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If Everything Goes According To Plan, You Could Buy A Tesla For Under $20,000 As Early As Next Year

One aspect of Tesla’s current lineup for electric vehicles that is still in progress is affordability. The cheapest Tesla vehicle on the market currently is the Model 3, which now starts at $36,990. However, the Californian automaker had announced last year on Battery Day that a $25,000 Tesla car is coming in three years’ time. Now, if certain things fall into place, it is very much possible that this vehicle, dubbed as “Model 2”, could be available for less than $20,000 as early as 2022.

Tesla’s Vision for the World

Elon Musk recently mentioned in an interview that Tesla’s vision is to accelerate the world’s transition towards sustainable energy. Producing a low-cost electric car is very much a part of their future plans. Even in Elon Musk’s “secret master plan”, he has mentioned the same. This master plan includes producing a low-volume expensive electric car (Roadster), then using that money to produce a medium-volume car at a slightly lower price (Model S). Tesla would then use this money to build a more affordable high-volume car (Model 3). Tesla has completed all of these goals, you could say.

At the end of Musk’s master plan part two, one of the goals is to expand the electric vehicle product line to address all major segments. With a premium SUV and sedan, a crossover and an affordable sedan already on the market, and a pick-up truck and semi-truck coming, an affordable hatchback is what remains.

Tesla May Launch Model 2 in China First

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Early last year, there were reports of Tesla designing a small, affordable car in Gigafactory Shanghai. Last month, there was an official government report from Gigafactory Shanghai which indicated the same. This report hinted at the design and manufacturing of a smaller and cheaper model (Model 2) at the Chinese plant as early as 2022.

A major factor that works in favour of a Model 2 launch in China is the government support that electric vehicles get there. China is the world’s biggest market for electric cars and that has led to a lot of policies favouring electric mobility in the country. Add to that the fact that Tesla’s Shanghai factory is one of the most efficient manufacturing plants they have. Tesla had delivered their first China-produced car just 10 months after the construction of the facility began. It has a very high production efficiency with low labour cost and low supply chain cost as well.

Tesla’s president of operations in China, Tom Zhu, confirmed last week in an interview that Tesla will design the Model 2 from the perspective launch of a Chinese launch, but they will sell this vehicle globally. A local R&D centre is under construction, and it will include vehicle design, engineering, development as well as testing.

Finally, a few days ago, a rumoured timeline showed up from the Chinese Media IT Home website. It says that Tesla approved the Model 2 in September 2020 and its product certification could happen next month. Tesla may reveal the initial design of the Model 2 as early as November 2021, with deliveries starting in 2022.

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Implications of the $7,000 Tax Credit Bill in the USA

Recently, the Democrats proposed a reform to the federal EV tax incentive program, which is known as the Green Act. If it gets passed, Tesla could get access to a $7,000 tax credit on 400,000 more electric vehicles. Tesla surpassed the already-existing federal tax incentive program in 2019, as it was limited to 200,000 vehicles. But with this proposed reform having a decent chance of passing, the $7,000 tax credit seems very much a possibility.

Tesla sold around 235,000 vehicles in the USA in 2020. Considering an up-ramp of production, this tax credit could be applicable to Tesla vehicles for more than a year. Now comes the speculation part. If the Biden administration passes this bill later this year, and the Model 2 timeline rumours are true, then the launch of the Model 2 could coincide with Tesla getting access to the tax credit. So the original price tag of $25,000 goes down to $18,000. Even with other fees included, the final price remains under $20,000, which is definitely a lot more affordable.

What A Sub-$20,000 Tesla Can Do To The Current Market

Today, the cheapest Tesla car that you can buy is available at around $37,000. There are very few electric cars in the USA available at an affordable cost, with the Nissan Leaf and Chevrolet Bolt being the prominent ones among those. But if Tesla manages to crack the small electric car segment while following this rumoured timeline, it could spell doom for gasoline vehicles.

Cars like the Toyota Corolla hatchback are currently a part of this segment, but an affordable futuristic vehicle coming from one of the industry leaders is definitely a game-changer. Yes, the base variant of the Model 2 will be minimalistic, but it will still be a Tesla at its core. The unmatched drivetrain, battery efficiency and high safety standards will be available at an affordable cost.

Our Opinion

Many of these details are unconfirmed. There is no concrete proof of the Model 2 timeline, nor is there any guarantee of the tax credit bill getting passed. But still, a Tesla vehicle between $18,000 and $25,000 is definitely something that will create waves. It will allow many people from the working middle-class to buy a really good car. It will bridge the gap between affordability and performance that currently exists in the electric vehicle industry. What this does is create a lot of excitement for the upcoming year, which seems to be full of promise for electric mobility. Some game-changing electric cars are coming to the market, and we could not be more excited. For now, it’s a case of waiting and watching.

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Mihir Tasgaonkar
A mechanical engineer who loves reading and writing about new technologies in the automobile industry.

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