SAN FRANCISCO • For Mr Earl Banning, getting behind the wheel of a Tesla meant spending more than he ever had on a car.
The 43-year-old Air Force neuropsychologist from Dayton, Ohio, ponied up US$54,000 (S$74,000) for a Model 3, figuring he would save on petrol and keep the car for a long time. It was almost double what he had previously paid for a fully loaded Honda Accord.
"I call it the Tesla Stretch - everyone I've met who owns a Model 3 is willing to spend more to get into a Model 3," he said.
When chief executive officer Elon Musk first revealed the Model 3 at a late-night party in March 2016, the vehicle was expected to compete in the premium sedan market against the likes of Audi, BMW, Lexus and Mercedes.
Instead, owners of mass-market cars such as the Honda Accord and Toyota Prius are opening their wallets for the sedan, signalling that the vehicle is pushing Tesla beyond its luxury niche and more into the mainstream.
The Model 3 is the key to Mr Musk's goal of bringing profitability to the 15-year-old company, which has struggled with production issues and self-inflicted controversies.
The car is particularly popular with younger buyers and Mr Musk has pointed to the fact that customers are paying for it as evidence that the Tesla brand still has strong pull with consumers.
"Tesla has captured lightning in a bottle," said Mr Jeremy Acevedo, manager of industry analysis at researcher Edmunds.
"It's hard to even benchmark the Model 3 against other cars because it's broken the mould in so many ways."
Tesla recently said that more than half the trade-ins for the Model 3 were from vehicles priced below US$35,000.
And there are signs that the sedan's popularity is adding pressure to rival carmakers who already are reeling from Americans' move towards trucks and sport utility vehicles. Last month, sales of cars such as the Accord and Prius continued to slip as deliveries of the Model 3 ramped up.
Mr Banning got US$16,000 from Tesla to trade-in his Prius, an offer that was slightly above the Kelley Blue Book value, which is the starting point for negotiation of a used-car sale between a buyer and seller.
The cheapest Model 3 available right now starts at US$46,000 before any tax credits and featuressuch as the US$5,000 "Enhanced Autopilot" can drive up the cost.
For Mr Eric Snapat, a 36-year-old from Burleson, Texas, it was "a little scary" to spend almost US$60,000 on a Tesla.
He used to drive a Nissan Altima, but is now carrying a six-year loan on a Model 3, an expense he can justify because he and his wife do not have kids.
Other drivers are finding ways to offset the cost.
Turo, a car-sharing marketplace, has more than 4,000 Tesla vehicles, including roughly 1,000 Model 3s, listed on the platform. In 2014, there were just 67 Teslas offered.
Mr Robert Preston, 26, bought a Model 3 in late July for US$56,000 and charges renters US$155 a day to use the vehicle. It is popular with city residents going on road trips, travellers and potential customers who want an extended test drive.
"Every weekend I have someone renting it," Mr Preston said.
From the outset, the Model 3 was supposed to be more affordable. Mr Musk originally said it would cost US$35,000 before options or incentives. But that version is not expected to enter production until next year and the polarising CEO has made it clear that Tesla has to focus on selling higher-end versions first for the company to survive.
"I think they will still make a US$35,000 version, but they'll configure it in such a way that no one will want it," said Mr Gene Munster, an analyst at Loup Ventures.
There are also questions about whether the demand for the car will be as strong once a federal tax credit for electric vehicles is cut in half next year to US$3,750.
Still, some potential customers are holding out hope for the cheaper model.
Mr Ray Nash got up at 2.30am to be among the first in line to place a reservation for a Model 3 at Tesla's store in Santa Monica, California. That was back in March 2016 and he is still waiting.
"I'm holding onto Elon's promise," Mr Nash said. "It's really bittersweet seeing all the Model 3s driving around town when I was one of the first to place a deposit. But I still love what the company is doing, and I fully support the mission."
BLOOMBERG
