As the Model 3 enters its third year—soon to be followed by the Model Y compact SUV—Tesla must prove that its wide appeal so far isn’t just a temporary rush of early adopters. Will most brand loyalists and economy-car buyers stick to their old habits? Or is Tesla repeating what Apple Inc. did with the phone: convincing consumers to fundamentally reassess how they value an established product?

Top 10 Cars Given Up for a Tesla Model 3 Buyers trade up, paying an average $50,528 for the Model 3 (U.S. Only) Electric or Hybrid

Electric or Hybrid Luxury

Luxury Economy Rank # Type Model Company Average Selling Price* Count 1 electric Toyota Prius Toyota 27,080 247 2 luxury BMW 3 Series BMW 46,477 157 3 none Honda Accord Honda 25,428 135 4 none Honda Civic Honda 21,448 121 5 electric Nissan Leaf Nissan 34,562 112 6 electric Chevrolet Volt GM 34,251 94 7 none Toyota Camry Toyota 26,160 75 8 electric Tesla Model S Tesla 95,000 70 9 none Mazda 3 Mazda 24,847 66 9 luxury Audi A4 Volkswagen 42,530 66 *Edmunds’s “True Market Value” reflects the average sales price including options and discounts from manufacturers and dealers. Tesla’s average Model 3 price is estimated by Bloomberg Intelligence.

I’m not rich, I’m an ordinary man with an ordinary job. I am exactly the buyer Elon Musk hoped to attract.

Stretching From Economy to Luxury Price range of vehicles traded for Tesla’s Model 3 (U.S. only) Source: Edmunds’s “True Market Value,” Bloomberg Intelligence.

Car customers are fairly predictable: They stick with vehicles that are similar to the ones they drove before. Brand loyalties are even passed down across generations. Tesla, so far, has broken these loyalties with the allure of new technology, high performance, and environmental sustainability.

The Silicon Valley automaker is on pace by early next year to become the first company in the world to sell one million electric vehicles. To maintain its lead, it must continue to draw customers away from gasoline cars—not just from the relatively small field of competing electric and hybrid vehicles. The chart below shows where Tesla’s customers have come from.

Tesla Takes a Bite From Everyone Previous vehicles owned (U.S. only) Electric or Hybrid

Electric or Hybrid Luxury

Luxury Economy Ungroup car models

I’ve owned three BMW 3 Series and was a diehard BMW fan. The Tesla blows those cars away.

While Tesla took the largest number of customers from Toyota, it affects the Japanese automaker very little. That’s because Toyota’s market share in the U.S. is enormous—more than 7 times greater than that of BMW or Audi.

The following chart orders the survey’s trade-in results in a different way: as a proportion of a brand’s U.S. sales. It shows BMW to be the automaker with the most to lose—almost five times more vulnerable than Mercedes-Benz. One explanation is that the two brands, while both competing in the same price segments, target different definitions of “luxury.” Mercedes is built for comfort and class, while BMW is defined by its driving performance. Comfort and class are hard to measure; for performance, you take the car to the track.

The editors at Motor Trend magazine tested the Model 3 against the BMW 3 Series and found that the “Model 3 wins this competition because it has thoroughly rewritten the rules of what a compact sports sedan can be.” BBC’s Top Gear ran the Model 3 against BMW’s more expensive M3 at Thunderhill Raceway Park in California, where the Tesla won by 2 seconds. The magazine cover screamed, “Electric Beats Petrol! Tesla Model 3 Outguns BMW M3.”

Model 3 Goes After the Ultimate Driving Machine Measuring luxury cars traded in for a Model 3 against each brand’s U.S. market share, BMW proves most vulnerable Rank Brand Company Units sold (2018) Count Vulnerability Index 1 BMW BMW 311,014 287 100.0 2 Mini BMW 43,684 35 86.8 3 Audi Volkswagen 223,323 120 58.2 4 Acura Honda 158,934 76 51.8 5 Infiniti Nissan 149,280 67 48.6 6 Porsche Volkswagen 57,202 23 43.6 7 Lexus Toyota 298,310 87 31.6 8 Mercedes-Benz Mercedes-Benz 354,144 73 22.3 Vulnerability Index is the ratio of branded cars traded for a Model 3 to total brand sales, normalized on a 100-point scale. Source: Sales data from Motor Intelligence

Anytime somebody gets behind the wheel, it’s very well received. We have one friend that actually bought one within the week after she drove ours.

Tesla doesn’t spend money on advertisements: No Facebook or Twitter ads, no lavish magazine spreads, no paid endorsements by actor Matthew McConaughey, no Super Bowl ads.

Instead, Tesla relies on splashy product events, the Twitter stream of Chief Executive Officer Elon Musk, and word of mouth. In the Bloomberg survey, almost 99% of Model 3 owners said they would recommend one to their friends or family—and many of them already have. In follow-up calls with a dozen survey respondents, every owner we talked to described taking friends or family members on test drives.

Model 3 Owners Are Tesla’s Biggest Sales Force Strongly Disagree

Strongly Disagree Disagree

Disagree Neutral

Neutral Agree

Agree Strongly Agree Average score I’d recommend a Model 3 to friends or family 13

13

29

286

4250 4.91 I would buy a Model 3 again 14

18

53

362

4141 4.87 The Model 3 has exceeded my expectations 12

15

83

733

3748 4.78 I will never buy another gasoline-powered car 16

77

218

612

3655 4.71 Model 3 is more reliable than my previous cars 23

89

894

962

2481 4.30

While I admire Elon Musk, I understand that a lot at Tesla hinges on him personally, which represents a substantial existential risk to their business.

Owner sentiment towards Tesla and its CEO were both very high. Many said Tesla’s mission to accelerate the adoption of electric cars creates an unusual sense of owner camaraderie. About 55% of respondents said their opinion of Musk influenced their decision to purchase the car. While that finding may seem lower than most scores in our survey, it’s worth considering how unusual it is for the CEO of a company to personally influence a buyer’s decisions.

“It’s rare to see the head of a company put so much of themselves into their company,” said Deanna Sherry, a 41-year-old library assistant in Clarksville, Tennessee, in a follow-up telephone interview. “I have no clue what the head of Ford looks like. And I only know Nissan because he went to jail.”

While most comments about Musk were positive, some customers worried about his combative approach on Twitter and his confrontations with U.S. safety regulators and the U.S. Securities and Exchange Commission.

The Tesla Factor A sense of mission unifies owners Strongly Disagree

Strongly Disagree Disagree

Disagree Neutral

Neutral Agree

Agree Strongly Agree Average score My opinion of Tesla is positive 14

16

65

582

3913 4.82 My opinion of the company influenced my purchase 35

104

448

1161

2827 4.45 I feel a sense of community with other Model 3 owners 17

64

472

1322

2697 4.45 My opinion of Tesla’s CEO Elon Musk is positive 43

100

426

1430

2590 4.40 My opinion of Elon Musk influenced my purchase 256

609

1177

1122

1406 3.62

Still on the expensive side - would love to see a sub $30k version before incentives.

Owners were most split over the impact of government subsidies. In Norway, which heavily taxes gasoline-fueled cars and subsidizes electric vehicles, more than 88% of respondents said subsidies swayed their purchase. In Switzerland, the government recently approved an ambitious target to increase electric-vehicle adoption but has so far been unable to agree on the incentives, such as purchase subsidies, to make it happen.

The U.S. federal tax break for electric cars is designed to phase out after a company’s sales reach 200,000 units. Beginning in January 2020, Tesla will be the only automaker whose customers don’t receive a U.S. incentive.

The Impact of Government Incentives Some policies work, some don’t Strongly Disagree

Strongly Disagree Disagree

Disagree Neutral

Neutral Agree

Agree Strongly Agree Average score Government incentives swayed my purchase 428

531

987

1603

1035 3.50 Location Norway 1

1

4

11

36 4.51 France 2

3

6

32

13 3.91 United States 199

398

810

1392

845 3.63 Canada 54

39

58

95

106 3.45 Netherlands 10

10

13

17

13 3.21 Germany 32

34

32

13

4 2.33 Switzerland 35

8

8

1

2 1.65

Models are fluid and fragmented as they continuously refine them. The ups and downs irritate current owners when they wonder if they bought at the right or wrong time.

A frequent source of complaint for Model 3 owners is the slew of changes Tesla has made to Model 3 options and pricing over the last year. The chart below shows how the offerings have evolved over time. After a particularly messy stretch of tinkering between November 2018 and May 2019, the lineup appears to have stabilized with a relatively even split between Tesla’s three main models.

Model 3 Lineup Emerges After a Year of Tinkering

It has forever changed my expectations for what a car should be.

A Car for Millenials and Gen Xers Model 3 owners by age

Bloomberg’s survey respondents were, as a whole, the epitome of early tech adopters. Almost 95% were men, and most were ages 30 to 50 with above-average incomes. The biggest concentration was from California, and employment was dominated by the tech sector. This demographic homogeneity may also partly reflect Bloomberg’s readership and the type of person who is willing to spend 15 minutes on a survey about cars.

Tesla is just beginning to move beyond the early adopter-stage and will need to expand across new demographics if it wants to keep growing. Continued success now depends on widespread adoption of electric vehicles in areas that are only beginning to see them for the first time. For the final section of Bloomberg survey results, we reached out to some respondents who don’t necessarily fit the typical profile of a Tesla driver to hear what they think about the future. Below is a selection of their comments, lightly edited for clarity.