Today's the big day for electric car maker Tesla (TSLA) - Get Report . From the company's design studio in California, CEO Elon Musk will unveil Tesla's latest car, the Model 3. And more than being just a new release, the Model 3 has the power to make or break the company. If the car is a smashing success, Tesla's business could take off. If it fails, the company could become toxic and even go out of business.
Nearly 10 years ago, Musk unveiled Tesla's first model, the Roadster. With a base price of $109,000 in the U.S., the Roadster was a flashy and luxurious battery-powered sports car that few could only dream of owning.
However, the Model 3 bears a price tag of $35,000, making it accessible to the mass market. In addition, some states will offer tax incentives and rebates making the effective price as low as $25,000. Higher-priced versions of the car will certainly be produced, and perhaps even before the more budget-friendly version, but from the first announcement of the Model 3, the low price has been a marketing tool.
The first Model 3s will be available for delivery in late 2017, but even then many erstwhile owners will have to wait a bit longer. The company is reserving the first batch of Model 3s for people who already own Tesla cars or who live in the company's home state of California.
In addition to the initial sedan release, Tesla will offer an SUV version of the Model 3, which will probably be named the Model Y. It is expected to cost $5,000 more than its sedan sister and will be slated for a later unveiling.
Although this news is exciting for the company and for lovers of electric cars, Tesla has been beleaguered, and the Model 3 could signal the death knell for the company if it doesn't sell as well as hoped.
Tesla has posted revenue losses every year since its founding, thanks to flat-to-lukewarm sales. From its high last July of $280, shares in Tesla stock plummeted to just above $140 in February. Today Tesla is up around $233.
Mark Spiegel of Stanphyl Capital Management even warns that successful Model 3 sales won't even help Tesla. "The Model 3 will not save the company," he said. "The Model 3 is going to speed up the end of the company." He has pointed out that since Tesla loses money on every car it sells, brisker sales could actually accelerate the company's demise.
A large problem with the Model 3 is the wait time for it to roll into owners' garages. The vehicle will face tight competition with other affordable electric cars from companies such as HondaMotor and Chevrolet's Bolt and another forthcoming General Motors release. These vehicles will be available to the general public sooner than the Model 3 and carry more reliability than the Tesla brand.
Indeed, Tesla has a bit to make up for in the reliability category after some editions of its Model S, on which the Model 3 is based, wound up on Consumer Reports' "Worst of the Worst" list.
Tesla has a lot to prove tonight when it reveals the Model 3 to the world. It could either revolutionize the business, giving the company a much-needed sales injection, or it could lead the already troubled company to close up shop. Either way, investors would do best to wait and see.
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This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.