Tesla plans on launching the Model 3 in the last quarter of 2017, and given the firm’s consistent inability to meet its previous self-imposed deadlines, it seems more than likely that the people lined up today won’t actually take delivery of their Model 3 until well into 2018. It’s highly unusual for an automaker to preview a production vehicle so far from its actual launch date for a variety of reasons: as Musk admits, the car is likely to change during the next two years of development work. In the meantime, a heavily hyped but unavailable car could cut into demand for Tesla’s existing models. With Tesla’s cash reserves falling below $1 billion and dwindling fast, the company might not survive long enough to launch the car people are currently lined up for.
Tesla plans on launching the Model 3 in the last quarter of 2017, and given the firm’s consistent inability to meet its previous self-imposed deadlines, it seems more than likely that the people lined up today won’t actually take delivery of their Model 3 until well into 2018. It’s highly unusual for an automaker to preview a production vehicle so far from its actual launch date for a variety of reasons: as Musk admits, the car is likely to change during the next two years of development work. In the meantime, a heavily hyped but unavailable car could cut into demand for Tesla’s existing models. With Tesla’s cash reserves falling below $1 billion and dwindling fast, the company might not survive long enough to launch the car people are currently lined up for.
So why is Tesla running a risk that every other automaker so studiously avoids?
Two plausible explanations come to mind. First, Tesla is racing to beat competing electric vehicles to the market. General Motors has already begun pre-production of its Chevrolet Bolt EV, which appears to compete directly with the new Model 3 on price point ($37,500 before the tax credit) and driving range per charge (200 miles). Perhaps Tesla wants to be seen as being the first company to bring an affordable EV to market, even if the Model 3 doesn’t hit sales showrooms until well after the Bolt (and potentially Nissan’s forthcoming next-generation Leaf EV as well). After all, a huge amount of its astounding brand power comes from the not entirely justified perception that Tesla alone is pushing electric cars into the mass market.
But there’s another, more troubling explanation for Tesla’s rush: The company needs more cash to actually complete development of the Model 3 and bring it to market. Tesla has been burning cash at a remarkable rate over the last year in order to ramp up Model X production and develop the Model 3: As of the end of last year, it was down to its last $1 billion in cash (maybe $1.2 billion, rounding up). Given its deep operating losses (it burned nearly $1 billion in cash in 2015 alone), that burn rate is too high to survive until 2018 while completing development work on the Model 3 and ramping up the sales, service, and Supercharger infrastructure needed to handle the expected new influx of customers. Even the $115 million in deposits collected won’t make a dent in Tesla’s capital requirements.