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

  • Most affordable Tesla expected to be a high-riding hatchback
  • Likely to be designed in China which could be one of its biggest markets
  • Could come with a low-cost and long-lasting LFP battery pack
  • Expected to be launched after 2025

Update: ‘Branding’ section updated.

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 25,000) price this decade.

Musk indicated in January 2022 that the USD 25,000 Tesla will not debut anytime soon. Refer to the ‘Tesla Model 2 Release Date’ section of the story for the details. Until the next official 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. The story also contains speculations about the technology, including battery chemistry.

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.

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. 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.

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.

Tesla China Shanghai R&D Center Data Center
Tesla aims to develop its Chinese R&D center in Shanghai to the same scale as its U.S. facility. Image Source: Weibo/特斯拉

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

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. Soon after, the company was on a hiring spree in China for the Gigafactory.

Tesla Model 2 imagined 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 features

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.

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 future EV’s platform will 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 the development of the platforms underpinning the S, X, 3, Y, Cybertruck, and Semi models in developing the new platform.

Manufacturing

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.”

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)

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 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 Robotaxi render
The Tesla Robotaxi was initially linked to the USD 25k car, but Musk has recently described it as a dedicated vehicle. Image: André Domingues via Coroflot

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 new entry-level Tesla. Long cycle life is paramount for commercial applications. 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. In 2021, 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.

While Tesla has indefinitely postponed the Model 2 since, BYD has since confirmed that it will supply batteries to Tesla. In an interview with Kui Yingchun (via wallstreet.cn & Weibo), a host of China’s state-owned network CGTN, BYD Executive Vice President Lian Yubo said that the company “will soon supply him (Elon Musk) with batteries.” Yubo, who holds the position of President at BYD’s automotive engineering research institute as well, said that the company is “very good friends with Elon Musk.”

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.

Soon, Tesla will start using a 55 kWh BYD battery pack in the Model Y manufactured in Germany. According to teslamag.de report published on August 11, 2022, Tesla has received EU approval for a Model Y with a BYD battery pack installed as part of the SUV’s structure. The report says that BYD battery packs have already reached Tesla Gigafactory Berlin, which indicates that production of the Model Y ‘Blade’ version could commence soon. The Model Y fitted with the structural battery pack sourced from BYD will deliver a WLTP range of 440 km (273 miles), reports said.

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, BYD Seal (Atto 4), 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 in March 2022, 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,” Tadanobu said.

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.

On June 1, 2022, Reuters published a report claiming Tesla had begun receiving Panasonic 4680 cell samples. The Japanese company started large-scale prototype production on a pilot line in Japan in May 2022. Tesla’s American-made EVs may get Panasonic’s new-format cells from a local plant.

Panasonic Energy, a subsidiary of Panasonic Group, is constructing a new lithium-ion battery production plant in De Soto (Kansas), USA. Production at this facility will begin with 2170 cells by the end of March 2025. In the future, the same factory could make 4680 cells as well, although the Japanese company hasn’t confirmed or hinted at such a plan. It is looking at another new EV battery plant in the U.S., located in the State of Oklahoma.

On June 13, 2022, LG Energy Solutions revealed a plan to produce 4680 cells in Ochang, South Korea. On June 16, 2022, Hankyung (The Korea Economic Daily) reported that Tesla has requested LG Energy Solutions to supply the new-format cells. This South Korean publication also claimed that Samsung SDI will develop Tesla-spec 4680 cells, indicating that could be another supplier. Samsung SDI will reportedly install a pilot production line to make 4680 cells at its factory in Cheonan, South Korea, with the end goal of starting mass production in 2025.

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 45-55 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).

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. Besides China, European countries are likely to show high appetite for the entry-level Tesla. 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. 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 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 pack. Image source: PSArtcar via ArtStation

Tesla Model 2 Release Date

Tesla doesn’t want to disclose the release date of its upcoming EV positioned below the Model 3, Musk said during the company’s Q3 2022 earnings conference call. However, this new electric car is the primary focus of the company’s new vehicle development team, he added.

The good news, however, is that Tesla has reportedly resumed Model 2 work after a brief pause to focus on its priority models, the Cybertruck and Semi. Months after Musk indicated that the company had put the Model 2 on hold, The Detroit Bureau reported on November 3, 2022, that the future entry-level EV is back in development. The article doesn’t reveal specific details about when the project will come to fruition, though. Tesla continues maintaining secrecy about the future car.

Speaking at a Goldman Sachs event on September 12, 2022, Martin Viecha, Head Of Investor Relations, Tesla, spoke about the USD 25,000 Tesla car, Business Insider reported the same day. He said that Tesla wants to launch a more affordable model eventually. The company needs a cheaper car before introducing the Robotaxi service, he added. A specific launch timeline still remains a question mark, though.

Musk has indicated that the USD 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.

Well, we’re not currently working on our USD 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)

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, Lucid Motor’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?

The Tesla Model 2 will challenge the likes of the VW ID.2, Renault 4, Fisker Pear, and the affordable EVs from the Honda-GM partnership.

What is the estimated Tesla Model 2 price?

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

Featured image: SugarDesign