At an investors’ meeting today, Tesla CEO Elon Musk announced that a more affordable vehicle will be available to the public from the electric car maker. The move is expected to tackle the threat posed by the Chinese EV makers that have begun to come into the European market and the US market as well.
The affordable Tesla has been in vogue for quite some time since it was mentioned in Musk’s biography written by Walter Isaacson. Even today when announcing the next generation compact Tesla car, Musk did not mention a price for the same. But if Tesla can hit the projected 2025 target date for release, the vehicle could become the cheapest electric vehicle in the US market at the time of release. This could even compete in the affordable category with budget EV categories in other countries. The timeline has to be taken with a grain of salt, given Tesla’s failure to keep up with Musk’s ambitious deadlines in previous announcements about other vehicles, most notably the CyberTruck.
The cheapest offering currently from the company is the base variant of Model 3 which starts at around $35,100, not taking into consideration the government tax credits. The cost of EVs has been a hurdle for many who wish to switch to a more environmentally sustainable mode of transportation, but cannot because of their excessive prices. This is the case in the US, Germany, and Japan. This is even though EVs have a much lower cost of ownership compared to traditional ICE vehicles because of savings on fuel, cost of maintenance, etc.
Cutting the costs down, therefore, would be a major priority for the EV manufacturer especially given the strong global price war that it is facing from its rivals, especially the Chinese counterparts. The Chinese manufacturer, BYD, for example, sold more EVs than Tesla last fall and Chinese auto exports have also doubled to more than 4 million in just the past year. Because of the protectionist trade policies from the US, customers here cannot purchase cheap Chinese-made cars currently, but Chinese companies are considering opening up manufacturing and assembling plants in Mexico to avoid the harshest of these tariffs and sanctions.
Considering all these factors, it becomes even more important for Tesla to stick to the landing when it comes to the release of the affordable EV for the masses if it wishes to maintain its title as the leading EV maker in the world.