The Seven-Year Soar of Tesla Model 3

Within a week of its release, Tesla Model 3 secured 320,000 orders. Over the next five years, its deliveries surpassed 1 million vehicles. Roughly calculating, since its release in 2016, Tesla Model 3 has delivered over 1.5 million units.

In the realm of new energy vehicles, such an achievement is unparalleled.

Model 3 hit the sweet spot of electric cars and ushered in the iPhone era of the automotive industry.

Throughout its seven-year development, this vehicle overturned various aspects of traditional automakers’ research, production, and sales. Its minimalist design and vertically integrated approach deeply influenced a wave of followers.

More than seven years later, the vitality of Model 3 is far from over; an updated model is on the horizon. Rumors suggest several new features are coming: HardWare 4.0, a 66 kWh battery pack, elimination of the gear shifter, and a 14% reduction in manufacturing costs.

If these rumors materialize, competitors aiming to rival Model 3 will undoubtedly face a fierce battle.

Reviewing the growth journey of Model 3, we witness a profound transformation happening within the automotive industry. Each car Tesla has produced on the steep uphill road and through thick snow is contributing to making future vehicles even better.

01 A Week of Unprecedented Orders

32,000 Orders for a Mass-Market Car

The world witnessed the success of the Model 3 starting in 2016, when it garnered a massive number of orders within just a week of its release. However, the foundation for this car’s triumph was laid back in 2006.

At that time, Tesla unveiled its “Secret Master Plan,” which outlined:

1. Produce a sports car.
2. Use the proceeds to manufacture an affordable car.
3. Use the proceeds from step 2 to produce an even more affordable car.

The sports car, Roadster, was delivered in 2008 with a price tag of $89,000.

The “relatively affordable” Model S was delivered in 2012, costing half as much at $44,500. During this phase, Tesla also introduced the Model X, which was delivered in 2015.

The “even more affordable” Model 3 belonged to the third step of this plan. Its development began in 2014 as Tesla aimed to produce an electric car for the masses, surpassing the annual sales of around 300,000 MINI and 500,000 BMW 3 Series vehicles.

Zachary Kirkhorn, who was then Tesla’s Chief Financial Officer, was assigned to negotiate with Panasonic in Japan to establish a super factory for battery production. Tesla provided the funds while Panasonic contributed the technology.

Tesla raised $2 billion through the sale of bonds.

Elon Musk, the CEO of Tesla, later recalled in an interview with BusinessWeek, “We didn’t need to raise all that money for the gigafactory right now, but I decided to do so because you never know when you might need the money.”

This strategic planning and fundraising paved the way for the eventual success of the Model 3, demonstrating Tesla’s foresight and commitment to transforming the automotive industry.

This was a bold gamble.

It’s important to note that at the time, Tesla had delivered only about 22,477 electric vehicles the previous year, with the Model S accounting for approximately 22,300 units. Comparatively, BYD, a leading Chinese electric vehicle manufacturer today, had sold fewer than 20,000 new energy vehicles at that time. There were no successful cases to serve as reference.

In 2014, when Tesla decided to build its battery factory, the global electric vehicle battery industry was still in its infancy.

That year, the top three electric vehicle battery manufacturers were AESC, BYD, and LG, with their combined production barely exceeding 1 GWh. Even Ningde Times, which is well-known today, had only been established for three years and its electric vehicle battery output was a mere 0.273 GWh.

“Other than us, no one will build this factory,” Musk said. “Competitors thought it was stupid. Battery suppliers themselves were supposed to build these factories. But as far as I know, all suppliers don’t want to spend a few billion dollars building a factory. Automakers wouldn’t invest such a huge amount of money because they’re not sure if they can sell that many electric cars.”

In June 2015, Tesla’s first “gigafactory” began production in Nevada, USA, with its main mission being mass production of electric vehicle batteries.

Fortunately, after its announcement, a flood of orders poured in.

In April 2016, Tesla unveiled the Model 3 in North America with a $1,000 deposit requirement. Within 24 hours, they received 180,000 orders, and by the end of the first week, they had amassed 325,000 orders.

This gamble paid off.

Model 3’s Former Delivery Hell

After Tesla made the right gamble, it immediately faced a setback – it couldn’t ramp up production quickly.

In July 2017, after delivering the first batch of 30 Model 3 vehicles, Musk promised the world that Model 3 production would reach 20,000 units per month by the end of the year, translating to a weekly production capacity of 5,000 units.

However, three months later, only 2,425 Model 3 units had been produced.

Difficulties arose from various aspects – the team faced limitations in final assembly, painting, bodywork, module production, packaging, and even logistics, including parts delivery from the warehouse.

There was an instance where Tesla produced 100 cars without their right-side headlights because the headlights hadn’t been delivered to the assembly line on time, requiring them to be installed after final assembly.

Problems also occurred in the automated production processes.

Initially, Tesla aimed to heavily automate production and spent a lot of money ordering robots from KUKA. Musk later reflected that over-automation was a mistake and ended up removing some robots and conveyor belts.

The Nevada Gigafactory, built with substantial investment, initially had a battery production yield with as much as 40% requiring rework or being scrapped.

A fan once asked Musk on Twitter how far Tesla was from bankruptcy when Model 3 was going into production. Musk responded, “About a month.”

Musk moved into the Fremont factory in California and wore the same clothes for five days straight.

The team set up a tent in the parking lot of the Fremont Gigafactory called GA4 (General Assembly 4), which used a combination of manual labor and machinery to accelerate Model 3 production.

02 Model 3’s Previous Production Hell

Tesla had placed a risky bet, and it paid off. However, following the success of the Model 3’s launch in 2016 and the acquisition of a substantial number of orders, Tesla encountered a problem—its production capacity couldn’t catch up.

In July 2017, after delivering the initial batch of 30 Model 3 vehicles, Elon Musk promised the world that Tesla would reach a monthly production of 20,000 units, equivalent to a weekly output of 5,000 units, by the end of the year.

However, just three months later, only 2,425 Model 3s had been produced. Obstacles arose not only from production challenges but also from various facets of the manufacturing process, such as final assembly, painting, bodywork, module manufacturing, packaging, and logistics. Even parts transportation from the warehouse experienced problems.

For instance, Tesla once produced 100 vehicles without the right-side headlights because the headlights hadn’t been timely transported from the warehouse. They had to be installed after the final assembly.

Tesla had initially leaned towards extensive automation in the manufacturing process, investing heavily in robots from Kuka. However, Musk later acknowledged that excessive automation was a mistake and dismantled some robots and conveyor belts.

The Nevada Gigafactory, which had been constructed at significant expense, experienced as high as 40% rework or scrap rates for its battery production.

At one point, a Twitter user asked Musk how close Tesla was to bankruptcy during the Model 3 production. Musk’s reply was approximately one month away.

Musk moved into Tesla’s Fremont factory in California and went five days without changing clothes.

The team set up a tented factory named GA4 (General Assembly Line 4) in the parking lot of the Fremont Gigafactory to accelerate Model 3 production using a combination of manual and automated processes. The factory continued working to fine-tune the automated assembly line.

Simultaneously, Tesla continued to refine its automated production line.

It wasn’t until July 2018 that Musk achieved his goal of producing 5,000 Model 3 units per week. In 2018, a total of 143,000 Model 3s were delivered.

Achieving this target came with its share of challenges. Doug Field, Tesla’s Vice President of Engineering at the time, left the company shortly after the announcement of reaching the production milestone. Field, a former Apple Vice President of Hardware Engineering, had joined Tesla in 2013 and was responsible for various aspects of Model 3 production. Musk had to take on some of Field’s responsibilities in Model 3 production.

In January 2019, Tesla’s Gigafactory in Shanghai commenced production. Within 11 months, it achieved a production capacity of 3,000 units per week and rolled out the first domestically produced Model 3. Apart from catering to the Chinese market, the factory also exports to neighboring countries.

With this, the Model 3 significantly alleviated the production pressures and began its rapid ascent.

In 2020, the global electric vehicle battery installation volume reached 137 GWh. With each Model 3 carrying a 75 kWh battery pack, and over a million Model 3 units sold in the four years following its release, Tesla required a total battery capacity of 75 GWh, capturing a substantial market share.

Why are so many people enthusiastic about this vehicle?

03 Seizing the Electric Car Trend and Launching the iPhone Era

After delivering the initial batch of Model 3 units, and following a year of production ramp-up, Tesla finally achieved its target of 5,000 units per week in July 2018. Subsequently, delivery figures began to soar.

According to Cleantechnica’s statistics, by the second quarter of 2021, cumulative deliveries of the Model 3 had reached 1.0315 million units.

Tesla’s financial reports indicated that in the full year 2022 and the first half of 2023, combined deliveries of Model 3 and Model Y amounted to 1.2471 million and 889,000 units, respectively.

Roughly calculated, over the span of more than seven years since its launch in April 2016, the Model 3’s cumulative delivery total surpassed 1.5 million units.

Today, the annual sales of the Model 3 have surpassed those of the BMW MINI and 3 Series.

Bloomberg conducted surveys of thousands of Tesla owners in 2019 and 2023. In the 2023 survey, owners expressed continued affection for this sedan, particularly its handling, and remained enthusiastic about recommending it to friends and family.

Of course, handling is just one aspect. As a pure electric midsize sedan, the Model 3 appeals to the majority due to its design, the trio of essential components (motor, battery, charging), cabin features, intelligent driving capabilities, Over-The-Air (OTA) updates, and more.

Fundamentally, the Model 3 caught the wave of new energy vehicles, ushering in the automotive industry’s iPhone era.

Its success can be attributed to:

1. Innovative Electric Motor: From the initial Roadster featuring externally sourced motors to the Model S and Model X with collaboratively developed ones, the Model 3 introduced an in-house-designed permanent magnet synchronous motor. Tesla’s Chief Motor Designer Laskaris led this initiative, marking Tesla’s foray into internal motor design.
2. Continual Battery Advancements: While the Model S and Model X employed 7,000 Panasonic-produced 18650 batteries, the Model 3 opted for higher-energy-density 21700 batteries, enhancing both energy storage and safety.
3. Evolving Electronics Architecture: The Model S introduced a highly integrated electronics architecture, enabling Over-The-Air (OTA) updates. The Model 3 expanded on this, adopting a body domain controller architecture, increasing integration levels and reducing wiring complexity.
4. Minimalist Design Philosophy: The Model 3 boasts sleek exterior design that remains timeless even today, surpassing many competitors. The minimalist interior design controls overall vehicle costs while maintaining a long-lasting sense of technological sophistication, free from being dragged down by excessive accessory designs.

Some individuals hold a strong affinity for this design philosophy, which has earned the Model 3 the moniker “bare shell” in a positive light.

Tesla has also revolutionized the cabin’s user experience. For instance, the traditional instrument cluster has been removed, making way for a large touchscreen infotainment system. To ensure a seamless experience, the infotainment chip has transitioned from NVIDIA Tegra 3 to Intel A3950, and finally to AMD Ryzen.

Autonomous driving is another hallmark of Tesla’s offerings.

In October 2014, Tesla introduced its first-generation autonomous driving hardware, known as Hardware 1.0, equipped with the Mobileye EyeQ3 chip.

By October 2016, Tesla upgraded to Hardware 2.0, incorporating NVIDIA’s Drive PX chip.

In April 2019, Tesla unveiled Hardware 3.0, marking the shift to their in-house developed Full Self-Driving (FSD) chip.

With in-house full-stack capabilities and over-the-air functionality, Tesla’s vehicles continually improve, gaining more intelligent cabin features and driving capabilities. Examples include Smart Summon, Sentry Mode, Navigate on Autopilot (NOA), and Full Self-Driving (FSD).

Automated production has brought economies of scale, driving down manufacturing costs.

Despite some fluctuations in the price of the Model 3, the overall trend has been downward.

HiEV has compiled the price changes for the Model 3 in the Chinese market, taking the example of the standard range rear-wheel-drive version. The price changes are as follows:

After demonstrating signs of success with the Model 3, Tesla introduced another new vehicle called the “High Ground Clearance” version, the Model Y. With both models continuously surpassing delivery milestones, Tesla announced the production of their four millionth electric vehicle in March this year.

Tesla has come to be seen as a technology company, and its market value once exceeded a trillion dollars. Currently, Tesla’s market value stands at $683.9 billion, still far ahead of the second-ranked Toyota. However, Toyota’s sales for the fiscal year 2022 reached 9.6098 million vehicles, over seven times that of Tesla.

With the upcoming release of the redesigned Model 3, this vehicle is highly likely to continue its strong performance and become a classic in its generation.

During the seven years after the launch of the Model 3, numerous competitors in the same category emerged in the market, including models such as the XPeng P7, BYD Han, Deep Blue SL03, Leapmotor C11, and NIO ES6.

These followers have been learning from the Model 3 and adopting Tesla’s car-making philosophies, moving towards centralized electronic architecture, full-stack self-reliance, and direct sales models. In some aspects, they have even surpassed the pioneer, boldly claiming that the Model 3 is no longer the benchmark.

Compared to the intensely competitive domestic electric vehicle market, the Model 3 may indeed appear somewhat outdated.

However, the upcoming revised version of the Model 3, known as “Project Highland,” is set to make its debut soon. Tesla has been frequently offering subsidies and promotional policies for the current Model 3, which serves both to engage in price competition and to prepare for clearing inventory before the release of the updated model.

Based on leaked information, the redesigned Model 3 is expected to feature the following changes:

• Equipped with Hardware 4.0
• Upgraded to an 8-megapixel front-facing camera
• Removal of ultrasonic radar
• Upgraded front and rear bumpers
• Sleeker design for the front headlights
• Addition of a rear diffuser
• Increased screen size for the instrument panel
• Removal of the gear shift lever
• Hollowed-out design for the steering wheel
• Rear-wheel drive standard range version to have an increased battery capacity of 66 kWh
• Addition of ventilated seats
• A 14% reduction in manufacturing costs

If these changes come to fruition, they will undoubtedly address some of the criticisms of the current Model 3, representing a comprehensive iteration covering exterior, interior, battery, and intelligent driving. A redesigned vehicle with improved features and a lower price poses a significant challenge for competing models that benchmark the Model 3, potentially leading to fierce competition.

Looking back at the evolution of the Model 3 over the years, it’s essentially a Tesla-wide revolution encompassing design, development, and production. Unlike traditional combustion engine cars, the Model 3 doesn’t just optimize power and enhance interiors; it opens up greater possibilities. The car remains steadfast in capitalizing on economies of scale to lower costs and advancing in areas like iterative autonomous driving through data accumulation.

Each car sold contributes to cost savings and data accumulation for selling more cars, epitomizing this novel approach to car manufacturing that birthed the Model 3 and holds the potential to replicate more of its kind.

For the automotive industry, this snowball effect is the most explosive. Faced with the uphill challenge of the new energy race, the snowball will only grow larger as it rolls along.