Why The Model 2 Is An Important Product For Tesla

Why The Model 2 Is An Important Product For Tesla

With a potential MSRP of $25,000, the Model 2 could be the product that takes Tesla to newer heights.

  • The Tesla Model 2, or whatever it’s eventually called, will have a low price tag, making it more accessible to a wider clientele and helping Tesla maintain its market position.
  •  The Model 2 has the potential to dominate the lower price brackets in the EV market, with its expected range and technical advantages making it a strong competitor against rivals like the Chevy Bolt EV.
  •  The Model 2 could help Tesla reach higher production numbers, especially in China, where it is facing increasing competition. The more affordable vehicle will be easier to manufacture and aligns with Elon Musk’s focus on productivity.

There is a lot of mystique surrounding the Tesla Model 2. As of October 2023, we have yet to know if it’s going to be a sedan, a hatchback, or a smaller version of the Model Y under a different name. That latter part is also submerged in ambiguity, as the company has refused to place any sort of label, codename, or moniker on the widely anticipated EV.

But, the internet chose to call it Model 2, so who are we to go against that? Yet, if there’s one thing we do know for sure is that the Model 2, or whatever else it is known as, will come with an alluringly low price tag. During the 2020 Annual Shareholder Meeting and Battery Day, the company confirmed its plans to release a $25,000 entry model. This unprecedented MSRP, is the current missing cog in Tesla’s plan to fully conquer the EV realm.

The company has been gradually expanding onto every area of the market, after all. The Model Y has effectively become the best-selling EV in the industry, followed closely by the Model 3. The Model S Plaid, on the other hand, is one of the fastest electric sports cars on the planet. Then, we have the Cybertruck, which is already shaping up to be the future of electric off-roading, while the Tesla Semi promises to reshape the trucking industry. The Model 2 could thus be Tesla’s knockout blow in its relentless onslaught on the EV sector, as well as its way to access an even wider clientele across the globe.

Tesla Needs To Be More Budget-Friendly

As of now, electric vehicles remain an optional commodity, rather than a necessity. You either buy one because you like it, or to simply brag about your contribution to the environment while smelling your own flatulencies in South Park-like fashion. Yet it is important to keep in mind that this will change sooner rather than later. Amid the incoming regulations and restrictions, EVs will gradually become the norm, effectively forcing every class in society to adopt them. What happens then, when other manufacturers adapt to this new demand and start producing EVs for the same price as gas-powered vehicles?

The masses will simply gravitate around them, which would in turn threaten Tesla’s hegemony as the main company in the e-segment. This scenario is already unfolding right now, with companies such as Fisker and General Motors racing toward the budget-friendly end of the market. The latter is offering the Chevy Equinox, an SUV that at $22,500 after tax incentives. Its start-up counterpart, on the other hand, is working on the Fisker Pear, a quirky compact SUV, with an equally low price-tag. Tesla’s task is thus clear if it wants to maintain its firm on the market: make an EV so cheap that people can’t help but buy it. The Model 2 already has the pedigree needed to separate itself from the pack.

Getting it qualified for the full $7,500 federal incentive would be the icing on the cake. The new federal incentive criteria require cars to have 50-percent of their battery components produced or assembled in North America and at least 40 percent of critical minerals used in their battery must be recycled from materials made in North America or extracted/processed in the U.S. or one of its free-trade agreement partners. Should the introductory model succeed in meeting these requirements, its final MSRP could drop as low as $17,500, which is uncharted territory in the e-segment at this point.

Based On Tesla’s History, The Model 2 Could Dominate The Entry-level EV Market

On April 5, 2023, the company confirmed in its Master Plan Part 3 document that it would integrate a 53 kWh LFP battery pack into the low-cost offering. To maintain a competitive appeal, the Model 2 should thus deliver a minimum of 250 miles on a full charge (per EPA estimates), on at least one of its variants. That threshold is the sweet spot to meet when considering the rest of the competition. The closest rival in terms of value is the Chevy Bolt EV. The compact car has been known to offer the same amount of range for roughly $27,000, yet never truly asserted itself as a crowd favorite.

On top of making the cardinal sin of not being a Tesla, the Bolt also tarnished its track record with a number of recalls, and fire incidents that made people look elsewhere. Nonetheless, the fallen angel of the EV industry is set to reemerge with a new aura and GM’s latest Ultium technology at its disposal. To counter that, the Model 2 could maximize efficiency by using CATL’s M3P batteries, which boast 15 percent more energy density than other LFP alternatives. These technical advantages, combined with the Model 2’s pedigree and its alluring price tag, could essentially make it the queen of the lower price bracket. As a result, Tesla would once again find itself at the forefront of a new era within the EV industry.

It Has The Potential To Bring In The Big Numbers

Aside from allowing Tesla to elevate its mainstream appeal, the Model 2 could also help the company reach next-level production numbers. After, this philosophy is partly responsible for the recent price cuts on the entire Tesla panoply. The Austin-based manufacturer has been slashing MSRPs on pretty much every model under its banner recently. This modus operandi is particularly needed in China so that the company can conserve its competitive advantage over the vast array of local competitors. Amid the recent market conditions, the PRC has become the battleground of a relentless price war between various electric vehicle manufacturers.

The Chinese scene is particularly important for EV makers, as it accounts for one-third of the global sales in the e-segment. While Tesla remains the second best-selling EV manufacturer in China after BYD, it is nonetheless losing ground at a rather concerning rate. This was further expressed by Elon Musk, who described the situation as “turbulent times.” In July, the company sold 64,285 China-made electric vehicles (EVs), which represented a 31-percent decrease from a month earlier. The Model 2 could very well turn out to be a masterstroke by the company, not only in China, but also on a global scale. Being a more affordable vehicle, the Model 2 will be easier to manufacture, and thus perfectly aligned with Elon’s vision, which is now centered around productivity. “I think it does make sense to sacrifice margins in favor of making more vehicles,” declared the CEO, as per Reuters.

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