Tesla expands its lineup with Model 2 and Q downwards

The annual investor conference is always a showcase for Tesla boss Elon Musk. This time, he confirmed at least one of two new volume models to be launched in the coming years. He stated:

“I just want to emphasize that we are indeed building a new product (...) we are not sitting on our hands here.”

Interestingly, before Model 2, a Model Q could come, a more compact SUV than the Model Y. He also showed a first teaser image of the Model Q, where the silhouette looked extremely similar to the Model Y. At the same time, he announced new steps to further simplify and diversify battery and vehicle production: not every model will use the same cell chemistry.

Tesla also aims for a $25,000 (or Euro) entry price

For the long-rumored Model 2, a starting price of $25,000 is in discussion, putting it alongside the compacts from the VW Group and Fisker's "Pear". Looking ahead, something can also be expected from Stellantis and the Hyundai Group. Since manufacturing in the USA might already be too expensive for this, Musk is planning a new Gigafactory in Mexico for the American markets. However, the main production site for Asia and Europe is likely to once again be China.

The new compact car platform should be almost half as cheap as the basis on which Model 3 and Model Y stand. According to Tesla insiders, Model 2 has been designed and developed for some time in the new R&D center at the Gigafactory in Shanghai. Small electric models are also disproportionately more popular there than in the rest of the world, which means that large quantities can be quickly achieved in China.

Musk wants to build five million units annually from Model Q and 2 alone

With which Musk is once again not holding back: He predicted an annual production of more than five million units just for Model Q and Model 2, both of which will come with a 48-volt architecture and the latest version of the "Power Unit". Like BYD, Tesla could also forgo rare earths in the battery and develop a cheaper cell chemistry. The space requirement of the electric machines is also expected to decrease massively. And since smaller motors require less material and can use new manufacturing methods, the production costs for the electric machine in the small Teslas are aimed to be around $1,000. However, the battery is also likely to remain the most expensive component here.

In order to achieve the $25,000 entry price, Tesla will likely install inexpensive lithium iron phosphate (LFP) batteries supplied by BYD. BYD uses similar batteries in its entry-level model "Seagull." Nevertheless, Musk has not yet committed to an exact production start date.

What does this mean?

Musk wants to compete with the major players in terms of volume, which is why he urgently needs new, more affordable models. The current vehicles are reaching their production limits (there is now even an extra affordable B2B business solution) and China is not resting. Therefore, he is likely to accelerate development of the Model 2 and Q behind the scenes.