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

Sandy Munro, the automotive expert who has been praised by Elon Musk, believes Tesla shouldn't build the upcoming $25,000 Model 2.
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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”.

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.”

Tesla Battery Day Presentation

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.


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Comments

Everybody is focusing on the cars and the prices. But the magic happens in the factory. More robots. Less employees. More automation. More added value. That’s what makes the price. 25000 dollar with low added value is bad. But tesla is focused on the added value and factories that evolve continues on that part that makes it realistic for Elon too achieve that goal.
Do you think it will be a 2 door car or a 4 door car?
Munro is afraid it will kick the hell out of and delete His 3 wheeled electric tricycle that he has intentions of producing for North America with Partner Nobe which has been in the making and has been failing for numerous yrs. .. (His tricycle is a foolish Idea that will never work for the North American market) It will become a total waste of time & money ...Tesla will need & use all the Batteries & Motors that they can produce for Tesla Use Only and it will cost closer to $30,000 to buy ... by the time it' goes into production in 2yrs. And Munro will lose it's pie in the sky supplier right at the get go !..In the end Elon Musk will make the Right Decision as Usual .. Munro is kissing up to Tesla because he needs something that Tesla's Got ..Sorry Sandy , This is very Obvious .. No Offense. I wish you well... 3 electric wheeled Trikes will not go over well in NA..
From what I've seen, Tesla always surprises Sandy so I'm certain they'll pull off a $25k.
What I see around my small city is a LOT of smaller cars, smaller than an M3. I bought a Bolt because I wanted an EV that was small, nimble, quick and excelled at city driving where I spend most of my time. If I spent my days riding the freeways then I would have bought a Tesla, but that's not what most people do. GM's small cars were, at least initially, junk. The VW Beetle on the other hand sold like hotcakes. If Tesla stops innovating they will become another Ford or GM, dependent on a few models while other more creative companies become the innovation leaders and Tesla becomes a niche player.
Asia and Europe alone warrant the need for more affordable compact Tesla models. If Tesla builds the lower priced models, Americans will also buy them.
Telsa should build small car, mini truck motorcycle, maybe asian 3 wheelers. All should be looked at as transitional to full electric. Some tradeoff may be needed to sell in the market. Separate Brand name for these vehicles.
If Tesla plans to sell 20 million cars a year I think that will be an inevitable path