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4 First Thoughts on Tesla's Game-Changing Model 3

As I'm sure you've heard by now, Tesla (NASDAQ: TSLA) finally took the wraps off its new Model 3 sedan on Friday night. It's a huge moment for the company: The hope is that the Model 3 will become Tesla's first high-volume product, pushing its annual sales well into six figures. 

I'll leave the full rundown to my fellow Fool Daniel Sparks, who has all the details on the new baby Tesla. Instead, here are four initial thoughts about the Model 3 that stood out for this Fool after Tesla's big launch event. 

There's no extra charge for black paint on the Model 3. But any other color, including this attractive blue, will cost $1,000 extra. Image source: Tesla Motors.

As expected, most buyers will pay more than $35,000

Credit where due: Tesla has absolutely delivered on its price promise. You will, in fact, be able to get a Model 3 for $35,000. But as I predicted last year, you might not want that one. It looks like most buyers will end up paying considerably more, maybe even more than I thought.

For those who haven't seen the details yet, Tesla is offering the Model 3 in two basic flavors:

  • A base $35,000 version, with 220 miles of EPA-estimated range and a zero-to-60 miles-per-hour time of 5.6 seconds
  • A "Long Range" version, for $44,000, with 310 miles of range and a zero-to-60 time of 5.1 seconds.

There's a catch, though: The base version won't go into production for several months. If you're on the waiting list and you want one soon, you'll have to pay up for the longer-range version.

The Model 3's back seat appears to have ample legroom for adults. Image source: Tesla.

Then there are the options. An upgraded interior, with a better stereo, wood trim, and more of the amenities you'd expect in a compact luxury sedan, is another $5,000. Non-black paint is another $1,000, 19-inch wheels are $1,500 (18-inch wheels are standard), Enhanced Autopilot is $5,000, "Full Self-Driving Capability" -- when it eventually becomes available -- is another $3,000... you get the idea.

The options list will get even longer soon. My fellow Fool Matthew Frankel, who is on the Model 3 waiting list, heard from Tesla that a "dual motor" (all-wheel-drive) version will be available for delivery in October. (With Autopilot and the nice interior, I bet that one comes in around $60,000, with yet another upcharge to have "Ludicrous Mode" enabled.)

Yes, Tesla has made sure that you'll be able to get a Model 3 for the promised $35,000, and that's good news. But you'll have to wait longer for it (the early production runs will all be long range models), and -- let's be realistic -- even if you're willing to skimp on some of the high-tech goodies, you'll probably want the nicer interior. 

Long story short: At least for the first year or so, I bet the Model 3's average transaction price will hover around or even above $50,000, a little higher than I had expected.  (Another prediction: There's a solid profit for Tesla at that price point.) 

The Model 3's dash has no gauges and no switches, just a touchscreen and one big air vent that runs the full width of the car. It seems odd, but there's smart thinking here. This Model 3 has the upgraded interior option. Image source: Tesla.

There's smart thinking behind the super-minimalist dashboard

The Model 3's dash is striking in its simplicity. There aren't any gauges or switches, at all. Instead, there's a single long duct for ventilation, and a big touchscreen that provides information like speed, and includes nearly all of the car's controls.

Why would Tesla do this? Here's what I think: People outside of the auto business often don't realize it, but dashboards are one of the hardest parts of a car to get right. There's a lot of hardware inside the typical dashboard, meaning that it's expensive to engineer and assemble. And if it's not designed and put together just right, it can become a frustrating-to-fix source of squeaks and rattles.

By replacing most of the dashboard's hardware complexity with software, Tesla played to its own strengths, making the Model 3 less expensive and easier to assemble, while eliminating a potential source of quality gremlins. Time will tell whether the touchscreen is a worthy replacement for what's missing, or a frustrating compromise, but it's an elegant idea if the implementation pans out. 

One more thought on the dash: I think a heads-up display showing speed, range, and some navigation information in the driver's line of sight would be a boon. I'm kind of surprised that Tesla isn't offering one, but maybe it will in time: An off-the-shelf system from a supplier wouldn't add a ton of complexity, and the cost wouldn't be outrageous. 

It may be a step ahead of the Model S in one important way

It'll be a while before professional car reviewers get to do full-blown road tests of the Model 3. But one expert reviewer, Kim Reynolds of Motor Trend, had an on-road drive earlier this week, and he came away very impressed with the Model 3's handling:

What's blanching, though, is the car's ride and handling. If anybody was expecting a typical boring electric sedan here, nope. The ride is Alfa Giulia (maybe even Quadrifoglio)–firm, and quickly, I'm carving Stunt Road like a Sochi Olympics giant slalomer, micrometering my swipes at the apexes.... The Model 3 is so unexpected scalpel-like, I'm sputtering for adjectives. The steering ratio is quick, the effort is light (for me), but there's enough light tremble against your fingers to hear the cornering negotiations between Stunt Road and these 235/40R19 tires... And to mention body roll is to have already said too much about it. 

For those who might not be fluent in the language of car nerds, I'll translate: The Model 3 handles like it's on rails. (Reynolds knows what's what -- you can take his word for it.) 

That sounds to me like a step forward for Tesla. The bigger Model S has many virtues, but -- at least to this car nerd -- its handling, even in high-performance trims, has always been compromised by its heavy weight. It sounds like the Model 3 feels a lot lighter, even if it's still heavy. 

Don't underestimate the importance of great handling as a selling point for the car: Reviews like this give the Model 3 big credibility against rivals like BMW's consistently excellent 3 Series. Tesla can, once again, hammer home its biggest and best selling point: Car lovers don't have to give up anything to go electric with Tesla, except gas pumps. 

Image source: Tesla.

The takeaway: Looks like Tesla did what it needed to do

One question that has been on the minds of Tesla fans and skeptics alike since the Model 3 was first announced: Could Tesla create a car at this price point that really delivered on the brand's high-tech-cool promise?

On first impression, admittedly from a distance, the answer appears to be a definitive "yes." The Model 3 appears to deliver a full dose of Tesla coolness at the promised (or at least, expected) price point. The longer-range version is a pleasant surprise and a genuine bar-raiser, bringing the price for a 300-plus-mile electric vehicle well below $50,000. 

There are still big open questions, of course. For starters, can Tesla mass produce the Model 3 to a high standard of quality? Persistent quality troubles could put a big damper on sales and leave Tesla scrambling, especially if a credible contender emerges from the big automakers in the near future. 

We won't know the answer to that for a while. But on present evidence, it looks like Tesla has done what it needed to do: It created a strong product that raises the electric-vehicle bar -- and that will draw plenty of eager buyers. 

And once again, it looks like Tesla has given the big automakers some big things to think about.

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John Rosevear has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Tesla. The Motley Fool recommends BMW. The Motley Fool has a disclosure policy.