July 28th finally saw the initial reveal and handover of the much awaited Tesla Model 3, a budget electric car by the automaker. A total of 30 cars were handed over by the company founder Elon Musk, to the employees who bought the car. Priced at $ 35,000, the car is a first by Tesla which is affordable to the general masses and not just the rich and elite. The hype around the car can be summarized by the fact that even though there is no set launch date, Tesla has 400,000 people who have reserved the car for when itís launched by paying $1,000 deposit.
Itís easy to see why thereís such a hype around it. The base model of the car can accelerate from 0-60 mph in 5.6 seconds and has a top speed of 130 mph. It can also travel up to 220 miles on a single charge. While the project is certainly ambitious to foray into the mass-market, thereís one stumbling block thatís holding Tesla back, its production. Tesla produced under 84000 cars in the past year. Elon Musk himself, in the reveal on 28th described manufacturing the Model 3 as "six months of manufacturing hell". Tesla aims to produce at least 100,000 cars by the end of this year and also to produce about 520,000 vehicles per year by 2018.
This rapid expansion into the manufacturing is what is making Tesla to raise funds of up to $ 1.5 billion. Building a luxury car for small number of wealthy and enthusiasts is one thing. Doing the same for mass-market is an entirely different beast. You may be wondering why Tesla is after such aggressive expansion, given its a proven leader in electric cars? The answer - competition. While the market for electric cars had been non-existent some years back, since Tesla, it has grown and will continue to do so. Major players like VW, Mercedes, BMW and Jaguar Land Rover all have high performance electric vehicles in the pipeline. While the affordable end of the market that Tesla is trying to enter into is dominated by Renault-Nissan already.
Tesla has significant silicon valley cachet over its competitors , which canít be matched at the moment. But if Tesla canít use it and become a high-volume manufacturer, it risks losing its market share to other established players who are now entering the same. Hence, it is no wonder that even though Tesla is left with $ 3 billion as cash on hand, it is raising additional funds to accelerate its manufacturing capabilities and achieve the desired target in order to dominate this segment of the market.