At $78,000, Tesla Moves Mass-Market Model 3 Beyond Masses

Elon Musk’s Model 3, once touted as Tesla’s $35,000 car for the masses, can now set a buyer back almost $80,000.

Musk unveiled specifications for a faster and more powerful version of the Model 3 in a series of tweets over the weekend.

It will cost $78,000, more than double the $35,000 base-model starting price discussed into the run-up before the electric car’s deliveries started last year.

And that does not include the Autopilot driver-assist feature, Bloomberg reported.

The increasingly expensive configurations for the Model 3 are planned steps, if somewhat counterintuitive ones, toward Musk’s vision of Tesla Inc. as a mass-production player with vehicles affordable to a broader swath of buyers. The $78,000 sticker puts the electric sedan beyond reach of many consumers, and, by Musk’s own estimations, brings it closer to the realm of luxury cars.

Musk’s latest tweets build the hype around a car that is faced repeated production delays and manufacturing bottlenecks, which the company is just starting to clear.

Tesla delivered 8,180 of the sedans in the first quarter, making it the best-selling electric car in America, and almost a half-million people have put down $1,000 deposits for Model 3s.

Burning Cash

The company burned through more than $1 billion of cash in the first quarter and may need to tap capital markets for more than $10 billion by 2020 to fund its car-making operations, new products and expected expansion into China, Goldman Sachs Group Inc. analysts said last week.

Mounting liquidity pressures and challenges with Model 3 production prompted Moody’s Investors Service to cut the carmaker’s credit rating further into junk status in March, adding fuel to a selloff of the company’s bonds to all-time lows.

For every additional thousand dollars that ends up being added to the price of Model 3, the size of the US auto market that buys cars that are that expensive shrinks by 1-2%, according to Kelley Blue Book. That is a tradeoff the company is willing to make.