A war of words is breaking out between two combative car company bosses. On one side is Elon Musk, the current innovation golden boy, and the man behind Tesla and its current domination of the burgeoning electric car market. On the other is Sergio Marchionne, the jumper-wearing CEO of Fiat-Chrysler.
Magic number
The nub of contention is Tesla's Model 3 electric saloon, revealed in part-finished form to the public two weeks ago and which currently, apparently, has 400,000 hungry buyers queuing up to buy one. To put that in context, 400,000 is the total number of cars sold by Volvo last year. It's also the number Marchionne hopes a re-launched Alfa Romeo can reach in the next half-decade if it's to be profitable.
Those 400,000 eager buyers makes Musk the genie of the magic lamp if he can pull off getting the Model 3 on sale fast enough, and with sufficient quality and performance, to keep those 400,000 deposit holders happy.
Marchionne, though, reckons he can beat Musk at this game. According to Automotive News, Marchionne told reporters at a Fiat-Chrylser meeting in Amsterdam that Fiat could build and put on sale viable Model 3 rival within twelve months if it could prove a business case for such a car.
“I’m am not surprised by the high number of reservations but you have then to build and deliver them and also be profitable,” Marchionne told Automotive News. “If Tesla can show me that the car will be profitable at that price, I will copy the formula, add the Italian design flair and get it to the market within 12 months.”
Questioning Tesla pricing
Marchionne may have had his tongue at least partially in his cheek, but he's not the first person to call Tesla's pricing model into question. Recently, General Motors queried just how Tesla could possibly sell the Model 3 at a price of $35,000 and still both make a profit and hit the car's claimed one-charge range. Tesla responded by saying that its cost-per-kilowatt numbers on its batteries were vastly lower than rivals were estimating, and that the Model 3's structure would be cheaper to build than had been thought.
While Tesla has income revenue of more than USD$4-billion, not to mention a now-handy pile of cash from all those Model 3 deposits, it has still consistently struggled to actually turn a profit. While Musk’s pockets are deep enough to make that more an inconvenience than a systemic issue for now, it will be crucial to get the Model 3 to market fast enough to keep all those buyers on-side, and to make it a fundamentally good enough car to justify all the hype.
Given how good a car the Model S is, and how much interest and excitement there is in the Tesla brand, Marchionne’s comments could well come back to haunt him.
