Update: Story introduction updated with Table of Contents.
In June 2021, Tesla launched the Model S Plaid as the quickest (0-60 mph) series-production car that made a bold statement in the auto industry. Over the next few years, it intends 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, Tesla will launch an electric car with a USD 25,000 (approx. EUR 23,600) price this decade.
Musk indicated in January 2022 that the $25,000 Tesla will not debut anytime soon. Refer to the ‘Release Date’ section of the story for the details. Until the next update on the project, here’s what has been said or reported on Tesla’s mass-market car project. This article also contains renders of the compact Tesla done by automotive designers and sleuths, all of which are unofficial.
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, admitted 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 announced, we’ll refer to it as the Model 2 or Model Q for easier understanding and for our story to be discoverable via search engines. 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. 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. Last year, Twitter user Ray4Tesla claimed this based on 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 in July 2021
Ray4Tesla predicted 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) would have started at the end of last year.
Role of the Chinese R&D center
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 would continue increasing investments and R&D efforts in the country.
After opening the Tesla Gigafactory Shanghai in 2019, it constructed the Tesla Shanghai R&D and Innovation Center and a Tesla Shanghai Super Factory Data Center in 2021. On October 25, 2021, the company announced that it had completed building the globally relevant R&D center and the local data center. Tesla can use the Chinese R&D center for vehicle development, including software, hardware, electronics, materials, etc. The Chinese data center will store China’s operating data, like factory production information, for instance.
From initial design to final testing, the creation of the USD 25,000 Tesla is likely to have an influence from its first R&D center outside the United States. In an interview with Xinhua Net (via YouTube/T-Study uploaded in Feb 2021), Tesla China President Tom Zhu confirmed that the company would be able to design, engineer, develop, and test models at this overseas facility.
Zhu said that Tesla had shared the ultimate goal of the Tesla China R&D center on many public occasions. He suggested models made here will indeed be global Teslas, not China-exclusive cars.
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), in the video uploaded by Youtube channel T-Study in Feb 2021.
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 the cheapest Tesla, but China shows the biggest potential in the current scenario.
Crossover Tesla Model 2
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. Soon after, the company was on a hiring spree in China for the Gigafactory.
Tesla Model 2 imagined as a supermini
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, which has since then changed.
While the Tesla news sites on the internet speculate on the body style, manufacturing could take place at both Tesla Gigafactory Shanghai and Tesla Gigafactory Berlin. In 2020, a Chinese Environmental Impact Assessment document discussed expanding production capacity at the Shanghai facility for “the production capacity of Model 3, Model Y, and related derivative models.”
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 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. 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 cars in high volumes in four factories worldwide.
Tesla Model 2 envisioned as a city runabout
Tesla Model 2 battery
Tesla could offer the Model 2 with a new Iron-based battery, which promises long cycle life. Further, the shift from Nickel to Iron for its future entry-level cars indicates Tesla is keen on lowering the cost of the vehicle. 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 luxury/convenience features deleted. Since Tesla already introduced the Model 3 with an LFP battery, it could gather essential insights into this chemistry for optimization in the mass-market Model 2 when it is ready for launch.
Model 2 to use the BYD Blade Battery?
Tesla’s new car project has generated more than a fair share of media speculation. Last year, Chinese media reports suggested 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 then 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.
On October 21, 2021, Financial Associated Press reported that Tesla had placed a battery pack order totaling 10 GWh from BYD. That equates to 200,000 battery packs if we approximately assume 50 kWh to be the energy content of each battery pack, enough supply for probably one quarter of the Model 3 and Model Y production. The cheapest Tesla will witness a much higher demand.
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 1.2 million km (nearly 750,000 miles) after 3,000 charging/discharging cycles. Manufacturing of the batteries takes place in Chongqing, China, and is used in models including the BYD Han EV and BYD Tang EV.
On the upcoming Tesla 4680 cell
The name 4680 comes from the cell’s dimensions, 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/source 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 takes place at a factory just a mile away from the Fremont vehicle assembly plant in the U.S. The cells made here go into the structural battery packs of the Model Y manufactured at Tesla Giga Texas. The mid-size SUV is the first model to get the new format cells. Production and deliveries of the Model Y with the battery pack consisting of 4680 cells have started to limited customers.
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)
In an interview with Bloomberg recently, Kazuo Tadanobu, the CEO of Panasonic Corporation’s Energy Company, indicated that the development of the 4680 cells is highly complicated. It has “taken an immense amount of stamina.”
The completely different shape of the cell alone is a big challenge. However, the result will likely be worth all that, with Tadanobu saying these cells will have a “considerable impact” in reducing the cost of EVs, effectively making them more widely accessible. Panasonic Corporation may produce the batteries consisting of 4680 cells in Wakayama, Japan, or, according to a report from NHK, in Oklahoma or Kansas in the U.S.
Towards the end of the Q2 2021 earnings conference call, Musk hinted that the company may not use the 4680-format for the LFP battery cells. 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
We feel that Tesla may use an LFP battery pack with 45-50 kWh (total/gross) energy content that offers a range of around 250 miles, enough to make it an affordable and reliable daily driver for urban conditions. In the Model 3, the company provides a CATL 55 kWh LFP battery pack that can deliver a range of 468 km or 291 miles (NEDC/China).
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. It will cost 33% less than the Renault Zoe, which puts the price 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.
Model 2 as a C-segment hatch
Tesla Model 2 Release Date
In 2021, a report from The Paper suggested that the official unveil might not take more than a few months, most likely not beyond 2022. According to the report, Grace Tao, VP, Tesla (China), said that we might be able to see the models designed in China driving on Chinese roads in the near future.
However, we don’t hold out much hope as Musk has indicated that the $25,000 Tesla will not debut anytime soon. When asked about the progress of the project during the Q4 2021 and full year 2021 earnings conference call, he said that Tesla has too many other projects of higher priority right now. The Tesla Cybertruck, Tesla Semi, and the Tesla Roadster are the company’s subsequent launches, all likely in 2023.
Well, we’re not currently working on our $25,000 car. At some point, we will, but we have enough on our plate right now, too much on our plate, frankly. So, at some point, there will be. But I think that’s sort of a question that — it’s sort of the wrong question. Really, it’s really the thing that overwhelmingly matters is when is the car autonomous? I think, at the point in which it is autonomous, the cost of transport drops by, I don’t know, a factor of 4 or 5.Elon Musk, co-founder and CEO, Tesla (Q4 2021 and full year 2021 earnings conference call on January 26, 2022)
Tesla manufactures over 900,000 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 launched the new Model S and a new Model X in 2021.
Tesla produced 24,390 units of the Model S and X combined and 906,032 units of the Model 3 and Model Y combined in 2021. The executive models recorded a combined sales of 24,964 units, while the midsize models outsold them considerably, totaling 911,208 units. In all, Tesla produced 930,422 vehicles and sold 936,172 cars last year.
Q1 2022 sales impress
Tesla made 14,218 units of the Model S, and Model X combined and 291,189 units of the Model 3 and Model Y combined in Q1 2022. The combined deliveries of these midsize and large models stood at 14,724 units and 295,324 units, respectively. In total, Tesla manufactured 305,407 vehicles and delivered 310,048 units in the first quarter of 2022.
Investors & analysts react to the Tesla Model 2 delay
During Tesla’s Q4 2021 and full year 2021 earnings conference call, Musk said that the company is not currently working on its USD 25,000 model. Analysts and investors haven’t taken this well. For instance, AB Bernstein Analyst Toni Sacconaghi doubts if the company can sell more than 3 million vehicles in 2024 if it’s not developing the USD 25,000 EV. Guggenheim analyst Ali Faghri has said that entering the lower price, volume segments “will be critical to support the company’s growth outlook” towards the middle of the decade, as per a report from Yahoo Finance.
Tesla’s competitors are already thinking about how to make a competitive electric car that most buyers can afford. Lucid Motors, for instance, is considering a low-range, low-cost model, suggests a report from Business Insider. Peter Rawlinson, the company’s CTO and CEO, has said if customers don’t need a long range in the car, can charge at home easily, and have access to plenty of fast-chargers, “maybe 150 miles is alright.” Further, Rawlinson expressed his interest in offering an EV with an ultra-high energy efficiency of 6 miles/kWh. Even with a small, ~50 kWh battery pack, such energy efficiency would translate to a range of about 300 miles!
Tesla Model 2 or Tesla Model Q FAQs
What is the Tesla Model 2 release date?
The launch of the Tesla Model 2 or the Tesla Model Q (name: TBA) is unlikely before 2025.
Which electric cars are considered Tesla Model 2 rivals?
What is the estimated Tesla Model 2 price?
The Tesla Model 2 would start at around USD 25,000.
Featured image: SugarDesign