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“Bigger Than the iPhone ”: The Second Big Company After Apple

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Tesla Motors built its reputation making sporty, elegant and very expensive electric cars with range superior to other electric vehicles. Now, Elon Musk’s company was staking its future on something relatively affordable. Could this make it bigger than Apple?

Tesla unveiled its Model 3 electric car on March 31, 2016, at its Los Angeles design studio. Before federal and state government incentives – at a starting price of $35,000 – the Model 3 was less than half the cost of Tesla’s previous models. The car was expected to have a range of at least 200 miles when fully charged, about double what drivers get from competitors in its price range, such as the Nissan Leaf and BMW i3.

Campers lined up overnight at the company’s Burbank store on San Fernando Road and other locations ahead of the unveiling. Long lines were reported from Hong Kong to Austin, Texas, to Washington as well.

It takes a lot to be bigger than Apple.

The company does not use a traditional dealer model to distribute and service its vehicles. The Burbank store is one of 11 from Laguna Niguel in Orange County to the San Fernando Valley. Campers also waited overnight at stores in the Bay Area.

The Model 3 was the most serious test yet of 13-year-old Tesla’s ability to go from a starter to a full-fledged automaker. It could be the car that finally makes electrics mainstream. Or, customers could be scared off by Tesla’s limited number of stores and service centers. Either way, the Model 3 was already changing the industry. Competitors sped up the development of electric cars and improve their battery range.

However, the Model 3 put Tesla within reach of millions of more customers. Last year, only 2.1% of new cars purchased in the U.S. cost $75,000 or more, but 35 percent — or 5.5 million — cost $35,000 or more, according to TrueCar. The Model 3 was a critical part of the money-losing automaker’s plan to increase sales from around 85,000 this year to 500,000 by 2020.

All is not perfect for Tesla.

But Tesla faced several hurdles. U.S. buyers remained skeptical of electric cars, and low gas prices haven’t helped already anemic sales. Sales of new electric vehicles grew 6 percent in the U.S. last year, but they remained less than 1 percent of the overall vehicle market, according to IHS Automotive. Tesla also faces growing competition from rivals like General Motors Co.

Right now, Tesla sells two vehicles: The Model S sedan, which starts at $71,000, and the Model X SUV, which starts around $80,000. But a lower-priced car had been a longtime goal of Tesla CEO Elon Musk. In a 2006 blog post, Musk said Tesla planned to build “a wide range of models, including affordably priced family cars” in order to speed the world toward a solar-powered future. If Tesla manages to do this, it could be bigger than Apple after all.

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