American electric car maker Tesla has spearheaded the global transition to sustainable energy through electric vehicles, solar energy, and integrated renewable energy solutions for homes and companies. However, affordability remains a significant barrier.
It must be noted that no electric vehicles are available for less than $30,000. For reference, the average cost of a new electric vehicle in June was over $66,000, far higher than the industry average and more in line with luxury than mainstream automobiles, according to Kelley Blue Book.
Clayton News Daily asserted that due to the affordability issue, millions of customers would be discouraged from shifting to EVs. Per Tesla’s website, the entry-level sedan Model 3 has a base price of $46,990. However, CEO Elon Musk had declared that this car would be priced at $30,000 to make it more affordable.
Even in 2018, Musk assured YouTuber Marques Brownlee that Tesla would be able to produce a cheaper vehicle for $25,000 in three years. “I think in order for us to get up to … a 25,000 car, that’s something we can do,” CEO Musk said. “But if we work really hard, I think maybe we can do that in about three years.”
Furthermore, Musk revived optimism for a low-cost Tesla EV, commonly known as the Tesla Model 2, during Tesla Battery Day in 2020.
“Tesla will make a compelling $25,000 electric vehicle that is also fully autonomous,” Musk had promised.
With its cutting-edge battery cell and manufacturing initiatives that may cut battery prices by over 50%, the company is optimistic to achieve this pricing. Even more, it was reported in September 2021 that Musk had informed Tesla staff that the Model 2 would be available in 2023.
However, at the earnings call for the fourth quarter of 2022, Musk disappointed the expectations of prospective automobile buyers by saying, “We’re not currently working on the $25,000 car. At some point we will. We have enough on our plate right now. Too much on our plate, frankly.”
At the Goldman Sachs Tech Conference in San Francisco on September 12, Martin Viecha, vice president of investor relations, stated that for Tesla to become a high-volume automaker, the company must have a more extensive portfolio of reasonably priced models, as reported by Business Insider.
Furthermore, the demand for the Model 3 sedan and the Model Y SUV/crossover was greater than anticipated, which lessened the necessity for a less expensive model, according to Viecha.
“Model Y will basically next year become the bestselling vehicle of any kind of all time in the world,” CEO Musk said. “This is an important sales lever that we’ve never touched, but in the future we might be boosting demand in other ways.”
On the other hand, the current cost of producing a Tesla is $36,000, down from $84,000 in 2017, as explained by Viecha. Interestingly, better vehicles and innovative factory designs contributed to the dramatic decrease in Tesla EV prices by making the manufacturing simpler.
It must be noted that the company’s initial factory in Fremont, California, was not the best location to produce the cars because it was too expensive. In comparison, Viecha highlighted that Shanghai and Berlin factories were significantly less expensive in terms of manufacturing.
Another thing is that continued car cost reduction is one of Tesla’s objectives, according to Viecha. By the end of 2022, the automaker is anticipated to reveal the locations of its upcoming factories.
Nonetheless, the Fremont plant presently can produce 650,000 vehicles annually, as Tesla reported during the second-quarter earnings. In fact, the Model S, Model 3 sedans, Model Y, and Model X SUVs are all produced there. Meanwhile, in the Shanghai factory that has a capacity of 750,000 vehicles annually, the company manufactures the Model 3 and Model Y.