Is Tesla Abandoning the Mass Market?

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It is interesting how a $35,000 car suddenly doubles in price.

 

By

Charley Grant

Charley Grant

The Wall Street Journal

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• BiographyCharley Grant
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May 21, 2018 11:40 a.m. ET

 

Tesla TSLA 1.76% has given the first signals that it is giving up on its ambition to become a mass-market car maker. Prospective customers should be angry, and investors ought to be wary.

Over the weekend, Chief Executive Elon Musk announced a new, $78,000 version of Tesla’s car for the people, the Model 3. More important was his admission that his promised $35,000 version would cause the company to “lose money and die” if built right away.

Tesla has struggled to produce a $50,000 version of the Model 3, and as the company burns through cash, the question is how many of those will be available once the faster $78,000 offering is ready. If Model 3 is suddenly a high-end car, then Tesla, whose other offerings start around that price, would be more comparable to Maserati than to Chevy, which is producing a $36,620 electric car.

The problem is investors have given Tesla a near $50 billion market cap in the belief the company will upend the global auto industry, not become a niche, high-end electric car maker. What that latter company is worth is hard to say, but it is not the current market valuation.

Then there are the nearly 500,000 Tesla die-hards who put down $1,000 deposits for what they thought was a car that started at $35,000. How many can afford, or would be willing to pay for the higher-end models? These refundable deposits account for a third of the cash on Tesla’s rickety balance sheet.

Mr. Musk said Tesla would produce a low-end Model 3 toward the end of the year, though Tesla’s forecasts are typically optimistic.

 

https://www.wsj.com/articles/is-tesla-abandoning-the-mass-market-1526917239