continually works to reduce the cost of it its batteries built at its Gigafactory (the 75-kWh pack for example that powers the long-range Model 3 costs Tesla about $14k/£10k). Customers of Tesla will clearly be benefiting as by selling its Model 3 car for $4k/£3k less than its previous starting point, Tesla will be potentially losing profit there, though due to its “Premium” interior package Tesla may be able to re-obtain a nice profit for the next quarter.
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