Sandy Munro Says Tesla Shouldn’t Make Elon Musk’s Dream $25,000 ‘Model 2’

Sandy Munro is a veteran automotive expert and has become famous in the Tesla community for the breakdown and deep analysis he does on Tesla’s cars. On multiple occasions, Elon Musk has praised him saying “Sandy Munro understands engineering”. Recently, in a closed-door presentation to Bernstein Research, a global investment research firm, Sandy made several points about why Tesla should not build the upcoming $25,000 “Model 2."

Sandy Munro understands engineering

— Elon Musk (@elonmusk) October 7, 2020

The edited transcript of the speech was acquired by Korea Times which reported on the story.

Model 2 is the unofficial name for Tesla’s upcoming car. Elon Musk speaking at Tesla’s Battery Day event said, “We are confident that in the long-term we can design and manufacture a compelling $25,000 electric vehicle. This has always been our dream from the beginning of the company.”

“Our first car was an expensive sports car and then it was a slightly less expensive sedan and then finally a sort of mass-market premium, like the Model 3 and Model Y. But, it was always our goal to try to make an affordable electric car. And I think probably 3 years from now we are confident we can make a very compelling $25,000 electric vehicle that is also fully autonomous.”

In the same announcement, Tesla showcased several breakthroughs that add up to bring down the cost of a battery pack by 56%. Tesla keeps its battery cost a secret so we don’t know from what initial price this cost reduction is from.

However, Sandy Munro based on his analysis says, "Tesla was at $158 per kilowatt-hour (kWh) when we did the Model 3. And the reason for that was because we went down to the cell level and looked at everything. Now for the Model Y, we think that it's around $108 ― $108 is a big drop in two years.”

Munro, with the Battery Day breakthroughs, believes Tesla can drop the price further down to $70/KWh. But, even with the long way Tesla has come, Sandy still doesn’t believe it will be wise for the company to produce the Model 2.

“At the end of the day, a $20,000 vehicle or $25,000 vehicle, I don't see that, I don't think it could get under $32,000. I don't see how you could do that and it'd still make any money."

It’s not that he doesn’t think Tesla can’t come up with a smaller vehicle that’s less costly; his concern is the satisfaction of their customers and shareholders. Also, the small car market comes with smaller profits and “lots of other issues” as he put it.

Giving General Motors as an example, Munro further strengthened his argument of why the $25,000 Model 2 is not the best idea. “Think about when General Motors started to try going into the small car business. They were very successful at selling big, giant cars. So when they went into the small car business, who bought their vehicles? Nobody.”.

Related Story: Refreshed Tesla Model 3 Starts To Roll Off The Line in Fremont California.

Currently, the least expensive car Tesla sells is the Standard Range Plus Model 3 which starts at $37,990. This would mean, with the new vehicle, Tesla is planning a further 35% cut to the entry point of the brand.

According to Musk, all modes of transportation will eventually move to electric. And as the company’s stated goal of advancing the advent of sustainable energy, he believes the onus is on them to offer a car in every major segment. In 3 years, Tesla is plans to have cars starting from $25,000 and going all the way up to over $250,000.

So what do you think? Is it a wrong move for Tesla to produce a smaller/cheaper car? Do you agree with Sandy that it will be hard to offer a compelling car at that price point? Let me know your thoughts down in the comment below.

For more information check out: The Fastest Car In Our Solar System Tesla’s Starman Has Its Closest Approach To Mars. Also, see Tesla Opens Large Sustainably Powered Supercharger Station In Germany.

Tinsae Aregay has been following Tesla and The evolution of the EV space on a daily basis for several years. He covers everything about Tesla from the cars to Elon Musk, the energy business, and autonomy. Follow Tinsae on Twitter at
@TinsaeAregay
for daily Tesla news.