It will go on sale in 2017 (if Tesla delivers them on time), so you might start seeing a lot of them on the road in future. Here's everything you need to know about the car.
Well, it's comparatively cheap. A Model S, Tesla's higher-end saloon, starts at £58,500 and goes up to £87,300 for the fastest version. The Model X, the company's electric SUV, is expected to start at £65,000 when it launches in the UK.
By comparison, the cheapest Model 3 will cost $35,000. That comes out to around £25,000 at current exchange rates, below the average price for a new car in the UK, although the actual price may vary slightly.
The Model 3 will make Tesla cars affordable for more people, and judging by the popularity of their other vehicles, they could sell quickly.
It'll go 215 miles on a single charge
That's the mileage on the basic model, according to Musk. More expensive versions of the Model 3 will likely have bigger batteries, increasing their range.
By comparison, Nissan's £26,500 30kWh Leaf gets 155 miles on a single charge.
The Model 3 might still not be practical for cross-country road trips, but for the price it blows other electric cars out the water when it comes to mileage.
Musk said the base model will do 0-60mph in less than six seconds, although pricier versions will go quicker.
Tesla dispelled a lot of the stereotypes about electric cars going slow with the Model S, and clearly they're trying to keep some of that in the Model 3.
You might actually be able to charge it on the road
The main thing holding electric cars back is the lack of charging points. Tesla knows this, which is why it's planning to expand its network of 'Supercharging' stations worldwide.
The Superchargers are power points which can fully charge Tesla cars in minutes, not hours. They're capable of charging the Model X's 90kWh battery from dead to 100 per cent in 75 minutes, so it's fair to assume that the Model 3's smaller battery will charge quicker.
It's still not as fast as filling a tank up with petrol, but a half-hour pit stop on a long trip isn't an enormous inconvenience. There's around 30 Supercharger stations spread across the UK, but Tesla wants to increase this number by the time the car launches.
It costs £1,000 to reserve
Tesla are taking pre-orders now, but each one requires a £1,000 deposit. This sum is refundable if you want to cancel the reservation, but only before you've agreed to purchase the car closer to the launch date.
It might turn Tesla into a mainstream carmaker
Tesla changed the game with their previous cars, but their price has prevented them from becoming mainstream. The company used the money raised from sales of the Model X to fund the Model 3, and they're hoping that its price, range and size (it can "comfortably" hold five people and cargo, according to Tesla) will make it a feasible choice for ordinary car-buyers.
It looks pretty nice
It may be the budget model, but it's still a nice-looking car. The entire roof is a single piece of glass, offering nice views out the top, and it's got a very sleek-looking, sporty silhouette,
Rather than the Model X's huge portrait-style touchscreen, the Model 3 will have a smaller, landscape control panel. Like the Model X, however, it'll come with Autopilot, a system which adds some self-driving features.
We'll find out more soon
In his trademark cryptic style, Tesla CEO Elon Musk tweeted before the event: "Tomorrow is Part 1 of the Model 3 unveil. Part 2, which takes things to another level, will be closer to production."
In the meantime he said, "some important elements" will be added to the Model 3, and "some will evolve."
The fans who have already put money down for the new car will be excitedly waiting to see what Tesla has up its sleeve.
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