Elon Musk teases $25,000 Tesla

Tesla aims to build its most affordable electric car yet within the next three years, with Elon Musk suggesting a $25,000 EV would be possible. The promise came during the Tesla Battery Day 2020 event, an opportunity for Musk & Co. to set the scene for where battery technology is today, and where the automaker believes it will be in the coming years.

It’s an important topic as, while exceedingly fast electric cars might make headlines, it’s battery capacity and production bottlenecks that control factors like affordability and supply. Tesla, Musk said today, aims to expand 30-40 percent in 2020 and ahead, and for that it needs a source of not only batteries, but more affordable and power-dense versions.

Progress on that is what could make a $25,000 Tesla possible, or at least contribute significantly to that. If the automaker can get the price per kilowatt-hour of its batteries down – Musk suggested Tesla could potentially halve that figure from its current value – then suddenly the single most expensive component of a modern EV drops massively. In turn, electric vehicles that are more affordable, but which don’t compromise on range, become possible.

All that requires time, however, and according to Musk it’ll be at least three years before Tesla’s work on battery tech reaches that sort of level. It’s not just one factor that will help drive down the cost: switching from cobalt for the cathode to nickel, which is cheaper; bringing cathode production in-house; and sourcing its own lithium from a mine in Nevada it has apparently retained the rights to. Together with other factors, like using the battery’s shell as a structural component in the end vehicle, that should be enough to boost production for maximum economies of scale, while also reducing vehicle complexity.

That latter factor has been a hard-fought battle for Tesla over the years. Musk has blamed complexity for part of the expense of earlier vehicles like the Model S and Model X, and indeed trimming that down was instrumental in making the Model 3 more affordable. The Model Y crossover may look a lot like its compact sedan sibling, but Musk says that it actually has 79 fewer parts, in part because Tesla has invested in machinery that can cast much larger components in a single piece.

The target is 370 fewer parts in the new, most affordable Tesla. In turn, Musk said, production costs could be trimmed by as much as 69-percent. Get to those levels, and suddenly a $25k entry-level Tesla is possible.

What sort of demand there is for that exact vehicle, of course, remains to be seen. Tesla finally delivered its long-promised $35,000 Model 3 in 2019, several years after first announcing the EV. However it doesn’t exactly make it easy to buy it: unlike the other variants, shoppers must call Tesla rather than use the online ordering tool. It’s also compromised in specifications, with the Standard Range Model 3 getting 220 miles on a charge, versus the 250 miles from the Model 3 Standard Range Plus that Tesla makes much easier to buy.

As with any Tesla announcement – and timeline – it pays to be a little skeptical. Nonetheless, while Musk’s promises might be ambitious, underestimating the automaker’s engineering capabilities is something the auto industry at large has learned is unwise. In the meantime, other manufacturers are pushing their own, more affordable EVs, but the allure of one with the Tesla logo on the hood could prove a wildcard.

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