Despite Tesla’s promises, a widely available and more affordable car from the premium electric vehicle company has yet to appear, leaving potential owners empty-handed.
Now, San Francisco startup Kyte, with $239 million in funding, aims to meet some of the demand. However, there’s a catch: you can have a Model 3 sedan, but you can’t keep it.
Starting in two weeks, if all goes as planned, motorists in San Francisco and part of the East Bay between El Cerrito and Alameda will be able to get their hands on a Model 3 via a “subscription” and with no down payment. Even at the April 15 launch, customers in the South Bay, other East Bay and Peninsula regions will be considered on a case-by-case basis, Kyte said, and the company aims to expand its service area to more of the bay area.
Options are available for durations and prices: three months for $1,350 per month; six months for $1,125 per month; or a year for $995 per month. Subscribers get 1,000 miles per month and can add miles for an additional fee. An optional collision waiver adds $250 per month, and there’s a one-time start-up fee of $299.
Kyte, an on-demand car rental company founded in 2019, isn’t the only company letting drivers get behind the wheel of a Model 3 without buying one. Hertz rents them in certain areas. Tesla, which recently moved its headquarters from Palo Alto to Austin and manufactures cars in Fremont, offers leasing, and Autonomy in Southern California has its own “subscription” program. But Kyte touts convenience, providing a liability-insured vehicle with roadside assistance and no deposit, delivered to the customer’s doorstep and picked up at the end of the term.
Tesla offers a three-year lease on the Model 3 for a much lower price of $468 per month for 10,000 annual miles, but requires an upfront payment of $5,663 and the owner must have insurance. Santa Monica-based Autonomy charges $490 per month for 1,000 miles per month, and like Kyte offers a three-month option, but requires a $4,900 “start-up fee” and also requires the driver to have insurance .
Kyte is offering the program in response to the widespread and rapid move towards electric vehicles, said Kyte Chief Product Officer Erik Zahnlecker.
“We don’t just want to be innovators in how we give people access to cars, but we want to be a catalyst for the rapid change that’s happening in the transportation industry as a whole,” Zahnlecker said.
For years, Elon Musk’s electric car company has been committed to producing a $35,000 Model 3. After a short period of availability at this price, the Model 3 is now priced at $47,000. But more than 300,000 people had deposited refundable deposits for the $35,000 version in the first week Tesla was taking pre-orders, the automaker said, suggesting huge demand among drivers who are unwilling or unable to not shell out close to $50,000.
Kyte, which is also launching the service in New York, said it is starting with a “double-digit” number of Model 3s, purchased directly from Tesla, and aims to have hundreds available. The company has no special relationship with Tesla, a spokesperson said.
Subscription programs for cars have been around for several years but have never taken off, partly because the cost is often not competitive with leasing or buying, partly because the market for them is small, said automotive economist George Hoffer, professor emeritus at the Virginia Commonwealth. University. However, the subscription model could work better with Teslas, Hoffer said, especially now that the pandemic and supply chain issues have driven up demand and prices for new and used vehicles. Residual Model 3 demand among people who were hoping to buy one for $35,000 could also help, as well as Tesla’s status as a premium vehicle, Hoffer said.
“It puts you in a Tesla,” he said. “I can see real benefits there.”
Yet companies that rent, lease or supply cars on a subscription basis have to bear the costs of vehicle depreciation, and while the current tight market means lightly used Model 3s sell for more than their new price, that is likely to change. and depreciation costs would be a factor. for Kyte, Hoffer said. But if depreciation remains low for Model 3s, when Kyte is done with them, “they become late-model high-value used cars,” Hoffer said.
Kyte said he plans to sell his Model 3s after 18 months to three years.