Tesla (TSLA) , the leader in the electric vehicle market, advocates mass adoption of clean vehicles. But a major obstacle stands in the way: affordability.
There are currently no electric vehicles under $30,000 on the market. According to Kelley Blue BookNew EV prices averaged over $66,000 in June, well above the industry average and more in line with luxury vehicles than regular vehicles.
This precludes millions of consumers from considering the EV option.
At Tesla, the base price of the Model 3, the entry-level sedan, is $46,990, according to its website. Chief Executive Elon Musk had promised that this car would sell for $30,000 so that a large number of people could afford it.
A cheap Tesla – speculation
In 2018, Musk even told YouTuber Marques Brownlee that three years after that, Tesla could build a cheap car that sold for $25,000.
“I think we can do something to get to … a 25,000 car,” said the billionaire entrepreneur. “But if we work really hard, I think maybe in about three years we can do that.”
During Tesla Battery Day in 2020, Musk raised hopes of having a low-cost Tesla vehicle, commonly referred to as Tesla Model 2.
“Tesla will make an attractive $25,000 electric vehicle that is also fully autonomous,” Musk had promised.
The company would achieve this price thanks to the new battery cell and battery production, which could reduce battery costs by more than 50%.
In September 2021, rumors surfaced that Musk had told Tesla employees that the company would release a Tesla Model 2 in 2023.
No affordable Tesla soon
But in January 2022, Musk crushed the hopes of would-be car buyers by saying during the fourth-quarter earnings call, “We’re not working on the $25,000 car right now. At some point, we’ll do that. We’ve got enough on our plate now. Too much on our plate, to be honest.”
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And now a Tesla executive has just closed the door to the prospect of a cheap Tesla in the near future.
Martin Viecha, vice president of investor relations, said Sept. 12 at the Goldman Sachs Tech Conference in San Francisco that to become a major automaker, Tesla needed a comprehensive portfolio of affordable models.
But Viecha added that demand for the Model 3 sedan and the entry-level Model Y SUV/crossover was higher than expected. And this reduced the need for a new, cheaper model.
“Model Y will basically become the best-selling vehicle of all time in the world next year,” said the director. “This is an important sales lever that we have never touched, but in the future we may be able to boost demand in other ways.”
His comments were reported by Business Insider.
On the other hand, Viecha had some very good news for Tesla shareholders and fans.
He explained that the cost of manufacturing a Tesla vehicle has fallen by 57% since 2017. Production of a Tesla currently costs $36,000, compared to $84,000 in 2017, the CEO said.
This drastic reduction in costs is due to improved vehicle design, which simplified production, and a new factory design.
He added that Tesla’s factory in Fremont, California, the company’s first, was not an ideal place to manufacture the cars because it was too expensive. He said producing vehicles in Shanghai and Berlin, two cities where Tesla also has manufacturing sites, was much cheaper.
One of Tesla’s goals is to continue to reduce vehicle production costs, Viecha said. The automaker is expected to announce the locations of its next factories by the end of 2022.
Currently, the Fremont plant has a capacity to produce 650,000 vehicles per year, the company said during: second quarter earnings. Tesla produces its four models there – the Model S and Model 3 sedans and Model Y and Model X SUVs.
In Shanghai, the company manufactures the Model 3 and Model Y at a facility capable of producing 750,000 vehicles per year.
Finally, the Tesla plant in Berlin can produce more than 250,000 cars per year and the same goes for the Austin plant in Texas. Tesla started production at these two plants this year.
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