March 31, 2016
Moment of truth arrives for Tesla, Elon Musk
by Claudia Assis
Marketwatch.com
Tesla Motors Inc. set out to make electric cars sexier—and sellable—by first offering luxury vehicles, with the ultimate goal of making electric cars mainstream.
Soon, the world will know whether that was the right approach.
Tesla is expected to unveil a prototype of the Model 3, a $35,000 electric sedan, at an event Thursday evening in its Los Angeles-area design studio. Tesla stores will start taking $1,000 reservations on the car, scheduled for production in late 2017, when they open on Thursday, and online reservations will begin at 8:30 p.m. Pacific as the California event unfolds.
The cheapest car currently available at Tesla is the Model S, which starts at $70,000. Its first car, the Roadster, sold for more than $100,000.
When German car makers Mercedes-Benz and BMW reached for the middle market in the late 1990s and early aughts, the results were mixed, with BMW much more successful in making owners of its cheaper offerings feel they owned a “real” BMW, said Erich Joachimsthaler, CEO of consulting firm Vivaldi Partners Group.
The risk of brand dilution by reaching the masses is real, but Tesla has more than a few things going for it, he said. First off, it is viewed as a technology company, not a car maker, and forged strong ties with its customers.
Moreover, the concept of luxury has changed, Joachimsthaler said. If you can’t buy a Burberry suit, you buy a scarf; if you can’t afford that flat in London, you rent it for a night through Airbnb. Luxury, especially for millennials, “is quality, technology. That is what you are willing to pay more for.”
With the Model 3, Tesla is extending its “halo to the middle market,” said Scott Monty, a communications consultant who was head of social media at Ford Motor Co. F, +0.19% Sure, a misstep could dent the brand, but Tesla has kept close tabs on production of its cars.
“From what I’ve heard about Elon Musk, to be kind, he’s somewhat of a control freak,” Monty quipped.
Tesla, like some brands such as Apple Inc. has a loyal following, and those consumers will give them leeway for mistakes, he said.
On the other hand, people absolutely expect that superior user experience, he said. Had the iPhone 5c—the midrange smartphone launched in 2013 with an eye toward emerging markets—flopped, many Apple customers would not look kindly on the misstep, Monty said.
Tesla has been late in delivering the Model S and, more recently, the Model X SUV. The Model 3 cannot be an empty promise, Joachimsthaler said.
“The only thing that changes faster than technology is consumer expectations,” he said.
http://www.marketwatch.com/story/moment-of-truth-arrives-for-tesla-elon-musk-2016-03-30
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