Over the past 10 years we have seen Tesla bring the prices of it’s vehicles down substantially. From the initial sporty roadster to the Model S and X in the Model 3, Tesla has revolutionized the way people see electric vehicles. However Tesla vehicles are still out of reach and expensive for the vast majority of the population. In order for Tesla to make a dent in it’s goal of drastically reducing global CO2 emissions, it has to offer an EV that most people can afford.
With the official announcement of Tesla‘s $25,000 car made by none other than Elon Musk at last weeks Battery Day, you would think the Tesla stock which has been an absolute tear over the past year I would get yet another boost from this long awaited announcement but alas, it’s stock in now experiencing what I think is a long overdue correction. But I digress. We are here to talk about Tesla’s $25,000 EV.
In his announcement from the stage during last week’s Battery Day, Elon Musk said “We are confident that long-term we can design and manufacture a compelling $25000 electric vehicle.” He went on to say “This has always been our dream from the beginning of the company and I even like wrote a blog piece about it because our first car was an expensive sports car and then there was a slightly less expensive sedan and then finally a mass market premium model 3 and Y. But it really was always our go to try to make a really affordable electric car and probably about three years from now, we are confident that we can make a very compelling $25000 electric vehicle that is also fully autonomous.
So Tesla plans to make a $25000 car within the next three years. As we all know, Musk has a tumultuous history adhering to strict deadlines and I think this will be no different. I. don’t think three years is no hard deadline for Musk and we still don’t know what it’s going to be called exactly. However Elon Musk promises that this $25000 car will be fully autonomous which is an interesting tidbit to keep note off.
All this has been made possible by all of the amazing innovations that Tesla announced around batteries, things that we knew were coming as the company announced its own battery sales projections and new battery manufacture techniques. In particular, Tesla has innovated the fundamentals of battery making like rolling dry electrodes into sheets with less machinery and less equipment which makes things a lot cheaper.
Tesla has also been seeking new suppliers for raw materials including new partnerships with a lithium mining company out of Nevada. With all these pieces put together, you can begin to see why Musk sees a 25000 car from Tesla hitting coming to reality in the next few years.
This has been Tesla’s grand plan all along, to cut the cost of battery manufactured by half because battery cost has been the limiting factor to creating such an affordable an affordable car. Back in 2016 Elon Musk promised us a $35,000 model 3 and as it is today we still do not have a $35,000 EV from Tesla which was promised to be the cheapest Tesla. I recently purchased a base Model 3 and my total cost was about $42,415. That leads skeptics to think Elon Musk’s promise of a $25000 EV in the next 3 years is a bit unattainable when we consider the facts on the ground as in the screenshot below.
However I think it’s unfair to compare Elon’s promise of the $35,000 EV to his new promise of a $25000 EV because when he made the promise with a $35,000 EV in 2016, the Shanghai Gigafactory was only in the planning stages. Production out of the Shanghai factory is now fast ramping up with a goal to hit about 1 million vehicles annually. Looking back at Tesla‘s previous shareholder meeting in July, Tesla pointed out how they have localized supply chains in China which further cuts down on transportation and acquisition costs.
Also with EV adoption in China being much higher than other markets particularly in Europe and the US for example, it is very likely that Tesla’s $25000 car would be a China first approach. As Tesla has been investing heavily in China, I think that’s the secret sauce to achieving the $25,000 TV in the next three years is the Shanghai Gigafactory.
When you take into consideration Tesla’s Shanghai factory which plans to ramp up the production to 1 million Tesla’s annually, Musk’s vision of a mass market Tesla $25000 car begins to come in to clear view and unlike all previous Tesla models unveiling held in California, this Tesla $25000 car will will be it’s first to be initially unveiled in China.
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