The Affordable Tesla Model Is—Apparently—Back On

Elon Musk revives talk of a small EV with half the cost of the Model 3 and Model Y platform.

tesla model 2
  • Tesla CEO Elon Musk mentioned his company's next prospective model, which would be positioned below the Model 3/Y in price, will exceed all other models combined in production volume.
  • The company previously floated the idea of a $25,000 Tesla model, which was planned to be produced in China, but has since shelved the project.
  • Tesla is now once again working on a new platform for a smaller EV, which it seeks to produce at half the cost of the Model 3/Y.

    The rumored $25,000 Tesla model was one of the most anticipated projects the company claimed to have been working on even before the Model 3 became a $47,000 car. The project, mentioned by Tesla CEO Elon Musk in 2021, appeared to have gotten as far as a Tesla styling studio in China where the company hoped to produce the car starting in 2023.

    "About three years from now, we're confident we can make a very compelling $25,000 electric vehicle that's also fully autonomous," Musk indicated in 2020.

    The project had then been shelved sometime in early 2022, with Tesla focusing on getting the Cybertruck and the Semi into production in addition to opening new plants overseas.

    The Model 2, as it is sometimes known in Tesla watcher circles and as seen in our (slightly whimsical) rendering above, now appears to be back on the drawing board, but without a clear timeline.

    "At this point we've done the engineering for Cybertrucks and for Semi, and, so, it's obviously against what we're working on, which is the next-generation vehicle, which will be probably about half the cost of the 3/Y platform, it will be smaller, to be clear," Musk said during the earnings call this week in response to a question about Tesla's third platform.

    "But it will, I think, certainly become, certainly exceed, the production of all our other vehicles combined," he added.

    We should note that Musk was understood to be talking about the cost of the platform to Tesla to manufacture, rather than the eventual retail price of such a car.

    2022 tesla cybertruck
    The Tesla Cybertruck isn’t expected to launch anytime before December 2023...
    tesla semi
    ...while the Tesla Semi likely won’t see mass rollout till 2024.

    It hasn't been lost on EV buyers that Tesla models have not become cheaper in the past three years. The Model Y is now a $67,000 car, while the promises of a $35,000 Tesla Model 3 are have long since faded. The Model S—a decade old though updated recently—now starts just north of $105,000.

    While recent Tesla price hikes have been attributed to the rising costs of raw materials and supplier strain, industry analysts have also warned that there may not be much profit margin in a car positioned below the Model 3, even if priced above the $35,000 mark. As other automakers, Tesla has an incentive to produce luxury versions of its offerings and charge more for them, as profit margins are higher in more expensive cars.

    With his recent comments Musk appears to be backtracking, hinting that Tesla does have an interest in producing more copies of a less expensive model.

    Slicing the production costs of the Model 3 in half, however, appears to be a taller order today than it was three years ago, as the EV industry continues to face shortages of parts and raw materials.

    Still, it's not lost on industry observers that Tesla's major concept debut of the year turned out to be a humanoid robot, which is nowhere near production—and is without mass demand from buyers. Priorities have clearly shifted in the past two years.

    Another thing that's changed is that Tesla will have a much larger field of competitors when its affordable model arrives, whether that's in 2024 or later. The Fisker Pear is on the way in 2024, with a promised price below $29,000, while Sono Motors has just revealed a $25,000 EV in Germany. Other automakers are also getting into the game with crossovers priced just below the $40,000 mark.

    Should Tesla produce a $25,000 car, or is there more demand for larger, more luxurious EVs at the moment? Let us know in the comments below.

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