Model 3 unveiled, huge demand

I know Byron is not a car guy, when you sit with someone all day long you get to know an awful lot about them. You had better enjoy your business partners as much as your family, you quite possibly spend more waking hours with them! Tesla however is a different kettle of fish, Byron was genuinely excited yesterday, comparing the launch of the Tesla Model 3 to the first iPhone. I guess with Tesla, this is dumbing their vehicles down in order to make them more affordable for environmental savvy folks across the world, and for those people who want to drive what is a beautiful vehicle. Watch -> Tesla unveils its $35,000 Model 3. And then also -> Meet Tesla's Model 3, Its Long-Awaited Car for the Masses.

Affordability of an iPhone is one thing, a car is something very different. Yet, according to this Barron's article (no relation to Byron) -> 100,000 Model 3 Reservations 'Now Seems Low', Credit Suisse estimated that there were 12 thousand people who queued to stick their names down for a car that they had never seen. Never. So actually, this was a little "low", during the presentation (from the Verge), Elon Musk said during the presentation that they had 133 thousand plus already.


So you had to part with (in the US) 1000 Dollars as a deposit on a car that you might well not get until 2018. You are paying for a spot in the queue and a chance to have one of these items, a unique step in humanity to wean us off fossil fuels. The sun comes up and goes down every day, without fail. Sometimes there are clouds in the way. We still get some element of sunshine however. Trip Chowdhry from Global Equities Research suggested that this is the fastest ever pre order amount in consumer history. Of course the company (Tesla) is only asking you to part with 1000 Dollars, not the full 35 thousand Dollars. In the US there are strong tax incentives to use battery operating vehicles, depending what state you are in, you can get big rebates. So the cost price might well be less than that, as much as ten thousand Dollars less.

Still, this is not even a dent in the overall car market, what it does represent is that the company changes to being a luxury model only, to a well priced vehicle for people that are well to do. This vehicle costs the same as a BMW 3 series, it hardly has "mass appeal" right? Range of 215 miles on a single charge, that doesn't seem close or far. The acceleration is pretty cool. Sales of Tesla are expected to be 500 thousand by 2020, a nearly 10 fold increase on the current production, all in five years. Doable? Perhaps. What really does grab me from this FT article (Tesla targets mass market with new Model 3) is this paragraph: "Evercore ISI said investors it had polled had guessed at 117,000 orders by the end of the year — a level reached in just the first day."


The demand is huge, the execution is going to be key. If the company can ramp up and deliver at that sort of scale, the margins will widen (anything is better than where they are currently) and the company will become increasingly profitable. It is not an automatic buy, the stock that is. If you are buying this, you must be prepared that the company might still stumble in the most incredible manner. It is not for everyone. We will continue to recommend the stock in small allocations at the fringes, for wider spread portfolios. You really have to hand it to Elon Musk, he may not be a nice man to get on with (he hates acronyms by the way - BTW), he is on a mission for the betterment of humanity.