Musk: Tesla Model 3 Is Not an Upgrade to the S

CARS.COM — Tesla CEO Elon Musk went out of his way this week to stress that the coming Model 3 electric car is NOT a newer, better version of the Model S luxury sedan. The S will continue to be a better car almost every way, he said, “as it should be, because it’s a more expensive car.”

Related: Tesla’s Model 3 Is the EV That Can’t Afford to Fail

On Tesla’s quarterly earnings conference call, Musk took “full responsibility” for confusion over its place in the Tesla pecking order that he said resulted from naming the new car Model 3. After all, the coming iPhone 8 will be better than the iPhone 7, right?

Not so with Tesla cars. The buyer of a Model S (with starting prices from $70,700 including destination to $141,200) will get a lot more than the buyer of a Model 3, starting at $35,000, said Musk. “Model 3 is essentially a smaller, more affordable version of the Model S with fewer features.”

The company’s letter to shareholders emphasized the point: “Model S will always have more range, more acceleration, more power, more passenger cargo room, more displays (two), and more customization choices.”

You’d think luxury-car shoppers would be up to speed on such things: Few would confuse an entry-level Mercedes-Benz CLA sedan with the uber-luxe S-Class, or a BMW 3 Series sedan with a 7 Series yacht with a spa inside.

But Musk says mixing letters (Model S) and numbers (Model 3) is the problem. “Model 3 was supposed to be called the Model E. But then Ford intended to sue us (over rights to that name), and then I thought we were being all clever by calling it the Model 3, but actually the joke’s on me, because it caused confusion in the marketplace, so we’re doing our best to clear up that confusion so people do not think that Model 3 is somehow superior to Model S.”

Tesla would not want the confusion to steal sales from its higher-profit Model S. But the question for buyers who can tell the difference may be whether the more luxurious Model S is superior enough. For some buyers, a lower price for the same status brand is an attractive feature. And Musk noted that both vehicles will share the “same level of technology,” including Autopilot capability. Range for the Model 3 will be an estimated 215 miles; the base Model S 75 is rated at 259 miles.

In other news for the quarter, Tesla said it is on track to begin Model 3 production in July, ramp up to 5,000 per week by the end of 2017 and 10,000 in 2018. Musk said net reservations for the Model 3 “continue to climb week after week,” but did not put a number on them. In response to an analyst’s question, he said he thought most reservation holders will get some amount of the $7,500 federal electric vehicle tax credit, which begins phasing out when a maker reaches 200,000 total sales.

In response to a question on the call about earlier statements that he might step back from Tesla at some point, Musk said, “I intend to be actively involved with Tesla for the rest of my life. … But that doesn’t mean I should be CEO forever. I think my main, the most valuable thing I could contribute is kind of product design and technology … that’s my forte.”