Despite Tesla’s promises, a widely available and more-affordable car from the high-end electric vehicle company has yet to appear, leaving would-be owners empty handed.
Now San Francisco startup Kyte, with $239 million in funding, aims to satisfy some of the demand. However, there’s a catch: You can have a Model 3 sedan, but you don’t get to keep it.
Beginning in two weeks, if all goes according to plan, motorists in San Francisco and a swath of the East Bay between El Cerrito and Alameda will be able to get their hands on a Model 3 via a “subscription” and no down payment. Even upon the April 15 launch, customers in the South Bay, other areas of the East Bay and on the Peninsula 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 terms 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 extra fee. An optional collision waiver adds $250 per month, and there’s a $299 one-time start-up fee.
Kyte, an on-demand car rental company founded in 2019, is not the only company to enable drivers to get behind the wheel of a Model 3 without buying one. Hertz rents them out in some regions. Tesla, which recently moved its headquarters from Palo Alto to Austin and makes cars in Fremont, offers leasing, and Autonomy in Southern California has its own “subscription” program. But Kyte touts convenience, providing a vehicle insured for liability, with roadside assistance and no down payment, delivered to a customer’s home and picked up at the end of the term.
Tesla offers a three-year Model 3 lease for a much lower $468 per month for an annual 10,000 miles, but requires an up-front 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 fee” and also requires the driver to have insurance.
Kyte is offering the program in response to the widespread and rapid move toward electric vehicles, Kyte product director Erik Zahnlecker said.
“We don’t want to only be innovators in how we give people access to cars, but we want to be a catalyst for the rapid change going on in the transportation industry as a whole,” Zahnlecker said.
For years, Elon Musk’s electric car company pledged it would produce a $35,000 Model 3. After a short window of availability at that price, the Model 3 now costs $47,000. But more than 300,000 people had put down refundable deposits for the $35,000 version in the first week Tesla was taking pre-orders, the car maker said, suggesting a huge demand among drivers unwilling or unable to cough up nearly $50,000.
Kyte, launching the service in New York City as well, said it’s starting with a “double-digit” number of Model 3s, bought 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 never taken off, in part because the cost is often not competitive with leasing or buying, in part because the market for them is small, said automotive economist George Hoffer, professor emeritus at Virginia Commonwealth University. However, the subscription model may work better with Teslas, Hoffer said, especially now when the pandemic and supply chain problems have spiked demand and prices for new and used vehicles. Residual demand for Model 3s among people who had hoped to buy one for $35,000 could also help, along with Tesla’s status as a prestige ride, Hoffer said.
“It puts you in a Tesla,” he said. “I can see real advantages to it.”
Still, companies renting, leasing or providing subscription cars must bear the costs of vehicle depreciation, and although the current tight market means lightly used Model 3s are selling 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 stays down for Model 3s, when Kyte is finished with them, “they become late-model, high-value used cars,” Hoffer said.
Kyte said that it plans to sell its Model 3s after 18 months to three years.