Tesla's Compact Car
There is a Tesla compact vehicle that Elon Musk has talked about many times. Many Tesla analysts like Ross Gerber and Gary Black are saying that this compact car is essential for Tesla.
However, this $30,000 car is not coming, but a $20,000 version is coming. Tesla has already done the engineering for the Cybertruck. The next generation factory that is going to produce the next generation vehicle is the Robotaxi platform vehicle. It will be half the cost and half the time of the Tesla Model 3 and the Tesla Model Y.
The next generation vehicle behing half the effort of all existing vehicles is a big deal. This vehicle will exceed the output of all the other Tesla vehicles combined. This is how Tesla will maintain 50% growth every year.
The effort for this vehicle will be about 50% of the Model 3. It will have half the loss and half the cost and half the factory floor space with twice the output and Tesla believes this can be done.
Tesla can sell a Model 3 for under $40,000 and still make a profit. Right now, the lowest end Model 3 costs around $47,000 and this is a 30% margin. You could sell this vehicle for $35,000 and break even or $40,000 and make a 15% margin.
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More On the Next Generation Vehicle
When you think about this next generation vehicle you have to take Tesla at their word. It costs Tesla about $32,000 to make the basic version of the Model 3. This compact car should cost Tesla about $16,000 to make. If they sell it for $20,000, then you have a 20% gross margin.
This vehicle should be about the size of a Toyota Corolla. And why hasn't Tesla been quickly moving to produce this vehicle? It is because all Tesla vehicles are selling out and they don't have enough materials and batteries for it yet.
In order to make this compact car at a cheaper cost, you are going to have to use LFP batteries. You are going to have to put these LFP batteries into a format that utilizes 4680 batteries and that format.
The vehicle will also need to have fewer parts, robots, and labor. This is how you get more vehicles in a smaller factory foot print. This vehicle will be produced quickly if you eliminate much of what makes the Model 3 more complicated.
The Model Y is trending to about 1.5 million vehicles per year - possibly 2 million. A revamped Model 3 could get to 2 million. Cybertruck could get to 2 million per year and the Tesla Semi could get to 1 million.
The next generation vehicle, if Tesla gets it to $20,000 cost or less, will outsell all of these vehicles combined. If I were Tesla, I would have factories on every continent producing this vehicle.
This vehicle could almost sell well in India - it would need to get down to about $15,000 though. That would make it a Model 1, which I wrote about last year.
For more information, see this video from Warren Redlich:
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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.