Tesla’s next model could cost less

Tesla’s next model could cost less

Tesla Inc. established its reputation by producing luxurious electric vehicles, but the company says it is gearing up to introduce a more budget-friendly model soon.

The upcoming Tesla model, unofficially named Model 2, is anticipated to be sold for around the same price point as the gas-powered Honda Civic.

Rumored to debut in 2025, the Tesla Model 2 is projected to carry a price tag ranging from $25,000 to $30,000, making it one of the most competitively priced electric models to hit the U.S. market.

According to Honda Motor Co. Ltd., the 2023 base Honda Civic hatchback starts at $24,750. But if the federal tax credit for electric vehicles is still in effect in 2025, buyers of the Tesla Model 2 could save up to $7,500 on their purchases. This would bring the effective price of the car down to as low as $17,500, making it even more affordable than the Honda Civic.

With Tesla’s Model 2 aiming for a price potentially the same as the Civic, the electric automaker is set to challenge the status quo and reshape the narrative surrounding electric vehicles (EVs) as “only for the rich.”

Tesla’s strategic approach to manufacturing the Model 2 may further contribute to its cost-effectiveness. While Tesla manufactures its more expensive vehicles in the U.S., it is speculated that the more budget-friendly EVs will primarily be produced at its forthcoming factory in Monterrey, Mexico, with the possibility of additional production at its facility in Austin, Texas. The adoption of a vertical integration strategy, under which Tesla designs its batteries, software and equipment in-house, allows for better cost control and operational efficiency.

Lars Moravy, Tesla’s vice president of vehicle engineering, revealed during the company’s March 1 investor day event that the Mexican factory choice, combined with the use of larger, flat batteries that double as the car’s floor, could potentially streamline EV assembly and reduce costs by up to 65%.

Despite Tesla’s ambitions to offer an affordable electric vehicle with impressive features and capabilities, some budget car manufacturers like Honda and Hyundai Motor Co. remain skeptical about the proposed price point. Hyundai, in particular, stated that achieving a $25,000 battery-powered EV without compromising driving range poses challenges, though it anticipates price parity between internal combustion engine and battery electric vehicle models eventually.

Honda is partnering with General Motors to bring its latest electric SUV to the market. But the Japanese automaker is not dependent solely on this collaboration, as it is also diligently working on developing its own electric vehicle platforms. The 2024 Prologue model relies on GM’s Ultium battery platform, but Honda has exciting plans for the future.

In April, Honda disclosed its intention to introduce a second electric model specifically designed for the North American market, set to debut in 2025. The upcoming EV is described as a “mid- to large-size” vehicle and will showcase Honda’s electric platform, known as e:Architecture.

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