Model 3 Impact on Model S

Model 3 Impact on Model S

Traditionally, automakers produce "tiers" of vehicles at various price ranges, from "low end" to "ultimate", as well as numerous iterations within each model class. Think C-Class Mercedes (4 cyl, 6 cyl, 8 cyl, AMG-lite, AMG) vs S-Class Mercedes (same iterations, basically). There are marked differences between those cars in terms of size, quality of materials, feature sets offered, and other "exclusive" trim levels that are reserved for the upscale S-Class. Realistically, folks aren't cross-shopping between a C-Class and an S-Class, they just aren't deemed to be in the same league.

But with the Model 3, and I know it's very early and all we saw were some prototypes, is it just me or does there seem to be far less distinction between it and the Model S? Yes, it's smaller, but interior volume is said to be pretty close. We've already heard that AWD and "ludicrous" versions would be available, with darned near close 0-60 times and, more importantly, range. The interior quality of the Model S has been discussed as something of a weak point in comparison to other cars in that price range, and there has always been this sort of "stigma" that the Model S is a $40k car with a $50k battery attached to it. BTW, I love the Model S and think very highly of Tesla, in general, and am happy that there will finally be a car in my price range, albeit it 2-3 years down the road. So I'm not knocking the S, but what I'm wondering is that if a fully loaded Model 3 will be, let's say $60k with ludicrous speed and all the bells and whistles, the comparable Model S is $140k or so ... so what's the difference? If the Model 3 will have all of the same technology, and comparable interior quality, and be just as fast (or close to it) with just as much range (or close to it) but is half the price of the Model S ... I can easily see Model 3 sales cannibalizing Model S sales and I'd never say the same using the Mercedes example.

For the price of a new C-Class right now, I can get a very decently loaded 2-3 year old S-Class. No contest there, for me (I'd take the S-Class), and the two just are not comparable. But if I had to choose between a new loaded Model 3 and a 2-3 year old Model S ... I just don't see any downside to the 3 other than a little less cache (because it's a "cheaper" car) and maybe a little less interior volume. Further, based on what I know today, there's nothing in the Model S that makes it worth DOUBLE the cost of the 3.

Do you think they'll remodel the S, change up the interior, add more upscale luxury items, stuff like that, to further differentiate and warrant the substantial price difference? Or do you think maybe a fully loaded Model 3 will be closer to $80k or $90k? Or maybe the S gets preferred service, or will charge faster, stuff like that?

Or am I the only one who sees it this way?

autoxer7 | 05. April 2016

I'll be interested what happens with MS sales over the couple of years. I half expect sales to stagnate as orders are directed to the M3 instead. On the other hand I don't identify with the market segment that buys exclusive/marquee vehicles so maybe MS sales maintain their upward trend.

jlewisthe3rd | 05. April 2016

Tesla needs to NOT give the Model 3 Ludacris speed or any speed or range that rivals the mid-high end Model S. If Tesla can successfully limit the performance of the Model 3 while still making it compelling then they will have noticeable differentiation in their cars and retain proper segmentation with room to grow within its lineup.

If you have a Model 3 you should aspire to "upgrade" to a model S one day. If you have a model S you should aspire to grow into a Model X for the road trips and make it the family car. All the cars should be distinct and not all look similar and do the same things. It would be a major slap in the face to current MS owners if the Model 3 performed as well as the MS. A "Thank You" to MS owners would be to keep the S as the flagship vehicle in a league of its own, which would preserve resale value for all owners down the line.

mr.numbers77 | 05. April 2016

I think it's obvious that the S and X will be used as the bleeding technology platforms before it trickles down to the 3. This is how it works, emerging tech makes it to the flagships well before they're offered on the main-stream models. I think we can expect a much updated Model S by the time the 3 rolls out.

PhillyGal | 05. April 2016 accelerate the world’s transition to sustainable energy.

If getting to that goal means cannibalizing (or some day nixing all together) Model S, so be it.
Do I think that will happen? Not necessarily, but it may be a means to an end. Shoot, cars in general may be a means to an end where Tesla ends up a car battery maker some day and no longer makes cars themselves.

cpmarino | 05. April 2016

@PhillyGal, as you have plenty of experience with the Model S, and were able to attend the reveal ... did you get a chance to sit or ride in the Model 3 or was that reserved for journalists only? If you did, and obviously conceding that it is a very early pre-production model, how did you find the fit/finish/quality as compared to the S?

stephen.kamichik | 05. April 2016

I have an early 2013 Model S.I love driving a big electric sedan which also happens to be the world's best sedan. It has lots of luggage space and seats five full-sized adults comfortably. However, I stood in line for two and one- half hours in the pouring rain to order a Model 3. My wife is going to love her Model 3.

Haxster | 05. April 2016

Another factor to consider: The same Gigafactory that will bring lower cost batteries to the Model 3 can do the same for the S and X. So the production cost of the S could move a little closer to the 3.

And, as was mentioned, the S could serve as the new-technology platform for the latest features, like maybe a motor-per-wheel design, and active anti-collision maneuvers.

PhillyGal | 05. April 2016

@cmparino - I thought it was gorgeous! Yes I did get to take a ride in it, though a short one.
I sat in the middle of the rear with an adult male on either side of me. (One was pretty tall!) There was definitely room but I wouldn't sign up for a long trip with 3 in the rear. Wouldn't in any other car either though.

The fit and finish was nice except the touchscreen which I'm almost certain will be better integrated like the S/X. Otherwise, it will be too easy to damage or steal. The lack of a dash behind the steering wheel is a little odd but we'll see what they have planned.

Every part of that event made me want to take a nap until 2018. Otherwise, waiting will be agony. It's a great car. The seats felt pretty high end and I noticed nothing about the interior that suggested poor fit/finish. The all glass roof is pretty marvelous to look through.

I'll be posting my thoughts on the whole event on Teslarati in the upcoming days.

flight505 | 05. April 2016

Sure, tech trickles down - no problem. Performance is another issue.

I have recently read about the "Osborne Effect," where a company announces a future product and in the process damages existing sales. There are many examples scribed on the Internet.

I would not purchase a Model S today until I found out if a much less expensive Model 3 will be better handling and faster than a Model S. This question still hangs over our heads.

I have invested six figures into my Model S, and will not be a happy Tesla owner if a Model 3 P100D comes along with Ludicrous at a fraction of the price I paid.

I do not think any Model 3 will be faster than a performance P85D or P90D Model S. Tesla not letting us know troubles me.

I am a car enthusiast and do not want a car for the masses. I want a performance car that stands out from the rest. That's why I bought a P85D for way into six figures. That's why I paid $5,000 for Ludicrous upgrade.

I would feel the same if Porsche came out with a lower cost Cayman that was faster than my 911 Turbo. If I was a Chevy Corvette owner, I would feel betrayed if Chevrolet came out with a faster Camaro than a new Z06 Vette.

The new Roadster will be faster than Model S - no problem; Roadster should be faster. I want to buy a Tesla roadster next.

If the car for the masses Model 3 is faster than a Model S, I will probably never buy another Tesla, but I hope they sell millions of cars.

JeffreyR | 05. April 2016

We've had a great discussion on this topic going since last April (wow we started it a year ago tomorrow).

Model 3 vs. Model S: How will they be different?

I believe that some people that stretched to get a Model S when upgrading from a Prius or similar sized car, will be choosing to wait for the Model ≡. Not all, but some. The good news is that maybe some people that were on the fence before have been moved by the overwhelming M≡ response. For example, I know NPR talked about the reveal a few times on 3/31.

Red Sage ca us | 05. April 2016

Don't worry about it. The Tesla Model S was never meant to be the top seller at Tesla Motors. I strongly suspect that over the next three-to-four years, the Model S will continue to dominate its own market segment, while being the lowest selling vehicle in the Tesla Motors stable. That's OK.

cpmarino | 06. April 2016

@flight505: Excellent examples. In the case of Porsche, there is no question that the Cayman platform (mid engine) is dynamically superior to the rear engine 911 platform. Porsche has, even with the Cayman GT4, purposely kept the Cayman performance in check, so as not to cannibalize 911 sales, same with Chevy as it makes sense. Dangerous to speculate now, of course, but just based on what I've read about the 3, I think Tesla is going to need to do more with the S to better separate it ... not just from a performance standpoint but from an overall luxury standpoint. Time will tell ...

Supraman | 06. April 2016

Is a comparison between the BMW M3 and M5 more relevant? Would M5 owners be bothered if the M3 was faster?

What is the timescale for a Model S revision announcement?

tandjharris | 06. April 2016

If you change your initial Mercedes comparison to the E class and the S class then it becomes closer to the Tesla comparison.
E class is available with 4, 6 and 8 cylinder engines. S class is available with only 6 and 8 cylinder engines. The performance and economy between the 2 classes is very close if the same engine is chosen, the technology in the cars is also very close, the space is similar and yet Mercedes sell the E class for a lot less than an S class with the same engine.

tandjharris | 06. April 2016

I forgot to add that people are cross shopping between the E and the S class, just as they will be between the 3 and the S.

jordanrichard | 06. April 2016

As Philly Gal said, it is a means to an end and the end being ICE cars. Tesla probably doesn't care which EV you buy. There are some BMW 3 Series models that out accelerate the BMW 7-Series, but yet people still buy the 7 Series. It is not all about speed. If one needs the utility of a hatchback, then instead of buying a fully optioned M≡, they will buy a used MS which comparatively is fully loaded.

mos6507 | 06. April 2016

"I have invested six figures into my Model S, and will not be a happy Tesla owner if a Model 3 P100D comes along with Ludicrous at a fraction of the price I paid."

And before the S, I'm sure a lot of Roadster buyers got their own case of buyer's remorse. That's what happens when you start from the top and come down. Some people really wanted to buy a lower-priced vehicle but there wasn't one available. Early adopters must fall on their spears for the sake of progress. It's not Tesla's responsibility to artificially cripple its lower-end vehicles.

jdanielp_uk | 06. April 2016

An impact seems unlikely given the autopilot safety features, but if Model 3 does impact Model S then a cominbation of their respective 5 star safety ratings and the lower weight of Model 3 suggests that effects will likely be fairly negligible...

In more seriousness, will the ramp-up in production that will be required to attempt to meet the demands for Model 3 not be likely to have some affect on the production capacity for Model S and X? Presumably the majority of the space on the factory production lines at Fremont will be shifted over to Model 3 fairly quickly as soon as the design has been finalised.

flight505 | 06. April 2016

@ mos6507
I really like my Model S, but I'm not ready to fall on any spear. Are you? Did you invest six figures in a Tesla Model S or buy any Tesla?

How many people are dreamers and wishers that have no Tesla and have made no investment and think for a small sum they can add a P100D L option to a 35K Model 3?

I don't think 0-60 MPH in less than 3 seconds is so easy to manufacture and sell at a much cheaper price. Even in 2016, a car is real metal, and much more than software on a video screen.

The Roadster and top Model S were both over 100K and in the same price range. | 06. April 2016

One difference that no one has talked about (that I've seen) is battery pack size. The S and X appear to have a much larger battery compartment. Give the same cells from the Gigafactory, this means the S and X can always have more range than the model 3. There could be some overlap between models . A $60K fully optioned 3 might have similar range to a base Model S at $70K. Nothing wrong with that. The S can have 5 adults + 2 kids, more cargo and more features. No different that just about any other car company with multiple levels of cars.

As for performance, the S also has a big advantage due to the larger battery options. It comes down to the maximum power the battery can provide. The larger the battery the better the potential performance.

Clearly lower price is very attractive for the 3, but for those that want the maximum range and performance, the S will continue to be the leader and compete with Mercedes S Class, BMW 7, Audi A8, etc.

mos6507 | 06. April 2016

"I really like my Model S, but I'm not ready to fall on any spear. Are you? Did you invest six figures in a Tesla Model S or buy any Tesla?"

Go re-read Musk's original blog posting from when he started the company. He made his long-term intentions known from the start. You chose to buy the Model S knowing that a cheaper vehicle was in the pipeline that would likely do much of what the S does for a lot cheaper.

carlgo | 06. April 2016

Look at this in reverse: if there were large numbers of Model Es on the road and then the S and X were later introduced as an up-market alternative, nobody would complain if the big cars were .1 seconds slower at the drag strip. People buy big expensive cars for other reasons.

I could see Tesla eventually offering their version of BMWs 5 Series, essentially a bigger E. The aluminum super car S and X would remain at the top. Again, this sort of size, option and performance overlap is accepted by buyers.

flight505 | 06. April 2016

So did you ever buy a Tesla?

flight505 | 07. April 2016

"People buy expensive cars for other reasons."

I bought P85D for performance - not for other reasons, and not for luxury. The inside of a Model S is pretty plain, not like a luxury car to me. But, I wasn't concerned with luxury. The dual performance motors sold me with acceleration.

I wonder if other Model S owners that invested 130 to 150 grand agree with you - and mos6507. Did either of you invest over 100K in a Model S?

Model 3 looks great, just don't think hotter 3's will be faster than a Model S in Tesla's lineup.