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Tesla Model 3: A make or break moment for Tesla Motors?

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(Read caption) Tesla Motors unveils the new lower-priced Model 3 sedan at the Tesla Motors design studio in Hawthorne, Calif., Thursday, March 31, 2016.

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The Tesla Model 3 was officially unveiled last night, but long before the curtain lifted, fans were already gushing about Tesla's latest entry into the electric car market.

To be sure, it's a nice looking ride--easily one of the best looking all-electric vehicles we've seen. But does it represent, as many journalists claim, a make-or-break moment for Tesla Motors?

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The answer is, yes and no. But mostly, no.

Yes, the Model 3 is important

If Tesla and its outspoken CEO Elon Musk solely want to bring electric cars to the masses, then yes, the launch of the Model 3 is definitely a defining moment. Luckily for Tesla, it appears that the Model 3 is poised for success.

The sedan's $35,000 base price--before federal and state incentives--positions it squarely within the range of new, gas-powered cars, which average upwards of $30,000 these days. It's far more affordable than Tesla's other two models, the Model S and the Model X, which start at roughly twice that price.

As we said above, it's also got great lines. Its silhouette is as sleek as many luxury, gas-powered models, and compared to other electric vehicles like the quirky-looking Mitsubishi i-MiEV...well, there's really not much competition.

Those two things--price and style--paired with Tesla's white-hot, Apple-like fan base, have already made the Model 3 something of a success. As of last night's event, well over 130,000 eager consumers had plunked down the $1,000 deposit necessary to reserve a Model 3 of their very own, even though none of them will receive it until late 2017.

If Tesla succeeds in producing the car revealed last night and delivering it in a timely manner, with all the bells and whistles and sky-high safety ratings that shoppers expect, the Model 3 could solidify Tesla's future in the world's auto industry.

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But even if the Model 3 fails, Tesla will likely survive.  

No, the Model 3 won't make or break Tesla

Like its founder, Tesla is more than a one-trick pony. So, even if the Model 3 tanks after its initial, warm reception, Tesla Motors has lain a fairly solid foundation for itself. Here are three potential scenarios that might play out in such a case.

Tesla could refocus itself on luxury vehicles. Tesla got its start as an aspirational brand, making cars that most consumers could only dream of owning. There are plenty of luxury lines that continue in this mold, like Bugatti, Lamborghini, and Rolls Royce.

Though Musk clearly wants to see electric cars in every driveway, he's made it equally clear that he doesn't think that Tesla can achieve that goal by itself--nor should it. (That's why he's offered to share so many of his patents with other automakers and entrepreneurs.) By focusing solely on luxe, desirable electric cars, Tesla could continue fueling demand for EVs without having to produce millions of them every year.   

Tesla could try another mass-market car. Major automakers launch underwhelming models every single year, and they manage to stay afloat. Admittedly, companies like Fiat Chrysler and Toyota have a wide range of models to ensure profitability in case a few fail, and Tesla only offers three--and if the Model S and the Model X were tanking, Tesla's future might be in jeopardy. But that's not the case at the moment, leaving Tesla free to try, try again if the Model 3 bites the dust.

Tesla could license its technology and support the roll-out of electrics in other ways. Elon Musk and his crew understand the obstacles that stand between Tesla products and widespread adoption of electric vehicles. That's why Tesla Motors has put so much energy (no pun intended) in developingcharging networks to ensure that owners have places to plug in. It's also why Tesla has broken ground on its gigafactory to produce batteries on a massive scale and improve battery technology. And of course, Tesla still owns many patents that haven't been opened to the public, and it has a huge staff of electric car experts.

If Tesla should ever decide to stop producing vehicles, it could easily leverage those assets to remain profitable, in much the way that Google appears to be doing in the field of autonomous cars.

Our take

All that said, Tesla's transition from luxury to mass-market won't be easy. The company faces plenty of challenges, including the need to increase production dramatically and meet consumer demand. 

However, given Tesla's growing body of expertise, the growing interest in electric vehicles, and the company's continuing underdog appeal, it's unlikely that the Model 3 could upend Tesla, even if it were a spectacular failure. Luckily for Tesla and Musk, that seems to be a fairly far-fetched "if".


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