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Originally Posted by afadeev

Thanks for thoughtful analysis, but the last statement above is an occasionally quoted misconception.

Tesla is making money on Model S - has been gross profit positive for may quarters now. They are negative net of R&D investment into new lines of business (GigaFactory, Model 3 scaling up, etc), but as long as those are NPV positive investments, they are doing the right thing.

Their stated 2016 goal was to be net profitable, but when Model 3 demand exceeded expectations, they changed tack and decided to accelerate Model 3 production ramp-up and delay net profitability time frame:

Old goal: http://www.reuters.com/article/us-te...-idUSKCN0VJ2J6
Why Tesla can go net profitable, if it forgoes investment into the future: http://www.fool.com/investing/genera...it-wanted.aspx
Ditching old goal: http://money.cnn.com/2016/05/04/news...esla-earnings/




That is exactly what they are doing!
Model 3 is a complete redesign of Model S, with an eye towards lowering manufacturing cost and shortening production cycle time.



Fair point.
Yet, Model 3 garnered ~380K pre-order deposits, which is ~3x the total EV sales in the US in 2015! I don't think anyone expected that, including Tesla.

Evidently, there is this mountain of latent EV demand in the US marketplace that has remained untapped by the present EV offerings, including the i3 (sales falling YTD vs. 2015 YTD). Model 3 hit just the right mix of price / range / form-function to, potentially, triple EV sales in the US.

Now the challenge for Tesla is to scale up production to meet that demand before someone else (Bolt?) does.
It's definitely a problem, but a good one to have!

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I hope Tesla is successful, but a complete redesign of the Model 3 will cost a lot of investment dollars. Yes Tesla is far up the EV design learning curve but of course not being privy to a lot of things both financial and production-wise, it is still going to take some serious innovation to get that kind of money out of the the cost of the car.

I think a lot of the pre-purchase Agreements are a lot of people thinking the Model 3 will be a Model S at $40K rather than $100K. Once the real car hits the streets and is critically reviewed, a lot of those potential sales could vaporize rather quickly. I doubt Tesla can make the Model 3 a quality-equivalent to the Model S at half the price. It's still a lot of money for a car that still has a limited range.