Elon Musk says making a cheaper Model 3 now would cause Tesla to 'die'

Key Points
  • Elon Musk says a $35,000 Model 3 won't arrive until Tesla hits a 5,000 weekly production rate for premium versions of the car.
  • Tesla's success hinges on high-volume, efficient production of the Model 3, the first car it intended to become a mass-market vehicle.
A Tesla Model 3 on display at a showroom in New York on Jan. 18th, 2018.
Robert Ferris | CNBC

Tesla CEO Elon Musk revealed that the standard version of the Model 3 -- priced at $35,000 -- is still a long way off. Making them today would be a money-losing proposition and pose an existential crisis for Tesla, he suggested on Twitter this weekend.


When Tesla first unveiled its Model 3 in 2016, the company touted its accessible price, and spoke of the car as one that would drive future profits by making Tesla electric vehicles a mass-market staple.

The standard Model 3 is supposed to have a starting price of $35,000, rear-wheel drive and a battery that gets 220 miles per charge, among other features. Higher-priced versions of the car come with a longer-range battery, all-wheel drive, glass moon roofs, and "Autopilot" semi-autonomous driving features, among others.

Also on Twitter this weekend, Musk teased a new $78,000 Model 3 that he says will be faster than a comparable BMW with a top speed of 155 miles per hour, and a range of 310 miles.

Tesla has yet to make the lower-priced version of the Model 3, and has struggled to reach high-volume production of the premium Model 3s.

Tesla pauses Model 3 production to focus on automation
Tesla pauses Model 3 production to focus on automation

Among other things, the company has been grappling with over-automation in its factories, tensions with suppliers including Panasonic and turnover of executive talent. It has been spending money on improvements at its Fremont, California plant and at its Gigafactory 1 in Nevada.

Despite these growing pains, its Model 3 is now the best-selling electric car in the U.S. More than 450,000 people have already reserved that vehicle, paying $1,000 refundable fees to do so. Although Tesla failed to hit its goal of making 2,500 Model 3s per week by the end of March, a leaked email in May suggests the company is closing in on a 3,500 weekly production rate.

On Tesla's first-quarter earnings call, Musk promised Tesla would be profitable and cash-flow positive in the third and fourth quarter of this year. The company may require as much as $10 billion in additional capital by 2020 to fund its operations, according to Goldman Sachs, and Moody's downgraded Tesla's credit rating in March.

Musk has said he doesn't want to raise capital in 2018 and would instead finance the company's operations with credit lines.

Shares in Tesla closed 2.8 percent higher on Monday.

WATCH: Tesla's troubles continue

Tesla's troubles continue
Tesla's troubles continue