When is it coming? What will it look like? And more...
Elon Musk loves to keep people excited by teasing upcoming models and features. He's also consistently late in bringing them to market. He once told an interviewer that Tesla would build a $25,000 entry-level model in three years. That was in 2018. Though the car is clearly late, the project is still reportedly in the works. The details on the $25,000 Tesla are still fuzzy, but a few small tidbits have trickled out.
Let's start with the most obvious detail, the price. The Technoking of Tesla has repeatedly promised a $25,000 MSRP for this new entry-level model, though as we've seen with the Tesla Model 3, the CEO can often be optimistic with his estimates. Tesla briefly offered the Model 3 at its $35,000 promised starting price, but the least expensive version available now costs $37,990 before "potential incentives and gas savings." The $35,000 base model was reportedly pulled for lack of demand.
The $37,990 Standard Range Plus Model 3 offers rear-wheel drive with a 263-mile range, 140 mph top speed, and 5.3-second 0-60 mph time. Musk once said it costs $28,000 for Tesla to build a Model 3 and that the company would have to lower those costs to $20,000 to make a profit on a $25,000 vehicle. Tesla would need to tap into economies of scale to hit this target, a goal that seems viable based on the company's current sales projections.
We already know that this entry-level model will be designed and likely built at Tesla's Gigafactory in Shanghai. The car will cater to the Chinese market but sell globally in places like the United States. Tesla released a single design sketch of the car, which looked like a baby hatchback version of the Model 3. Our rendering artist took the Tesla design and fleshed it out more, creating our interpretation of the entry-level car that's been dubbed the Tesla Model 2. Inside, we predict Tesla will need to create an extremely minimalist cabin to hit the $25,000 target price.
If the Model 2 ends up looking similar to Tesla's design sketch or our rendering, we imagine it will compete again other small entry-level electric vehicles like the Chevrolet Bolt, Mini Cooper SE, and Nissan Leaf. Of course, the Model 2 would face stiffer competition in China, where vehicles like the Wuling Hong Guang Mini EV (pictured below) are sold for less than $5,000. The Chinese market has far more lenient crash test regulations, meaning automakers can offer far less expensive vehicles without all of the features required by US law.
Tesla could keep the price down in China by keeping the Model 2 similarly sparse, but such a car would not be legal in the US market. Details about the drivetrain are virtually non-existent, but we believe the Model 2 will be on-par with the aforementioned EVs like the Bolt and Leaf with a minimum of 200 hp and at least 200 miles of range. Though it seems like a pricey feature, Tesla has previously promised that the entry-level model will include Autopilot with the Full Self-Driving option.
While we think a sub-compact hatchback from Tesla would look pretty cool, that body style is not popular here in the US. Another potential idea to hit that target price would be to copy Apple's iPhone model. Whenever Apple releases a new iPhone variant, it continues to offer the outgoing variant for a discounted price. Perhaps Tesla could introduce a second-generation Model 3, then offer the outgoing model for $25,000. There are similar parallels in the automotive industry, like the Ram 1500 Classic selling alongside the new Ram 1500.
Though this strategy could work for Tesla, it seems like the company is keen on developing a new car from scratch at its Chinese design center. This leads to the biggest questions of all; when is the Model 2 coming, and why haven't we seen it yet? The first question is, sadly, impossible to answer right now. Musk promised the entry-level Tesla three years ago, and three years later, it still isn't here. The latest estimations peg a 2023 production start, but those rumors may also turn out to be overly optimistic.
Aside from economies of scale, there are several hurdles Tesla must overcome before we see a $25,000 entry-level model. For starters, the company needs to start production of the Semi, the Cybertruck, and the Roadster, the latter of which was revealed back in 2017. Another hurdle involves battery technology. During Tesla's battery day, Musk claimed the company would introduce an in-house "tabless" battery that would be cheaper to produce while offering six times more power and boosting range by 16%. These batteries sound like a game-changer, but they are likely several years away.
Much like the batteries themselves, it seems like the $25,000 Tesla is similar to many other Musk promises, a great idea with a long wait time. We won't say that Tesla will never produce a $25,000 car, but you shouldn't hold your breath for it if you are in the market for a new car in the next few years. If Tesla can deliver on this promise, we see no reason why the company shouldn't dominate the Chinese and global markets. Many consumers say they would buy an EV if they were more affordable, and $25,000 seems like a very fair price.