Tesla's Musk hands over first Model 3 electric cars to early buyers

Tesla Chief ExecutiveOfficer Elon Musk said on Friday the Model 3 had over half amillion advance reservations as he handed over the first 30 toemployee buyers, setting the stage for the biggest test yet ofthe company's strategy to become a profitable, mass marketelectric car maker.

Outside Tesla's Fremont, California factory, Musk showed offthe $35,000 US base vehicle with a range of 350 kilometreson acharge that marks a departure from the company's earlier luxuryelectric cars.

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Hours before the event, Musk acknowledged it would be "quitea challenge" to build the car during the early days ofproduction.

"We're going to go through at least six months ofmanufacturing hell," Musk told journalists.

The over half a million reservations are up from about373,000 disclosed in April 2016. Customers pay $1,000 refundabledeposits for the car, which is eligible for tax credits. Any newbuyers would likely not receive their car until the end of 2018,Musk said.

A longer-range version of the car is priced at $44,000 US andwill drive 500 kilometres on a single charge. The carsfeature a streamlined dashboard devoid of buttons or knobs, witha 15-inch touchscreendisplay to the right of the driver.

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Tesla faces major hurdles living up to the Model 3 hype. The500,000 vehicles Tesla vows to produce next year are nearly sixtimes its 2016 production.

Were Tesla to produce, and sell 500,000 cars per year, thecompany would likely outsell the BMW, Mercedes, orLexus brands in the United States.

Production delays and quality issues marred the launches ofTesla's Model S and Model X vehicles, and the company blamedproduction problems for a shortfall during the second quarter ofthis year. Musk has said a simpler Model 3 design will greatlyreduce potential assembly-line problems.

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Tesla has burned through over $2 billion US in cash so far thisyear ahead of the launch. A troubled Model 3 launch couldheighten the risks for the company, while a steady delivery ofModel 3s could generate a stream of cash that would allow Teslato avoid going again to the capital markets to fund itsoperations.

Tesla's share price has surged 54 per cent since January inanticipation of the Model 3 launch, and Tesla's pricey valuationnow exceeds that of traditional rivals like General Motors Coand Ford Motor Co.

Until now, Tesla has operated as a niche producer of luxuryelectric vehicles, with a charismatic, showman CEO who regularlyinteracts with fans on his Twitter account. Now loss-makingTesla is trying to move into a different league, buildingvehicles in high volume for customers able to pay only a fewthousand dollars more than the average price of a conventionalcar or truck sold in the United States.

The Model 3 is part of Musk's broader plan to build a cleanenergy and transportation company that offers electric semitrucks, rooftop solar energy systems and large-scale batterystorage systems.