USD 25,000 Tesla Model 2 “progressing,” imagined in 6 designs [Update]

On June 11, 2021, Tesla launched the Model S Plaid as the quickest (0-60 mph) series-production car and made a bold statement in the auto industry. Over the next few years, it wants to push the limits at the low end of the lineup, not in the aspect of acceleration and performance, but affordability. To truly democratize electric cars, it is developing an EV with a USD 25,000 (approx. EUR 22,000) price tag.

Tesla hasn’t revealed the name of its USD 25,000 electric car, but the media refers to it as the Tesla Model 2, and sometimes even as the Tesla Model Q. However, the company’s co-founder and CEO, Elon Musk, has confirmed at its 2021 annual shareholder meeting that it doesn’t plan to use the former for sure. He said:

Model 2 is not a car. There’s no Model 2.

Elon Musk, co-founder and CEO, Tesla (2021 annual shareholder meeting)

Until the actual name of the USD 25,000 Tesla model is out, we’ll continue calling it the Model 2 or Model Q for easier understanding and for our story to be discoverable via search engines.

Tesla Model 2 project progressing, hints Elon Musk

“We’re continuing work — development work on the Semi, Cybertruck, the Roadster and other products,” Musk told analysts during the Q1 2021 earnings conference call. These “other models” include the officially announced but yet-to-be-named USD 25,000 Tesla.

Tesla confirmed the Model 2, the name the internet has warmly given the upcoming Tesla compact car, at its 2020 Annual Shareholder Meeting and Battery Day. The affordable Tesla car could emerge at the end of 2023, and here are some interesting design inspirations for the model.

Tesla Model 2 prototype built?

Rumor has it that Tesla has completed the prototype of the Model 2 in China. Twitter user Ray4Tesla claimed this on the basis of a post of a reliable source who goes by the name 不是郑小康 on Weibo. Ray4Tesla said that the Chinese social media handle frequently gets it right before others, and the Weibo post is as follows (translates):

Model next gen(:) It’s not a smoke bomb. Most of the suppliers have been negotiated, and they will be small-scale by the end of the year, but they are not disclosed.

Weibo user 不是郑小康

Ray4Tesla predicts that the Tesla Model 2 prototype is ready and that trial production (which usually yields a small volume of cars for testing, demo, and customer clinics) will begin at the end of 2021. A Sina Auto report in early 2021 said that Tesla may start testing the first batch of Tesla Model 2 prototypes this year.

Role of the Chinese R&D center

From initial designing to final testing, the creation of the USD 25,000 Tesla is likely to have a major influence from the Tesla Lingang Gigafactory, where Tesla is building is its first R&D center outside the United States. In an interview with Xinhua Net (via YouTube/T-Study), Tesla China President Tom Zhu confirmed that the company will be able to design, engineer, develop, and test models at this overseas facility. The new R&D center will likely be up and running this year.

Zhu said that Tesla has shared the ultimate goal of the Tesla China R&D center on many public occasions, indicating that the USD 25,000 will be the star project of the new facility. He suggested that the new entry-level model will indeed be a global Tesla, not a China-exclusive car.

The ultimate goal has been mentioned in many occasions. In the future, we want to design, develop, and produce an original model in China. It is manufactured here and sold to the world. This R&D center is the starting point of the goal. We have mentioned before that we hope the vehicle built in China can have 100% local components.

Tom Zhu, President, Tesla (China)

Tesla has high hopes for China as a future hub for R&D and manufacturing. During the opening ceremony of the World Internet Conference 2021 on September 26, 2021, Musk said that the company will continue increasing investments and R&D efforts in the country. A Tesla China data center to store the data of local customers launched earlier this year, while the globally relevant Tesla China R&D center is nearing completion.

On August 9, 2021, Ray4Tesla suggested on Twitter that the Tesla China R&D Center will become operational soon. While we don’t know the inauguration date, a full-scale recruitment drive will probably begin once it is up and running. Still, according to the Twitter user tracking Tesla’s developments, there are several job openings at the upcoming facility in seven categories already:

  • Vehicle design
  • Vehicle software
  • Hardware design engineering
  • Material engineering
  • Powertrain/energy engineering
  • R&D engineering operation
  • Vehicle engineering

The Tesla Model 2 pictured (display image) is from Instagram user Sugarchow (Instagram handle: sugardesign_1). Like most speculations, it shows the USD 25000 Tesla car as a compact hatchback to challenge the VW ID.3 and Nissan Leaf. European customers could be the main target for Tesla’s VW ID.3 challenger, but China shows the biggest potential for a cheaper Tesla in the current scenario.

Crossover Tesla Model 2

Tesla Model 2 render Shanghai
Tesla invited designers in China to submit portfolios on social media in January 2020. Image source: Tesla

The design sketch above was posted by Tesla on Chinese social media following the Made-in-China Tesla Model 3 launch ceremony in January 2020. During the event, Musk also stated that the company wanted to create a design and engineering center in China to design an original car for worldwide consumption.

Following the message, Tesla invited designers in China to submit portfolios. The company was on a hiring spree in China for the Gigafactory soon after.

Tesla Model 2 as a supermini

Tesla Model 2 SUV design render
Tesla news sites ask the important question: Will the Model 2 have a crossover-SUV design? Image via Twitter

Autonomous driving

Tesla will likely offer the full self-driving pack (Tesla Autopilot) in the affordable Tesla Model 2, bringing autonomous features to a wide audience. Musk confirmed at the 2020 Battery Day event, where he stated the company was confident in making a fully autonomous $25,000 Tesla model in three years.

No pedals & no steering?

The Tesla Model S has one of the most futuristic car interiors, and its new yoke-like steering plays a major role in creating the feeling. The Tesla Model 2’s interior could look take an even bigger leap without pedals and steering.

Legacy automakers are designing autonomous driving concept cars with retracting pedals and steering. Tesla is thinking ahead and considering to equip no pedals and steering, and that in a production Model 2, Twitter user and Tesla tracker Sawyer Merritt said, citing Musk in a company meeting. Of course, we don’t see this effective on every Model 2 variant as regulations in most countries mandate pedals, brakes, and controls, but it could be that a variant with the highest version of FSD could have a cleared-out cockpit.

Manufacturing

While the Tesla news sites on the internet speculate the Model 2 as a sedan or crossover-SUV body style, manufacturing could take place at both Tesla Gigafactory Shanghai and Tesla Gigafactory Berlin. In 2020, a Chinese Environmental Impact Assessment document talked about expanding production capacity at the Shanghai facility for “the production capacity of Model 3, Model Y, and related derivative models.”

Capacity utilization

The annual production capacity of the Tesla Gigafactory Shanghai is 450,000, and a new report from new.qq.com suggested that Tesla is running this plant at full capacity already. If the momentum continues, the company will record 100% capacity utilization in the very first full year of production. In addition to China, the Tesla Gigafactory Shanghai produces EVs for Hong Kong, European countries, Australia, New Zealand, and Singapore, Bloomberg reported on August 10, 2021.

Localization

Tesla’s goal of achieving 100% localization in China, which local President Zhu talked about in the interview, is not far from reality. Citing a China (Shanghai) Pilot Free Trade Zone (FTZ) source, xinhuanet.com said in a report on August 18, 2021, that the company could achieve about 90% localization there by the end of 2021. 100% localization would allow the company to price the Model 2 very aggressively.

With the high level of quality Tesla aims to offer even in its most affordable car, meeting the target price of USD 25,000 is challenging. However, the company is determined to achieve that. The LFP chemistry will keep the battery cost low, but there’s more the company can do. About that, below is what Zachary Kirkhorn, CFO, Tesla, said during the Q1 2021 earnings conference call:

Obviously, building a car like a Model S is quite complex and has various moving parts. Model 3 and Model Y were steps of improvement in that. But when you look at some of the other advancements that we are including in the Model Y, factories into Austin and Berlin, we have reduced the body pound by as much as 60%. And the part costs money.

Zachary Kirkhorn, CFO, Tesla

Another way Kirkhorn suggested Tesla can meet the production cost targets is by making high volumes, in four factories worldwide.

Tesla Russia plant report

Russia is not the most EV-friendly nation at the moment, so it’s no surprise that a Tesla plant for the country was never a serious discussion. But, after argumenti.ru reported in a September 19 article that Tesla was planning to open a factory in Korolev, Russia, Musk confirmed on Twitter the next day that the company hasn’t made a decision about a new Gigafactory location. According to local media reports, Russia plans to have 72,000 EV charging stations and 1,000 hydrogen filling stations by 2030, which should interest Tesla’s strategists when planning new gigafactories this decade.

Tesla Model 2 as a city runabout

Tesla Robotaxi render
The Tesla Robotaxi could be based on the Model 2, but luxury/convenience features would be filtered for the commercial application. Image: André Domingues via Coroflot

Tesla Model 2 battery

Tesla could offer the Model 2 is with a new Iron-based battery, which promises long cycle life. Further, the shift from Nickel to Iron for its entry-level future cars indicates Tesla is keen on lowering the cost of the car. An Iron base (which is more abundant than Nickel) would mean that Tesla would have fewer supply constraints. However, Musk indicated he had urged mining companies to produce more of the material.

With its long cycle life, the Tesla LFP battery (Lithium Iron Phosphate) would be an integral part of the Tesla Robotaxi. Long cycle life is paramount for commercial applications. The Robotaxi could be a derivative of the Model 2 with some of the luxury/convenience features deleted. Since Tesla already introduced the Model 3 with an LFP battery, the company could gather essential insights into this chemistry for optimization in the mass-market Model 2 in 2023.

Model 2 to use the BYD Blade Battery?

Some new media reports suggest that Tesla could use BYD’s Blade batteries in the Model 2. Financial Associated Press reported on August 5, 2021, that BYD plans to supply Blade batteries to Tesla beginning in Q2 2022 (April-June 2022) and that these batteries have entered the C-sample test phase.

BYD later released a statement saying that it has never indicated or stated that Tesla will use its Blade batteries, tech.ifeng.com reported on August 11, 2021.

BYD claims that the Blade batteries with Lithium Iron-Phosphate cells offer new levels of safety in the EV industry. In a nail-penetration test, the Blade Battery’s surface temperature reached only 30º – 60º C and emitted no smoke or fire. Longevity is another advantage, with the company claiming that it can last till 1.2 million km (nearly 750,000 miles) after 3,000 charging/discharging cycles. The BYD Tang achieves a range (NEDC) of 505 km (314 miles) with the BYD Battery. Manufacturing of these batteries takes place in Chongqing, China.

On the upcoming Tesla 4680 cell

The name 4680 comes from the dimensions of the cell, 80 mm in length and around 46 mm in diameter. “We get five times the energy with six times the power, and enable 16% range increase just (from the change in) form factor alone,” Andrew Baglino, Senior Vice President, Powertrain and Energy Engineering, Tesla, said at the Tesla Battery Day in 2020.

Tesla will likely produce the 4680-format cells in three continents to ensure uninterrupted supply in all main factories: North America, Europe, and Asia, Musk suggested at the 2021 shareholder meeting. The North American production will be at a factory just a mile away from the Fremont vehicle assembly plant in the U.S. This facility “will be able to make more than enough cells for Giga Texas to scale production of Model Y,” which will be its first model to get the new format cells.

The nice thing is like having at least a factory in Europe and a factory in China, a factory in North America or at least have factories where – for our high-volume products – where they’re on the continent where most of our customers are.

Elon Musk, co-founder and CEO, Tesla (2021 shareholder meeting)

Tesla is experiencing hiccups with the 4680 cells, Musk suggested during the Q2 2021 earnings conference call. Prototype production or limited production isn’t challenging, but mass-producing them is proving difficult. “We have a challenge with basically what’s called calendaring, or basically squashing the cathode material to a particular height,” Musk said.

So it just goes through these rollers and gets squashed like pizza dough, basically, but very hard pizza dough. And it’s causing — it’s denting the calendar rolls. This is not something that happened when the calendar rolls were smaller, but it is happening when the calendar rolls were bigger. So it’s just like — we were like, OK, we weren’t expecting that.

Elon Musk, co-founder and CEO, Tesla (Q2 2021 earnings conference call)

Baglino revealed during the Q2 2021 earnings conference call that Tesla has proved the mettle of 4680 cells, and so, it is mainly the production aspect that remains to be worked out.

We have successfully validated performance and the lifetime durability of the 4680 cells produced in Kato, and we’re continuing ongoing verification of that reliability. We’re actually accruing over one million equivalent miles on our cells that we produce every month.

Andrew Baglino, Senior Vice President, Powertrain and Energy Engineering, Tesla (Q2 2021 earnings conference call)

Towards the end of the Q2 2021 earnings conference call, Musk hinted that the company may not use the 4680-format for the battery cells of the Model 2 and could offer a different format. He said:

I see us sort of like consolidating around a 4680 nickel-based structural pack for long-range vehicles. And then not necessarily a 4680-format, but some other format for iron-based cells.

Elon Musk, co-founder and CEO, Tesla (Q2 2021 earnings conference call)

Tesla Model 2 Range

There’s no word on the battery pack capacity of the Tesla Model 2. Tesla may use an LFP battery pack with around 45 kWh (total/gross) energy content that offers a range of around 250 miles, enough to make it a reliable daily driver for urban conditions. In the Model 3, the company offers a CATL 55 kWh LFP battery pack that can deliver a range of 468 km or 291 miles (NEDC/China).

2023 Tesla Model 2 or Tesla Model Q rear rendering
The USD 25,000 Tesla will give compact cars like the VW Golf and the Nissan Leaf a run for their money. European countries are likely to be its main market besides China. Render: Theottle/Instagram

The Renault 5, a potential rival to the Tesla Model 2, will deliver a range of 400 km or 249 miles in Europe’s WLTP test cycle when it launches in early 2024, Renault confirmed in July 2021. It will cost 33% less than the Renault Zoe, which puts it around EUR 21,000. There are similar price and range expectations from other upcoming compact EVs in Europe. So, it’s clear that in addition to a base price of under EUR 25,000, the Tesla Model 2 must offer a range of at least 250 miles to maintain its competitive position.

Most configurations could have a single motor powering the rear wheels, and an AWD performance variant may top the range competing with the Alpine R5 and perhaps the Cupra version of the Seat Urbano.

Model 2 as a C-Segment hatch

Tesla 25000 USD car render
A Tesla Model 3 with the LFP battery is now on sale in China. The company would use these learnings for the Model 2’s LFP. Image source: PSArtcar via ArtStation

Tesla Model 2 Release Date

In January 2021, Sina Auto reported that the internal environmental impact assessment process for the Tesla Model 2 has begun and that the unveiling could take place in the second half of the year at the 2021 Guangzhou Auto Show (November 19-28, 2021). However, it doesn’t look like a concept Model 2, let alone the final EV, would show up anytime before 2022. Moreover, Tesla doesn’t hold Motorshow debuts, and we doubt that its ways are changing anytime soon. For a launch like the Model 2 that promises to democratize electric cars, it will most certainly program a company event for the world premiere.

Tesla manufactures over 624,582 cars in 2021

Until the affordable Model 2 is ready, Tesla is increasing the standards set for itself in the current model range. The company recently refreshed the Model S and should release a new Model X in the coming months. It sold 9,275 units of the Model S and X combined and 232,025 units of the Model 3 and Model Y combined in Q3 2021.

Between January and September 2021, Tesla delivered 627,350 units. The Q3 2021 results have surpassed analyst projections. The numbers of the first three quarters are higher than all four quarters of 2020 (production: 509,737 units and deliveries: 499,550 units).

Tesla Model 2 or Tesla Model Q FAQs

What is the Tesla Model 2 release date?

The Tesla Model 2 or the Tesla Model Q (name: TBA) is expected to launch in late 2023.

Which electric cars are considered as Tesla Model 2 rivals?

The Tesla Model 2 will challenge the VW ID.2, Renault 4, and the Seat ‘Urbano’.

What is the estimated Tesla Model 2 price?

The Tesla Model 2 would start at around USD 25,000.