This post has been updated.
For many, the breadth of that appeal hinges on the price tag.
Before the rollout event, Tesla had released few details about the pricing structure of its new car, noting that it would start at $35,000 and that people would be able to customize some features. A fully equipped Model 3 would cost about $60,000, according to the company late Friday.
Rebates in a handful of states could lower the price for eligible customers. There is also a $7,500 federal income tax credit. But that tax credit only lasts until the company reaches 200,000 electric vehicles sold in the United States, and Tesla has already sold more than 100,000 vehicles. And the company announced at the event that there are half a million reservations for the Model 3.
A variety of customizations, such as motor options, greater battery life, enhanced autopilot and larger wheels, could push the Model 3’s price well above $40,000, analysts say. At that cost, experts say, the Model 3 would soar past the price of the average new car sold in the United States, as well as any vehicle that might be considered mass-market. Analysts say the Model 3 is an aspirational vehicle.
“The average transaction price for a new car is about $36,000,” said Rebecca Lindland, an executive analyst at Kelley Blue Book. “That’s the sweet spot that new car buyers can afford.” Lindland noted that mass-market buyers aren’t necessarily part of the middle class.
She expects the Model 3 to appeal to a category of buyers known as “early adopters.” These are consumers who are slightly more risk averse and have less wealth than the “innovators” who purchased the Model X and the Model S.
Each year, roughly five percent of Americans buy a new car. Auto prices hit an all-time high in 2o16, increasing 2.7 percent from the year before and nearly 13 percent since 2011, according to Edmunds.com, which tracks auto prices. Yet, despite rising auto prices, people are still buying cars in record numbers in the United States. Sales for 2016 set a record of 17.6 million cars and trucks, an increase over the 17.5 million vehicles sold the year before, according to figures from sales tracker Autodata.
To make those purchases possible, analysts say, growing numbers of new-car buyers are stretching loans longer than ever before. The average car loan is $30,534, and the average time lien holders take to pay it off is 68 months, according to Experian. But analysts say new-car buyers are stretching loans out for as long as 84 months, or seven years. Personal finance experts have advised that people keep auto loans to four years.
“I think a lot of folks will be leasing the Model 3,” Bankrate.com analyst Claes Bell said. “In the U.S., the median household income is $56,516 dollars. At that income, a lot of folks are going to have a hard time affording a vehicle around $30,000 in price, much less anything higher.”
Tesla chief executive Elon Musk has made clear his desire to bring “compelling mass market electric cars” to the world, noting in a 2013 blog post that if the company could have achieved that mission with its first product, it would have. Due to the limitations of a start-up, Musk wrote, Tesla opted to build a sports car that had the “best chance of being competitive with its gasoline alternatives.” He said that Tesla’s initial offering could be misinterpreted as company officials “believing that there was a shortage of sports cars for rich people.”
But observers say that air of exclusivity, paired with Tesla’s futuristic branding, is exactly its appeal.
Roger Pressman, the founder of EVannex — a Tesla aftermarket accessories company — may be one of the few people outside of Tesla who caught a glimpse of the Model 3’s emerging demographic when he stood in line with several hundred people anxious to put down their deposit for the vehicle last year.
At a glance, Pressman said, Model 3 buyers are between the ages of 25 and 45 and most have never owned an electric vehicle. They’re drawn to Tesla, he said, because of the “sashay” of Musk’s futuristic vision and their desire to drive an environmentally-friendly vehicle.
“People in that age range are very used to using devices, and this car is a device on wheels,” Pressman said. “I do think the demographic will be very similar to the demographic that buys the BMW 3 Series.”