Tesla unveiled the Model 2 this week for $26,000 but kept it quiet

Tesla’s “Investor Day” caused a lot of disappointment – even sinking Tesla’s stock by a day – because there wasn’t a big announcement as expected, particularly of its new low-cost next-generation vehicle. However, they do reveal a number of important details about the vehicle, most of which you need to know – except when you’ll be able to buy it.

Tesla’s name is probably not “Model 2”. The Model 3 should have been the Model E to spell “SEXY”, but other cars use the “Model E” name.

It will cost well below the $30,000 sticker price

While there were times when, in theory, you could get a Model 3 for $35,000, today the base model costs $43,000. Tesla reports on its website that this is actually around $29,000 after rebates and fuel savings. They don’t include maintenance savings in that.

Later, Tesla presented a slide describing the total cost of ownership of the new car model over 5 years, compared to a Corolla and a Model 3.

They already believe that a Model 3 is cheaper to own than a Corolla, but has a high initial cost and a lower operating cost.

In this chart we can see that Tesla has stated that it expects the total cost of ownership in the first 60,000 miles (5 years) will be precisely 71% of that for the Model 3. That includes about $2000 of electricity and very little maintenance – probably 1.5-2 sets of tires at $800 each and a few other very small items. These shouldn’t differ much between cars, although the smaller model might be a little lighter and use cheaper tyres. The other main costs will be registration fees, insurance and, above all, depreciation.

Now, for Tesla to make the Model 3 beat the Corolla, they are not using the methodology of big sites like Edmunds and Kelly Blue Book. Tesla’s 2021 Impact Report shows an estimate of around 63 cents/mile. You’ll notice that for the Tesla, depreciation (which is a function of the vehicle’s price and lifespan) is a much larger proportion of the total cost than it is for gas cars. The main way to reduce TCO is to reduce the sticker price.

  1. Depreciation/Taxes/Fees/Financing/Incentives – 44 cents
  2. Insurance – 10 cents
  3. Maintenance and tires – 5.4 cents
  4. Energy – 3.4 cents

However, this report is for the Model 3 at a higher price and without the $7,500 federal tax credit. (Price in 2021 ranged from $39,000 to $43,000.) Some insurance components also vary by car value. So we can roughly say that around 66% of TCO after discounts is based on the cost of the car, although different cars may depreciate at different rates, so we can’t be exact.

As such a rough calculation suggests that for the TCO to drop to 71% we should see a car sticker price of around $26,000 – well within the range of the commonly asked price of $25,000.

Of course, when you hit $7,500 in federal and state credits – $2,000 in California and up to $5,000 in Colorado – you’re looking at $13,500 plus fees in Colorado for a new Tesla economy model. A model that also costs half of its operation. It’s hard to see any cost-conscious entry-level car buyer opting for current gas car prices.

Of course, even though Tesla predicted a $35,000 price tag for the Model 3, it really didn’t deliver on that, offering a car at that price for only a short time. So it’s possible that the cost forecast in the chart above is not delivered. But even something a little more like $30,000 before rebates will be a game changer.

How good is a car?

At that price, it’s going to be shit, right? Well, it won’t have the 250 mile range of a Model 3, but it will probably do around 200 using LFP batteries which have a very long life and which you can more easily use 100% range with. With the lithium-nickel batteries found in higher-end cars, you rarely try to charge the car to 100%, although you can if you need to. With fast chargers every 50 miles on major highways and charging at home, 200 miles is more than enough.

Throughout the presentation, Tesla emphasized its manufacturing philosophy – make it cheaper and better at the same time. They haven’t always lived up to this – when they removed the ultrasonic sensors to save costs, they dropped the parking assistant, but they claim it will return soon.

All of Tesla’s efforts are to turn the car into a computer. The more the car is a computer, the more it runs on the economics of electronics – which means getting better and cheaper at the same time, not just a little bit, but by leaps and bounds.

Tesla is also applying this Silicon Valley philosophy to its manufacturing and design, and it seems to be succeeding.

At the top you can also see how they predict that Do this car’s entire powertrain for around $1000. At that price, plus the battery, they can make cars much cheaper than $26,000 for special needs.

We can predict that Tesla’s new model won’t actually be much worse than the original Model 3, and the Model 3 will likely look better to justify its higher price tag. Some things will get a little cheaper, especially things Tesla doesn’t make like upholstery, trim, tires, and maybe sound deadening. It won’t look like a luxury interior, but you won’t expect it to be. The shape will remain similar as required by physics.

You’ll get a similar screen – maybe a little smaller and a similar clean bezel. They’ll likely remove more physical buttons and motorized seat adjustments on the passenger seat – but in general, they prefer anything that can get software control and be quality made. you probably won’t have a transmission rod, which they took from higher-end cars. They might not have the same hardware package they believe is needed for FSD called the HW4 – they might take some of the cameras out, but also leave room to upgrade them later or do those things in a higher trim level to keep the base price low.

Many of the fancy features will be present in the software. Software costs nothing to reproduce, but it costs money to write. Tesla plans to make money off its more expensive cars by giving you fancier software, not fancier hardware.

Today, you can pay $500 or $2,500 for different laptops, or $200 or $1,000 for different phones. These devices do not differ in capacity by the 5:1 ratio; in fact, in many cases, the less expensive device does a large fraction of what the high end does. Tesla will also make cars work like this. Think of Apple, which sells the same hardware as others for higher prices, making the software customers want most.

Of course, the top-charging network will work for you no matter what car model you buy, and it’s now one of the top reasons to buy a Tesla.

And the van?

Here, Tesla tells us that it expects the global vehicle fleet to have 700 million cars as the new platform cars, along with 380 million high-end sedans and 40 million luxury sedans. They also predict 300 million of another class of vehicles, combining pickup trucks like the CyberTruck and vans – with your van under a curtain. So a van definitely seems in the plans.

Will it be a commercial van for delivery and work or a minivan for families? Or a van style taxi for your dedicated robotaxi as they suggested? This they did not say. But this is what comes next.

Pre-orders are not yet available. But we know its cost, roughly what it will look like and what features it will have.

You can watch a live stream on YouTube where I discuss many other Tesla Investor day reveals, made shortly after the event:

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