Cars

How the Tesla Model 3 Will Change Cars -- Even if It Fails

Published On 04/08/2016 Published On 04/08/2016
The Model 3 can change the landscape
Courtesy of Tesla Motors

If the just-revealed Model 3 lives up to the considerable hype it's receiving, Tesla has a particularly potent cocktail to offer its customers and shareholders: profits, quality control, and a unique customer experience that will finally give Tesla a tangible advantage over its competitors. But that's a big if, folks.

Despite the fact that Tesla is now closing in on over 300,000 pre-orders for the Model 3, there's no guarantee the marque's first true mass-market offering will be successful. Consumer Reports recently gave Tesla its black mark of shame for scoring a worse-than-average reliability rating, and other all-electric and hybrid competitors (Chevy Volt, Nissan LEAF, et al...) have already bested Tesla's much more expensive Model S in terms of owner satisfaction and overall reliability.

But all that aside, one thing is for sure. Even if the Model 3 fails -- even if Tesla fails -- many of the key ingredients that make the company so unique and newsworthy are, in all likelihood, going to completely change the way you buy any car, new or used, in the future.

Courtesy of Tesla Motors

Dashboards as you know them are on the way out

It's no accident that the new Tesla Model 3 cut all the dials, knobs, and instrument clusters that can so quickly become outdated on a cutting-edge infotainment screen. Displays like this are becoming a huge focus for new-car buyers in general, and particularly for Tesla shoppers. Other manufacturers have done away with the traditional dashboard design layout, but only in concept; the Model 3 still represents a striking departure from an auto-industry staple that has lasted for nearly a century. It might be a bit of an open question as to whether it will completely kill off the dash as we know it, but it will certainly be joined by others, and very, very soon.
 

"Version" will matter more than "model year," just like your phone

Tesla isn't marketing the Model 3 based on the model year -- just the version number. Think about it like this: do you have an iPhone 6, or a 2015 iPhone 6? To the customer, this represents a psychological advantage, because it takes away the buying pressure during those times of the year when model changeovers typically take place. You don't really want a 2016 when you can get a 2017 in a couple months, do you?

As new versions roll out, Tesla will emphasize software updates and wireless maintenance with the Model 3, much as it does with the S. This enhances the perceived value for Model 3 owners, who won't have to worry as much about the depreciation cliffs that come with having an older "year" of the same car.

Courtesy of Tesla Motors

Buying a new car will be radically different

Tesla's decision to forego partnering with traditional car dealerships saves the company billions in real estate and inventory costs. That's good for them. But for the consumer, that also means you get to skip the shady car dealers, all-too-tacky add-ons, and bogus fees that mar today's retail environment. And that's pretty damn good for you, too.

So when nearly 300,000 people put down deposits for Teslas, both online and at its very own Apple-esque stores, just mere days after the Model 3 launched, this whole idea of an anti-dealership, less-expensive distribution network was proved 100% solid. And where there's a proven economic case made, laws will eventually accommodate, and you will see other manufacturers follow suit.
 

And that will include used cars, too...

Without dealerships handling Tesla's used-car inventory in the form of "certified pre-owned" programs, Model 3s that are traded in for newer models or repossessed will likely be handled in house by Tesla. For the company, that means Tesla will keep all those used-car sales profits for itself, thereby adding to the long-term per-car profit for every new car it sells. How does that help you? It means Tesla will retain control, not only of the dealership experience, but the quality of the cars it certifies. Once again, it's a model that pleases all parties involved, and one you'll see replicated by other manufacturers.

Courtesy of Tesla Motors

Shady mechanics and questionable repairs will get the boot

No oil changes. No non-warranty work for the first eight years and infinite miles. Free towing up to 500 miles. All of these service initiatives will help Tesla avoid having any non-Tesla-certified technicians work on its cars.

Plus, because of the perceived complexity of electric vehicles in general, Tesla will likely have greater control over repairs and maintenance once the warranty expires -- which means fewer questionable repairs from shade-tree mechanics. In the short term, the Tesla Model 3 has a big leg up on gas-propelled competition like the BMW 3-Series and Mercedes C-Class. In time, though, as electric propulsion becomes more prevalent, you can expect the others to catch up.
 

Early deposits will result in better resale value

Tesla's $1,000 early deposit requirement greatly reduces the number of buyers with bad credit, which means fewer defaults, which means fewer used Model 3s on the market to depreciate the value. Fewer people with bad credit have the luxury of forking over a grand from their savings accounts a whole two years before they'll realistically get that car. Tesla's focus on consumers who already have the cash, savings, and patience to buy its product will help reduce the number of defaults and early lease terminations of the Model 3. Thus, there will be lower supply in the used-Model 3 market, helping resale values stay high. And as the anti-dealership model spreads to other manufacturers, so too will the early deposits and the scarcity of returned leases. Translation: your car's value won't drop off quite so fast.

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Steven Lang is an auto auctioneer, car dealer, and former part-owner of an auto auction near Atlanta, Georgia. Feel free to reach him directly at his Facebook page which you can find here

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