Tesla's Model 3 Currently Costs $38,000 to Produce but Will Sell for $35,000

Tesla’s Model 3 currently costs $38,000 to produce but will sell for $35,000

Tesla continues to have issues with making their upcoming $35,000 Model 3 car available for the promised price. Although the car itself has been positively received and its futuristic features have impressed reviewers and regular users, actually buying one of the vehicles has proven frustrating for many customers. Those who want to own a Model 3 have to put down a deposit, and even then up to a quarter of orders have been refunded due to production delays.

Now Electrek is reporting that Tesla CEO Elon Musk has told employees that the difficulties with the Model 3 production are very much still ongoing. While he confirmed that the company has now met their production goal of 1,000 Model 3s coming out off the line in a day, maintaining this rate will be a major challenge. Apparently, it is the construction of car bodies that is the limiting factor in production right now.

A cost issue was also raised — Musk revealed that the current cost for producing a Model 3 is around $38,000, which is $3,000 over the eventual aimed sale price of the car at $35,000. Tesla hopes that with improvements in production efficiency, this number can be brought down so that the Model 3 can become profitable to produce, or at the very least break even. Musk is confident, and last month he said that he believes that Tesla can achieve a $35,000 Model 3 within 6 months.

While it seems like a big problem that Tesla cannot currently produce their vehicles at a cost that is less than the price they sell for, in the long run this might be a sound strategy. The affordability of the Model 3 when compared to Tesla’s high-end offerings means that the brand is now accessible to a much larger audience: no longer just auto enthusiasts with money to burn, but also regular drivers. This opens up a much larger pool of potential customers as well as raising the profile of the brand, making it a more recognized name in car manufacturing. And as Tesla scales production, they will be able to produce the car more cheaply. Plus, with many options and trims available for Tesla products, most buyers will end up paying quite a bit over the base price of $35,000 — as long as Tesla is able to fulfill all the orders that have been rolling in.

Correction: This story has been updated to reflect that $35,000 is the proposed future not current price of the Model 3.

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