On Thursday evening, in front of a small crowd of invited guests in Hawthorne, California, Tesla Motors CEO Elon Musk will unveil the reason why he co-founded his spunky, cash-bleeding electric car company 13 years ago.

A working prototype of a $35,000 Tesla car with a 200-mile range, which Musk is expected to unveil, is the vehicle the outspoken billionaire futurist anticipates will help spur global mass adoption of cleaner electric vehicles.

It won’t be the first electric vehicle to break through this psychological range-anxiety barrier — General Motors’ $37,500 Chevrolet Bolt is expected to offer that travel distance when the car goes on sale later this year. But the lower-base-priced Model 3 is widely expected to have some the most advanced options of any comparably priced car.

Whether Tesla will play a big role in a massive global shift toward electrified mobile transport will depend largely on how the smaller electric sedan sells. Tesla already faces stiff competition in this space from the traditional manufacturing industry — with its deep well of engineers, factories and patents — ahead of when the Model 3 is expected to roll off the assembly line, in late 2017.

Some skeptics argue that cracks in Tesla’s strategy are already showing. Most notably: The company will need more cash as its debts mount. And although much has been said about Tesla being more of a tech company than a traditional automaker, it still faces the same costly challenges of a traditional automaker. 

“Elon has built an auto company, but he’s running it like a web and software company,” said Matt Stack, managing director of investment advisory firm XLP Capital. “When you’re building products like a car, you have to look at an anchor point like revenue, because it predicts the sophistication by executives in deploying capital effectively.”

In a recent report for the investment firm Devonshire Research Group, Stack points out that Tesla’s so-called revenue multiple (a measure of a company’s value relative to the revenue it generates) at 7 times far exceeds the average readings for both the automotive and software industries, which are 0.9 and 5.1, respectively, according to Devonshire.

In other words, if holding stock in Ford Motor or Microsoft is a risk, then Tesla is far riskier, resembling more the promise of future returns you see in a biotech startup or a real estate venture. “There’s the business of building a great car, and then there’s the business of having a great company,” Stack said.

Tesla has already proved it can build attention-grabbing cars. The Model S has received largely positive reviews for its performance and advanced features. But questions linger about the long-term reliability and resale value of its cars — questions that will remain unanswered until the odometers of the first Model S sedans, released into the wild in 2012, start populating the used-car market. 


Although little information has been revealed about the Model 3 prior to Thursday’s event, analysts have said they expect it to offer the features that define the company's cars to date, including a console touchscreen, over-the-air software updates and price-increasing optional add-ons, such as the semi-autonomous and auto-park driving features available in its six-figure siblings.

And the Model 3 platform could offer a range of body styles, the kind of cost-saving shared-global-platform strategy that’s become so popular among the major automakers.

“We expect the Model 3 range will include a variety of body styles, including a 4-door sedan, coupe, cabriolet, small SUV and other passenger configurations,” Morgan Stanley automotive analyst Adam Jonas said in a note Tuesday.

The first public showing of the Model 3 on Thursday, which can be viewed at the company’s website starting at 8:30 p.m. PT in California, will coincide with a nationwide campaign to lure fans of the automaker and its outspoken futurist CEO Elon Musk to make $1,000 down payments. Most of them won’t see the car delivered for at least two years.

Tesla said it expects to deliver 80,000 to 90,000 new vehicles in 2016, up from the roughly 50,000 cars it sold last year. The company will announce its first-quarter sales shortly after the end of the month, possibly over the weekend. It is expected to have sold about 16,000 cars in the first three months of the year. If it greatly misses that target, that puts in jeopardy its annual sales target.