All about that base (model): Tesla’s $35,000 car is here

Today, Tesla announced some very interesting moves. Some are incredibly risky, others have been expected but weren’t expected today.

First, Tesla has announced that the Model 3 Standard Range is now available for sale. For the promised-two-years-ago price of $35,000. The base model is a base model – cloth seats, no power seats, manual steering wheel adjustments, etc. The range is 220 miles per charge, which is fine for a commuter car or to run around town, but maybe not the best road trip machine (even if Tesla’s supercharger network is fairly robust around the US). The most interesting part is that the base trim has a cousin – the “plus” edition that has parts of the premium interior and a slightly longer range – 240 miles – for only an extra $2,000 (which I think is underpriced, I would have made it 3k, add another $1,000 to the mid-range too). I think in hindsight, this is what Tesla would have made the base trim if he didn’t put his foot in his mouth two years ago about the base trim being priced at $35,000. I would expect in a few years the standard range model at $35,000 will go away, and the “plus” model will become the new bottom of the line.

Ultimately, I’d say that for most people the “plus” trim is the Model 3 to get for those who want to get the “cheap” Model 3. You get a little bit better range (an extra 20 miles) but also much nicer interior – power heated front seats, vegan leather seats, better sound, and smartphone docking. For only $2,000 that seems like a steal (again, I think it should be more). If you’re going to spend this much on a car, make it a good experience.

ModelBase PriceDifferentiating Features
Standard Range$35,000N/A
Standard “Plus”$37,000vegan leather seats, better audio, power heated front seats
Mid-Range$40,000264 miles of range, full premium interior (heaters for all seats, satellite view on maps, in-car internet and streaming media, etc.)
Long Range (RWD)$43,000
Full premium interior, 325 miles of range
Long Range (AWD)$47,000AWD, 310 miles of range, full premium interior
Performance$58,0000-60 in 3.2 seconds. ’nuff said.
Option Price
Paint colors: gray, blue$1,500
Paint color: white$2,000
Paint color: red$2,500
Autopilot (traffic-aware cruise, auto-steer$3,000
Full Self-driving (pending regulator approval)$5,000
White interior (full premium interiors only)$1,000

Second, they revamped the autopilot and full self-driving (FSD) option feature sets. What used to be called “Enhanced Autopilot” is now split across AP and FSD. And while EAP used to cost $5,000. AP+FSD now costs $8,000. Of course, the prices of the car as a whole didn’t change, which tells me its not about getting more money out of the consumer, rather its about figuring out what the right options mix, understanding your fixed and variable costs, and getting the ASP of the cars just right so they can meet their profit goals.

Next, and by far the most risky thing Tesla has ever done since the falcon wing doors is the shuttering of their retail stores. Tesla will become a pure online sales company, while they continue to expand their service network. Most stores and galleries will close. This is a radical turning point in the company’s history (whether it’s a good one or not, only time will tell). Tesla is now relying on buyer’s risk appetites (you can return the car within 7 days or 1,000 miles) and other owners selling people on the car, rather than on the ability for someone to go down and see them in person and take a test drive.

The stores closing give me mixed feelings. I recently brought my wife to the local Tesla store, and had her test drive a Model 3 (ostensibly to gain her approval, but also to test the fit of our kid’s car seat in the back). Being able to go see the cars in person and sit in them is a great asset to the company (the gallery approach), but I have to say I was disappointed with the sales rep and the test drive experience – the test drive was literally over within 7 minutes and the total route was less than 2 miles. I think we sat in the car explaining all the do-dads prior to the test drive longer than the actual drive.

I think the galleries would be a much better approach than dealership-style experiences. And Tesla knows that unless you get a lemon, you’re not going to go through the hassle of buying a car and then return it within 7 days (especially not a sexy Tesla). But ultimately people want to at least sit in the car before they buy one. It is very risky. I’d almost be tempted to tell Tesla to bring back a much much much more modest version of their referral program with the store closings to get owners out there and use the network effect to sell the car to new customers.

Finally, Tesla made a few other changes to their lineup – bringing back the Model 3 LR RWD, discontinuing the Model X “Standard Range”, and un-derating the Model 3 LR RWD range back up to 325 miles (it was always that, but Tesla voluntarily de-rated the range).