Over the long term, we’ve seen how Tesla has been transitioning to more affordable vehicles.
The company went from selling a luxury sports car, the Tesla Roadster, to selling the Tesla Model 3, which at the cheapest version goes for $35,000.
However, the Model 3 by no means is the cheap vehicle. For the majority of the people in the world, the car remains at an incredibly high price.
Tesla’s mission statement is to accelerate the road to sustainable energies, without the majority of the population purchasing electric vehicles, the company won’t be able to accelerate the transition at a rapid pace.
Elon Musk will soon unveil a cheap compact vehicle that will start its production in China. In this article, I’m going to discuss why I believe Tesla will reveal a twenty thousand dollar compact vehicle, and show you the evidence that backs this up.
In early 2020 Elon Musk unveiled his plan to create a Tesla Chinese design center where people would submit their designs for Tesla’s new vehicle.
In this presentation, Elon Musk made it clear that a new vehicle was coming, but we weren’t given a timeframe as to when this vehicle would be unveiled.
Tesla’s recent battery innovations have been revealing that the company may be closer to this new vehicle than we think. In a recent report by Reuters, Tesla unveiled a new battery that would last 1 million miles while costing just $80 per kilowatt-hour.
To put this into perspective, Tesla’s current batteries cost one hundred twenty-seven dollars per kilowatt-hour, so having that cost decrease to $80 per kilowatt-hour would genuinely be a monumental change.
Another key factor revealed in this Reuters report was that Tesla was looking to reuse these batteries in its solar panels, power walls, and power packs, effectively giving the batteries a second life.
In the past, Tesla has always indicated that they were against giving batteries a second life.
However, it seems like the company is making an exception for its new Chinese battery, which is hinting at the fact that Tesla is attempting to make its new battery the cheapest it can be.
Now if Tesla wants to sell a vehicle at a low price, it would first have to meet the demand for its higher-priced cars, including the Model 3 and Model Y.
It would make sense from a business perspective, as a company would not sell a vehicle with a lower profit margin if it can sell cars with higher profit margins like the Model S, 3, X, and Y.
Recent drone shots have been reviewing that Tesla’s Shanghai gigafactory is expanding at a breakneck pace as it is in the process of tripling, if not quadrupling to support the demand for the Model 3 and Y.
Once the production capacity of Tesla’s Shanghai gigafactory can meet the demand for the Model 3 and Y, it only makes sense to release a cheaper vehicle.
Also, keep in mind that the pickup truck market in China is tiny, so it wouldn’t make sense to mass-produce the cyber truck in China.
Tesla’s self-driving technology is improving at a rapid rate, and Elon Musk has previously made it very clear that he would like to roll out a Tesla ride-sharing app.
What often differentiates uber and lyft is the time it takes for the driver to drive to the customer’s location.
For Tesla to minimize this time, he needs to have more Robo Taxis on the road; a cheap vehicle would accelerate the need for Robo taxis by seeing the astronomical amount.
Elon Musk also estimated that Robo taxi would make around $30,000 per year. If Tesla was able to sell a vehicle with the full self-driving option for about $35,000, then that vehicle would quickly pay itself off, and would consequently result in unprecedented demand.
Elon’s goal of a Robo taxi ride-sharing network would be a cheap vehicle for it to be sustainable. Now it seems likely that Tesla will unveil a new affordable car, but what can we expect?
Tesla’s new vehicle must have three key criteria. It must have a long-range, charge fast, and have a high-profit margin.
First, let’s start with a long-range. To compete with Tesla, Volkswagen is releasing a vehicle named the id3, which at the base version has a 45-kilowatt hour battery pack that can give the car a range of 205 miles.
You might be wondering, how does a battery pack this small give the vehicle such a high range? This is primarily because the car is both aerodynamic and lightweight.
A compact vehicle would make the most sense for Tesla because it allows it to give the car a higher range with a smaller battery.
The smaller a battery pack is, the faster it would take the charge that battery pack. For example, the iPhone 5 takes a lot less time to charge than a brand new iPhone X.
In theory, this makes perfect sense, since Tesla will be able to achieve a higher range with a smaller battery pack. This would mean Tesla’s vehicles would charge a lot faster if it were a compact vehicle.
Now we know that compact vehicles don’t need as large of a battery pack, which would mean higher profit margins.
Overall from a business perspective, a compact vehicle would make the most sense, and Elon Musk’s release of Tesla’s prototype vehicle shows that he knows this.
Along with these three key criteria, a compact vehicle also logically makes sense, given China’s right environment driven by its high population.
This is why pickup trucks aren’t trendy in China, and there isn’t much space to fit a vehicle as large as a pickup truck.
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