USD 25000 ‘Tesla Model 2’ or ‘Model Q’ proposed in 6 designs [Update]

Update: ‘USA’ sub-section added to ‘Manufacturing.’

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 line-up, 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 price this decade, as confirmed during its 2020 Annual Shareholder Meeting and Battery Day.

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.

Branding

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)

On the second day of the 2022 B20 Summit Indonesia (November 14, 2022), the name of the affordable Tesla model came into question again. Musk attended the event virtually, and the host asked him if Tesla should christen its entry-level car ‘Model I,’ with the I standing for Indonesia and India, where affordable EVs may become popular in a few years. While he dodged the speculation, Musk admitted that a more economical Tesla makes sense and that the company should act on it.

In 2018, ‘Tesla Model C’ emerged as one of the rumored names for the car positioned below the Model 3. 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 Model 2 prototype built?

Rumor has it that Tesla has completed the prototype of the Model 2 in China. In 2021, 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 2021.

Crossover-style Tesla Model 2

An alleged spy picture of a USD 25,000 Tesla from a factory, probably Tesla Gigafactory Shanghai, surfaced on January 4, 2023, on Chinese portals. Rather than a newly designed hatchback, the camouflaged model looked like a shortened, lowered, and narrowed Tesla Model Y. Additionally, it appeared to have a short wheelbase.

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 candidates to submit portfolios. Soon after, the company was on a hiring spree in China for the Gigafactory.

Official teaser

On February 22, 2023, during the inauguration of the Tesla Global Engineering Center in Palo Alto, California, Tesla likely teased the Model 2 in a video, which we’ve embedded at the end of this section. At the 11:26 mark, you’ll see a covered vehicle that looks like a downsized Tesla Model Y, as we stated in the ‘Crossover-style Tesla Model 2’ sub-section of the above section.

Several design sketches of what seems to be the Model 2’s exterior and interior follow immediately next. One of them appears to show a small EV identical to the one in the sketch we’ve included in the ‘Crossover-style Tesla Model 2’ sub-section of the above section.

Video Source: YouTube/Tesla

On May 16, 2023, at the 2023 Annual Shareholder Meeting, Musk teased a future model that seemed to be the Tesla compact car. The Tesla chief showed a picture of the EV’s side profile, which, just like the previous teaser, had hints of the Tesla Model Y. “We are actually designing a new product,” Musk said while showing this image. “There are two new products that I think you will be very excited about and both the design of the products and the manufacturing techniques are head and shoulders above anything else that is present in industry,” he added.

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 inaugurating 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 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.

Tesla Model 2 imagined as a supermini

Features

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 USD 25,000 Tesla model in three years, which has since then changed.

Best-in-class infotainment system

The Tesla compact car will attract young customers who’ve wanted a Tesla but couldn’t afford the line-up. This tech-savvy crowd deserves nothing less than Tesla’s best. For this reason, the Model 2 will probably have an infotainment system with a wide range of connectivity and entertainment solutions. In December 2022, the company brought Cyberpunk 2027 and thousands of other new games to the Model S and X. That month, it started offering Apple Music in its EVs too.

Platform

On October 19, 2022, during Tesla’s Q3 2022 earnings conference call, Musk offered hints on the entry-level Tesla. He said that the company’s future EV platform would be smaller than the one underpinning the Model 3 and Model Y and cost about half to make. The company will use everything it learned from developing the platforms underpinning the S, X, 3, Y, Cybertruck, and Semi models while making the new platform.

Manufacturing

According to a report 36 Krypton released on April 4, 2023, Tesla is planning an annual production capacity of 4 million units for its upcoming entry-level model. That sounds ambitiously high for a single model. For reference, Tesla sold 1.3 million vehicles in 2022. The Chinese publication refers to the future EV as a “small Model Y” based on information from its sources. As with most other rumors for the USD 25,000 Tesla, we’d suggest taking the targeted production volume with a pinch of salt.

During Tesla’s Q3 2022 earnings conference call, Musk indicated that the targeted sales volume exceeds all of its other vehicles combined. He was talking about the anticipated production volume of the model:

It will, I think, swiftly become, like shortly exceed the production of all our other vehicles combined.

Elon Musk, co-founder and CEO, Tesla (Q3 2022 earnings conference call on October 19, 2022)

With the high level of quality that 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:

Mexico

Production of USD 25,0000 Tesla will take place at a new Gigafactory in Santa Catarina (Nuevo León), Mexico. Giga Mexico may mainly or only serve North American demand, although it might not be the only plant in the region making this car, but more on that later (next sub-section). China and other markets in Asia could source the car from Gigafactory Shanghai.

Santa Catarina Governor Samuel García has said that Tesla is advancing with permits from various Mexican ministries for the new plant, and the first stone for this factory could be laid any time now, Milenio reported on July 7, 2023. García also said that the design work of the upcoming Tesla EV is in the final stage.

On August 4, 2023, Forbes Mexico released a report claiming that this plant will cover an area of 260 hectares (642 acres). The company has sought permission from the Ministry of Environment and Natural Resources (Semarnat) to construct an industrial warehouse in Santa Catarina. The facility will be located beside the Monterrey-Saltillo highway. According to a report Milenio released on August 30, 2023, Tesla owns 1,561 hectares (3,857 acres) in Santa Catarina and it has allocated 260 hectares (642 acres) of that area to the upcoming Gigafactory, internally called “Mario Project.”

The budget model that Tesla wants to make at the upcoming plant will need a whole new production line, and finalizing that could take 12 to 15 months.

Elon alluded to the fact that Mexico will build our next-gen vehicle, but we will also be doing that in our other plants, and so it’s really about getting them all up and running. We expect that to be a huge volume product.

Lars Moravy, Vice President – Vehicle Engineering, Tesla (2023 Investor Day on March 1, 2023)

USA

Tesla will manufacture its next-gen car at the Giga Texas plant in Austin, USA, Axios reported on September 8, 2023, based on information seen in Walter Isaacson’s ‘Elon Musk’ biography. It claims that Tesla decided to change the rumored compact car and the Robotaxi’s initial production site from Giga Texas to Giga Austin. The latter would be a smaller, fully autonomous car based on the same new platform as the upcoming entry-level model.

The design of both the future EVs was previewed internally in February 2023, and they had a Cybertruck-like feel. Musk loved the way they looked and said people would perceive them as futuristic. Starting their production from a new plant (Giga Mexico) would’ve required many of Tesla’s top engineers to move there, as the company prefers them to be located close to the assembly line, it adds.

Germany/Spain

As for Europe, earlier it was believed that they would source cars from Gigafactory Berlin-Brandenburg. However, a new possibility has emerged that the cheapest Tesla car could ship from a new Spanish factory. Spain offers lower manufacturing costs compared to Germany, making it an attractive location for producing mini cars. Volkswagen Group will make all EVs for the lower segments in Spain for this reason.

According to a report Levante-EMV released on June 8, 2023, Tesla is considering building a new Gigafactory with an investment of USD 4.5 billion in Valencia, Spain, and talks with the local government are said to be underway. Interestingly, the same location is where Volkswagen Group’s PowerCo is currently building an EV cell gigafactory. Within minutes of that story emerging, CincoDías reported that its sources have verified the development.

China

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. 100% localization would allow the company to price the Model 2 aggressively.

India

Tesla is notably absent in India, one of the fastest-growing electric vehicle markets worldwide. Despite the country’s increasing adoption of EVs, Tesla’s attempts to enter India have faced obstacles due to punitive taxes imposed on imports. Local production of the Model 3 and other existing Teslas was considered impractical, as these would likely be deemed too expensive for the majority of Indian customers, making local production economically unviable.

The upcoming entry-level Tesla could also be quite expensive to local car buyers, but it does possess some potential, as the nation’s population continues increasing spending on lifestyle products. According to a report Times of India published on July 13, 2023, Tesla plans to launch this model in India and make it locally, targeting a price of INR 20 lakh, which converts to roughly USD 24,000.

Tesla is targeting an annual production volume of 500,000 units for the Indian factory, and since the country doesn’t have a demand for that many Tesla EVs, it’ll be exporting a sizable chunk of the volume to Indo-Pacific markets.

Tesla Model 2 battery & motor

Tesla Model 2 envisioned as a city runabout

New drive unit

It is Tesla’s goal to significantly reduce the use of rare earth materials in the components of its cars and increase their efficiency. Tesla announced on March 1, 2023, that its next drive unit would use 75% less Silicon Carbide without compromising performance or efficiency. The company indicated that it plans to use this drive unit in the USD 25,000 model. A fully indigenous controller will be used in this car. There will be a 48-volt lithium-ion auxiliary battery that will require less current and thinner wires.

On the LFP 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 LFP battery (Lithium Iron Phosphate) would be an integral part of the new entry-level Tesla. Long cycle life is paramount for commercial applications. Since Tesla already introduced the Model 3 with LFP, it could have essential insights into this chemistry for optimization in the mass-market Model 2 when it is ready for launch.

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

On April 5, 2023, Tesla revealed in its Master Plan Part 3 (pdf) document that it plans to offer its upcoming compact car with a 53 kWh LFP battery pack. The company sees this EV as a standard-range vehicle that can utilize a lower energy density chemistry, being primarily used for short or medium distances in and around the city. The company already uses an LFP in mid-size EVs (Model 3 & Model Y), but with a notably higher energy storage capacity (75 kWh).

The Tesla compact EV with the 53 kWh LFP battery pack should deliver an EPA-est. range of at least 250 miles, which seems enough for an affordable and reliable daily driver. In the Model 3, the company used to offer a CATL 55 kWh LFP battery pack that delivered 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. There are similar price and range expectations from other upcoming compact EVs in Europe from the VW Group and Stellantis. 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

The Tesla Model 2 may debut at a special product event in the coming months. The market launch may not take place before 2025, though. Tesla its compact EV will record double the sales of its mid-size EVs (Model 3 and Model Y) combined – 42 million units. That seems quite an ambitious target for just one vehicle, especially for a company that sells just around a million units of all its models combined annually.

It was also reported that Tesla had resumed Model 2 work after a brief pause to focus on its priority models. Months after Musk indicated that the company had put the Model 2 project on hold, The Detroit Bureau reported on November 3, 2022, that the future entry-level EV is back in development. The article didn’t reveal specific details about when the project will come to fruition, though.

In its 2023 predictions that were released on December 29, 2022, Tesla stock analysts at Loup Ventures believe that the Model 2 will only be unveiled in early 2024. Analysts at the research-driven venture capital firm, which has its bases in Minneapolis and New York, are opining that Tesla is likely to put the new EV into full-scale production only in mid-2025. The firm also cited practical but economic factors such as a possible recession in the industry, plus possible cannibalization of Model 3 sales should Tesla launch the predictably-cheaper Model 2 in a shorter timeframe.

VW confirms a pair of sub-25k Euro entry-level EVs

Volkswagen drew a step closer to introducing a sub-25,000 euro (appx. USD 26,866) entry-level EV on March 15, 2023. The German automaker previewed the future electric car with the VW ID. 2all concept, with the expectation of unveiling the dealer-bound model in 2025 for the European market.

The all-new electric hatchback should get VW’s latest design language with modern features and an estimated WLTP range of up to 450 kilometers (280 miles) while being based on the MEB Entry platform. Volkswagen is also planning another electric car with a targeted starting price of under 20,000 euros (appx. USD 21,493), which would undercut Tesla’s rumored entry-level EV’s price if it ever comes stateside.

Tesla Model 2 or Tesla Model Q FAQs

Featured image: SugarDesign