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Tesla Model 2 - Most Important Vehicle Since Model T 100 Years Ago

The Tesla compact car - Model 2 - is going to be the most important vehicle since the Model T, 100 Years Ago.

Tesla Model 2 (Compact Car) - Most Important Vehicle In 100 Years

The Tesla Model 2 - or the compact vehicle, will be the most important vehicle ever made in 100 years. This vehicle is set to surpass all other compact carts like the Toyota Corolla with a low cost and the hardware necessary to run FSD and be a Robotaxi.

The expectations for the Model 2 are that it will compare with the Model 3 in these ways:

* 15% shorter
* 30% lighter
* 25% smaller battery

When looking at how gas car compacts compare to mid-size gas sedans, you can see the comparison between the Model 3 and gas mid-size sedans to reach this conclusion. With those numbers, it's logical to apply this to compact cars. Here are some comparisons.

Mid-sized Sedans:

BMW 3: 3,582 lbs.
Honda Accord: 3,131 lbs.
Model 3: 3,552 lbs.

Compact Cars:

Toyota Corolla: 2,833 lbs.
Toyota Yaris: 2,315 lbs.
Model 2: 2,500 lbs.

This would mean the Model 2 would have about a 40 kWh battery pack using LFP batteries and if the Model 3 RWD has a usable 54 kWh battery pack. I think the Model 3 RWD has a total battery pack size of 60 kWh, with 6 of that being usable if you reach 0%. It's a "buffer" and Tesla is smart to include this as it helps reduce range anxiety.

I expect the Model 2 to have about a 3 to 4 kWh buffer.

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More Features and Variations of the Model 2

The Model 2 should be about 37% less expensive to build than the Model 3. Half of the difference comes directly from the car being smaller, and the other half will mostly be a redesign and manufacturing innovations that Tesla will realize, especially when millions are produced each year and economies of scale are reached.

You can see a $21,600 cost of goods sold (COGS) for this vehicle, including the full suite of FSD hardware. Let's see some number that breaks this down:

Model 3 Costs:

Depreciation: $2,000
Labor: $2,400
Other: $4,100
Body & Exterior: $3,800
Chassis: $4,500
Interior: $3,900
Electrical: $3,800
Powertrain: $2,500
Battery: $7,000

Model 2 Costs:

Depreciation: $1,200
Labor: $1,200
Other: $2,700
Body & Exterior: $2,400
Chassis: $3,100
Interior: $2,600
Electrical: $2,800
Powertrain: $2,000
Battery: $3,600

The biggest savings will come from the reduction in size of the battery for the Model 2: about $3,400.

Tesla Model 2 Comparison

The cost decrease is about $12,500 to produce the Model 2.

There are other factors like superior range and performance that will give the Model 2 an edge. There will be the infotainment screen and software usability that Tesla has a lead in. Then, there is the Tesla Supercharger network that makes charging easier.

The Tesla Model 2 will command a premium over a Toyota Corolla, the same way the Tesla Model 3 commands a premium of the Honda Accord. The Model 2 will have 20% gross margins -vs- single digit gross margins for comparable compact cars like the Toyota Corolla.

Tesla should be able to reach a 30% gross margin for its vehicle business, especially when FSD gets to the point it can start driving itself around. The $25,000 MSRP of the Model 2 also addresses 80% of the car market and paves the way for Tesla to exceed 12 million units and $400 billion in auto revenue by 2030.

The Model 2 will be the most important car since the Model T because it will be the most advanced vehicle ever made at the price point of $20,000 to $25,000. 80% of people will be able to afford this vehicle as well. It will change everything and the Model 2 is truly the end of all other EVs and gas cars.

What do you think of the Tesla Model 2 - is it the end of all other vehicles?

In Related News: Tesla Model Y is Big Savings For Police Departments

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Jeremy Johnson is a Tesla investor and supporter. He first invested in Tesla in 2017 after years of following Elon Musk and admiring his work ethic and intelligence. Since then, he's become a Tesla bull, covering anything about Tesla he can find, while also dabbling in other electric vehicle companies. Jeremy covers Tesla developments at Torque News. You can follow him on Twitter or LinkedIn to stay in touch and follow his Tesla news coverage on Torque News.

Image Credit, Tesla, Screenshot