Is The Tesla Model 3 A Lean Mean Driving Machine?
Tesla unveiled the next addition to its premium electric vehicle family, the Model 3, last week. At $35,000, Elon Musk made good on his promise for an “affordable” EV option and the public has responded by exceeded expectations for the slow rollout. According to Bloomberg, there are more than 325,000 reservations giving Tesla Motors Inc a nice $325M cash asset infusion. Implied future sales make it the “single biggest one-week launch of any product ever,” according to the company’s blog.
Even though the EV will not be available until late 2017, buyers reserved their very own Model 3 for $1,000 pre-test drive.
Is this Lean in action?
It’s an interesting situation that we’ve analyzed as outsiders** and Lean advocates. In Lean Startup, you eliminate uncertainty around your product by testing your hypotheses. The product becomes an experiment that is tested instead of something that is slaved upon, tweezed, tweaked, and perfected. Deliver value, get feedback, adjust, deliver.
We’re not saying that Tesla is a startup but looking at how it’s launched its latest product, it has similarities. Instead of creating 400,000 cars at a very high cost (one battery is about $10,000), they created a few for the launch and then began to take orders and therefore gauged interest.
Does Tesla now have $375M in revenue? Car and Driver explains that each reservation is completely refundable and it’s not counted as revenue until the car is delivered. Tesla will use the deposit money for launch and operating expenses but all of that cash is technically considered a debt.
With Tesla knowing that there is sufficient interest in the Model 3 and money to help with the rollout, it’s a safe bet to say the next two years looks pretty good for the company. In Lean Startup terms, they conducted an experiment, learned that their consumers are interested, and at the same time managed to bankroll their launch. Not too shabby!