Tesla has been through hell and back this year, from production nightmares to conflict with the SEC and constant battle with the Wall Street. But there’s finally some good news for the automaker. The company latest mid-sized sedan, Model 3, is now the highest grossing luxury vehicle in the United States. Surprised?
An Unexpected Winner
The revenues from various auto companies are in and there is one clear winner for the month of August. Tesla may be one of the most controversial companies around but it has managed to accomplish the unthinkable.
Its newest Model 3 sedan is the bestselling luxury vehicle in the U.S. The company marketed the car as a mass-market vehicle instead of a luxury car because of its $35,000 starting price, which is drastically lower than its predecessor Model S’ six-figure price tag.
Model 3 may be the highest grossing luxury car in America right now, but it is nowhere close being the mass-market vehicle Tesla had once promised it would be. Even though the company says that car starts at selling price of $35,000, customers have to wait from three to six months for the base model to be available.
The $35,000 car comes with just a standard battery in comparison to Model 3s, which costs $49,000 and above and employs long-range batteries. Need more powerful specs like the dual motor AWD? You’ll have to fork over $55,000 or more – and that doesn’t even include features like the autopilot, custom colors and wheels and other ‘luxury’ options.
Mass-Market vs. Luxury
Getting all the specs mentioned above pushes Tesla’s Model 3 into the luxury car price range, but that’s even better news for the company. Mass-market cars don’t even come close to making the profits luxury cars make from selling fewer units.
Mass-marketing isn’t the best decision for Tesla anyway given the current state of its production plant which can only churn out 5,000 units per week (and that too after company was forced to create another make-shift production line in Giga Factory’s parking lot). The 5,000-cars-per week isn’t a sustainable level of production over the long-run unless Tesla undergoes a major production overhaul which could cost millions.
Selling cars in the luxury price range will be a crucial strategy for making Tesla profitable so that it doesn’t have to suffer from another cash crunch. Even Elon Musk knows this, which is why he has decided to put brakes on the distribution of the $35,000 Model 3 vehicles.
He told a Twitter follower in May that if Tesla shipped the minimum cost Model 3 cars instantly, the company could lose a ton of money and forced into bankruptcy. The current Model 3s is branded as ‘premium sedan’ instead of a luxury car by Tesla.
America’s Favorite Automaker
But whether Tesla wants to or not, it is now directly competing with other luxury players in the auto industry and the numbers from August shows that it has completely blown its competition out of the water.
Cox Automotive senior analyst, Rebecca Lindland, says that the company’s success with the Model 3 has been surprising to say the least. The company has jumped from being a leader in the electric vehicle niche to a mainstream automaker in the luxury segment.
Last Tuesday, Tesla announced that it has successfully sold almost 56,000 Model 3s sedans in the third quarter, becoming the bestselling luxury car in the industry. Nearly all of its customers were based in the United States. The next bestseller was Audi Q5 which sold over 21,000 units during the same period. It’s surprising how Model 3 surpassed all other established brands in sales even though it doesn’t use any traditional advertising platforms like its competitors do.
Its controversies and habit of overpromising has turned Tesla into its own enemy. In August, Elon Musk announced plans to take his company private but later abandoned them which lead to a high-profile lawsuit from the SEC. Investors claim that Musk deliberately deceived them to manipulate Tesla stock prices.
