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Following a report of substantial revenue but no profits, Tesla is reassuring investors that the forthcoming Model 3 sedan will not render the flagship Model S obsolete. During a recent conference call, Tesla CEO Elon Musk remarked, “We have observed some impact on Model S orders due to customer confusion” regarding the lineup of Tesla vehicles.
Essentially, there is a decline in Model S orders as customers opt to purchase the more affordable Model 3. This confusion arises from the misconception that the Model 3 represents an upgrade over the Model S simply because it is newer. Although the two vehicles may seem similar at first glance, they differ significantly.
The Model S is a full-size luxury liftback that offers superior performance, whereas the Model 3 is designed as an entry-level compact luxury sedan. A major distinction between the two is their pricing: the Model 3 starts at $35,000, while the aging Model S begins at nearly $68,000 (before incentives). In terms of performance, the Model 3 is expected to compete effectively with rivals like the BMW 3-Series, though it is unlikely to dominate high-performance models like the ZL1 at the drag strip anytime soon.
This confusion among prospective Tesla buyers raises the question of how many current Model S owners might have chosen the Model 3 had it been available when they made their purchase. If Tesla hopes the Model 3 becomes the success they anticipate, they will need to implement some changes to the Model S to maintain its distinctiveness and relevance within the Tesla lineup.
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