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Tesla Motors, Inc.'s Model 3 Price Is Confirmed

By Daniel Sparks - Feb 10, 2016 at 9:28AM

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The automaker provides updates on the Model 3's pricing, timeline, and planned unveiling.

There's always been some concern that Tesla Motors (TSLA 0.16%) wouldn't be able to live up to its own ambitions to cut the starting price of its fully electric vehicles in half. But just one month before the company unveils the vehicle, and less than two years before it is scheduled to go into production, Tesla is confirming (via Bloomberg) that it's still firm on its $35,000 starting price.

A Model 3 update
"We can confirm it's $35,000 before incentives," Tesla spokeswoman Khobi Brooklyn told Bloomberg. "We haven't changed our minds."

Going further, Brooklyn also noted that the Model 3 is still "on time." The company has planned to unveil the vehicle in March and to begin its first deliveries to customers by the end of 2017.

In regards Tesla's March unveil of Model 3, Brooklyn said "everyone is going to learn more about it" and that the company will give "a really great update."

Big risks
Tesla's Model 3 is critical to the company's growth plans. With a starting price at half of its Model S starting price, the vehicle will dramatically expand Tesla's addressable market. But the stakes are high for several reasons

First, General Motors (GM -0.35%) is set to launch its all-electric Chevy Bolt, which has a starting price of $37,500, about one year ahead of Tesla's planned launch for its Model 3. General Motors' Bolt is a clear statement about how seriously the company is taking fully electric vehicles. And if Tesla doesn't deliver a Model 3 on time, the Bolt could snap up some of the electric-car company's customers.

Second, If Tesla's Gigafactory, which is currently ahead of schedule, is ready to ramp battery production before the vehicle itself goes into production, then Tesla could find itself in a tough financial situation.

Tesla Fremont factory. Image source: Tesla Motors.

The risk associated with the timeline for the Model 3 and the Gigafactory also works the other way around. Tesla has said it will need its Gigafactory, or the world's largest battery factory, to come online around the same time the company is ramping up production of the Model 3. Fortunately, management said in the Tesla's most recent quarterly shareholder letter that the currently under-construction Gigafactory is on schedule for the first cell production to be allocated to vehicles to occur in 2017 -- cells which management said will specifically support Model 3 production.

Big rewards
If Tesla does roll out its Model 3 on time, as management apparently still believes it will, Tesla will be well positioned to capture rising demand for fully electric vehicles with 200-plus miles of range.

Furthermore, the Model 3 launch could overshadow General Motors' Chevy Bolt -- even if the automotive giant is first to market. Tesla has repeatedly likened its Model 3 to BMW's 3-Series, which is the world's most successful car with a $35,000 starting price. It's likely Tesla is trying to make the Model 3 more compelling than the 3-Series, with greater style, performance, handling, and safety than the iconic car. If Tesla can truly make its Model 3 more compelling than the 3-Series, General Motors may serve as more of a catalyst for the overall electric vehicle market than direct competition to Tesla's Model 3.

Investors may get a few more updates on the company's timeline for Model 3 when Tesla reports fourth-quarter results today after market close.

Daniel Sparks owns shares of Tesla Motors. The Motley Fool owns shares of and recommends Tesla Motors. The Motley Fool recommends General Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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