A test of patience for Tesla's wait-listers

A test of patience for Tesla's wait-listers

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Slow production of Tesla’s Model 3 sedan leaves customers at the bottom of the 455,000- person reservation list facing a three-year wait for their new cars.

That leaves an opening for other EV makers, such as Chevy, to woo away Tesla customers. But it’s not an opening Chevy plans on openly exploiting, the company said.

“It’s not in the cards,” Steve Majoros, marketing director of Chevrolet cars and crossovers, told Automotive News last week.

On paper, the Bolt EV and Model 3 are similar in terms of performance and price. However, Tesla has created a cult following that had customers making down payments on the car even before its unveiling.

And it would be nearly impossible for a competitor to identify those wait-list customers without offering a broad incentive for those who prove they were on the list. Tesla, for privacy and competitive reasons, wouldn’t share that list.

Like all first adopters, most Tesla reservation holders know what they’re getting into when they drop a $1,000 deposit on a car sight unseen.

When Tesla unveiled the Model 3, 180,000 people paid a deposit to reserve their spot in line, according to Tesla CEO Elon Musk, though the car wouldn’t be delivered for more than a year — and, in most cases, has yet to be delivered.

However, with the sleek exterior characteristic of the Model S and Model X and a spartan interior consisting of just a center console touch screen, the Model 3 is somewhat prevented from requiring any major redesigns in the near future, said Mike Ramsey, an analyst at consultancy Gartner Research.

“This model is very simple,” Ramsey said. “It will stick around for quite a while with the way it looks. It has an exterior design that ages well.”

December sales of the?Chevy Bolt topped 3,000.

Delivery rate

Last week, Tesla said it increased the delivery rate of the Model 3 by more than seven times. On Wednesday, Jan. 3, Tesla said it delivered 1,550 Model 3 sedans in the fourth quarter, up from 220 in the third quarter.

Tesla said it is in the process of relieving bottlenecks that have slowed initial production rates. But the automaker will need a major production breakthrough to make sure customers don’t end up receiving a car with a 3- to 4-year-old design at a new-car price.

“We’re very appreciative of our Model 3 customers, who continue to stick by us while patiently waiting for their cars,” Tesla said in a statement.

When Musk launched the Model 3 in July, he projected the company would produce 5,000 vehicles a week by the end of 2017. During the company’s third-quarter earnings call, Musk pushed back the production target to the first quarter of 2018. On Wednesday, it was delayed again to the second quarter.

Reports suggest the initial delay may have been due to an unfinished assembly line at Tesla’s Fremont, Calif., plant. In November, Musk said a supplier to Tesla’s battery gigafactory had “dropped the ball,” forcing the company to rewrite code to get the production line back on track.

No matter the cause, Tesla customers are still stuck waiting for a car with no sure timeline as other automakers begin to roll out their competitors and as Tesla’s $7,500 federal tax credits disappear, which will happen after the company hits 200,000 EV sales.

Mass market

The predicament for Silicon Valley’s darling automaker is a stark contrast from its largest Detroit rival, General Motors, which just completed its first limited full year of sales of the Chevy Bolt EV.

GM sold 23,297 Bolt EVs in 2017 — making it the best-selling, all-electric mainstream EV in America. That made for an average of about 2,750 vehicles a month since sales expanded nationally in August.

In December, the car topped 3,000 in sales — a small milestone but enough to have it outsell the Chevrolet Volt to become GM’s top-selling plug-in for the year.

This year will be an early indication as to whether automakers, including GM and Tesla, can produce mass-market EVs that will attract owners who aren’t early adopters of the technology.

Barclays analyst Brian Johnson said 2018 is shaping up to be the “Year of the Model 3, Part 2″— referring to how “production bottlenecks” and delays stifled sales in 2017. Problems, he says, that may continue this year.

“While one would assume the ramp to steadily increase, in reality the ramp is likely to be lumpy, with weeks of downtime/low production as Tesla addresses bottlenecks — only raising production once bottlenecks are solved,” he said in a note to investors last week.

Easy conquests

Majoros last year said Chevy did some cross-market research in an early Bolt EV buyer study about whether people who purchase the car were interested in or waiting for the Model 3. He said the results were “a pretty healthy number.”

Chevy, Majoros said, is naturally attracting some Tesla buyers, though he declined to provide details.

Conquesting battery-electric vehicle, or BEV, buyers is easier than those of traditional powertrains, according to IHS Markit.

According to a report released last week by IHS, BEV buyers’ loyalty to a brand is generally “below make loyalty for the remaining models in the BEV’s brand.”

Make loyalty is the percent of BEV households that return to market and acquire another vehicle from the same make.

Helping the conquest is the rate at which buyers are switching vehicles. Currently, more than four of every 10 battery-electric vehicles are leased, substantially above the lease penetration rate for both hybrids and all vehicles, according to IHS.

Stephanie Brinley, senior automotive analyst for IHS Markit, says the real battle between the Model 3 and Bolt EV will come once Tesla’s production is at a “more robust level,” and even then, measuring the cars based on traditional metrics such as sales may not be the best way to evaluate success.

“GM is rolling it out the way that they want to,” Brinley said. “GM’s strategy for Bolt is much broader than immediate sales in the coming months.”

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