Correction, and Confusion: What Are Tesla’s Next, Cheaper Models? – CleanTechnica

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Based on what Tesla wrote in its quarterly shareholder letter, I published the other day that Tesla did indeed have cheaper electric vehicle models coming out next year. The core lines from the Tesla shareholder letter on this were as follows:

“Our cost of goods sold (COGS) per vehicle came down to its lowest level ever at ~$35,100. […] Preparations remain underway for our offering of new vehicles — including more affordable models — which we will begin launching in the first half of 2025. […]

“Plans for new vehicles, including more affordable models, remain on track for start of production in the first half of 2025. These vehicles will utilize aspects of the next generation platform as well as aspects of our current platforms and will be able to be produced on the same manufacturing lines as our current vehicle line-up.

“This approach will result in achieving less cost reduction than previously expected but enables us to prudently grow our vehicle volumes in a more capex efficient manner during uncertain times. This should help us fully utilize our current expected maximum capacity of close to three million vehicles, enabling more than 50% growth over 2023 production before investing in new manufacturing lines.”

My reading on that was, and still is, that these lower-cost models will be mixtures of the Tesla Model 3/Y and next-gen Cybercab — but normal cars that people can drive themselves, and that cost a bit less than a Model 3 or Model Y.

However, under my article, some readers noted that Elon Musk had said on the shareholder conference call that these cheaper vehicles, and all future Tesla vehicles, wouldn’t have steering wheels — that the Cybercab was the lower-cost vehicle targeted for production next year. I’ve now listened to the full conference call and I understood his response, and that of others at Tesla, differently.

The question that was posed was “When can we expect Tesla to give us the ~$25K, non-robotaxi, regular car model?” You can listen to the Q&A here (direct link to 37:12 into the video, when this question is asked). What happened, as I heard it, is the term “non-robotaxi” irritated Musk. He immediately said “We’re not making a non-robo—” and he and someone else on the Tesla team then spent a few minutes emphasizing that every vehicle they make — even today — are seen by them as robotaxis — or future robotaxis, but robotaxis already in terms of hardware.

I did not hear any claim that these cheaper models referenced in the shareholder letter wouldn’t have steering wheels or would be the Cybercab.

So, I’m sticking with my assumption and reading of the letter and conference call that these will be “normal cars.” My best guess is they’ll be a bit smaller than the Model 3 and Model Y and/or will use cheaper components and materials.

As far as price goes, I do have a correction to make. I had written “So, perhaps the starting price will be $30,000?” However, on the conference call, it seems that Musk said the lowest cost they could envision reaching was ~$30,000 after incentives, which would presumably be ~$37,500. That’s obviously well above $30,000 pre-incentives, and also far above the $25,000 target mentioned in the question (which may also be what triggered Musk and got him into a tangent on all Teslas being robotaxi capable).

Now, does ~$37,500 really count as a cheaper Tesla? That’s basically what the original price of a base Model 3 was supposed to be, and in the territory of what they reached for a little while. Of course, we can bring in the discussion of inflation, a global problem since the COVID-19 pandemic.

But Tesla has also eliminated the lower-cost Model 3 Standard Range, making the Long Range RWD the cheapest Tesla at $42,500. Is there really much — or anything — to do to offer a Model 3 Standard Range again with a smaller battery and drop the price by $5,500 to $37,000? Frankly, this is making me more confused than I was previously.

Musk said on the call that he wasn’t aware of any other EV producer making a profit. That was early in the presentation, but I found it a bit surprising and confusing, because the largest plugin vehicle company in the world, BYD, makes a profit on its EVs — and invests a lot more into R&D. Also, BYD offers some much cheaper EVs (and some Model 3 and Model Y competitors), but Musk seemed to be arguing that Tesla simply couldn’t make vehicles at a cost lower than $35,000 (cost to themselves, not to customers).

Well, we will see what happens in the future and what Tesla brings to market, but I’m starting to think Tesla may just roll out a downgraded Model 3 like Steve Hanley covered a couple of months ago and call it a day on lowering purchase costs. Or, perhaps, that vehicle idea is dead and it is just as I wrote the other day, that Tesla will produce something that is a mix of the Model 3/Y and the Cybercab that will be a bit lower in price.