Why Tesla's Next Car Should Not Be a Smaller, $25K Vehicle

A new vehicle type like a van may help Tesla more than an affordable car

TopElectric/YouTube

Tesla is known for its luxurious, high-end electric vehicles with cutting-edge technology and impressive performance. However, the company may be planning a significant pivot to produce a more affordable car that would cater to a broader audience. This move would undoubtedly shake up the automotive industry, but one renowned industry expert thinks a cheap vehicle, while doable, is not the right move for Tesla.

Sandy Munro recently shared his insights on the future of electric vehicles, specifically Tesla, with Tesla Owners Silicon Valley. Munro sees a path that Tesla could achieve this less expensive car. According to Munro, it would need to use lithium iron phosphate (LFP) batteries, which are cheaper and still good enough for most of the population. Tesla currently only uses LFP batteries in a portion of their models today.

Sandy Munro Discussing Tesla

The Risk with Small, Cheap Cars

Munro says no one makes much money on small cars, especially in North America. Furthermore, Tesla would have to be more frugal in its approach to creating a more affordable vehicle. This approach means the company would have to consider what features are not essential. For example, Munro suggests that cheaper drum brakes could be used instead of disc brakes and that Bose stereo system might not be necessary for a more affordable car.

Munro says Tesla could get down to $24,000 to $28,000. But he cautions, "coming out with the cheap car, what does it really do for you? Not much, because people are still willing to put their hand in their pocket and pull out 40 grand and say I want that one. That is the risk with small cars." He also says small cars make a few hundred dollars per unit sold, considerably less than Tesla's current margins.

However, Musk must see some advantages in offering a more affordable car; he told the B20 conference in November, "Musk responded to the question familiarly, "I can't speak too much to the future of Tesla product development, except to say that we do think that making a much more affordable vehicle would make a lot of sense and we should do something."

A No-Risk Proposition with High-Profit Potential

Nevertheless, there is a significant gap in the market that Tesla could not only fill but dominate, "if I were Elon Musk, I'd be looking at making a minivan or something like that. He can still make a shitload of money and not take any risk. That is a no-risk proposition, making a minivan." Musk has floated the idea of a "highly configurable vehicle" in the past, and Munro sees a gaping hole. "When Dodge and Chrysler walked away from the minivan, there was no minivan out there. There is one, Kia Carnival and these guys can't keep them in the showroom."

Munro thinks it is the marketing people who killed the minivan, "everybody in marketing says, 'oh, we don't want to produce a car like that because it emasculates men and it gives women the image of being a soccer mom.' Guess what? There are a lot of guys out there who like that car because it was the biggest selling thing they had, and on top of that, there are a lot of soccer moms! So why not try and take advantage of that?"

A Tesla minivan would have all the amenities expected from the brand, but it could also sell the safety factor. Teslas are repeatedly awarded for their rigorous design and commitment to safety. Given that minivans are synonymous with transporting young families, it would be a perfect match.

We will learn about Tesla's next-generation model on Investor Day on March 1.

Tesla Reveals Robotaxi App and Names the Robotaxi the CyberCab

Tesla has invested billions of dollars over the years toward vehicle autonomy. The mission continues as Elon Musk and Tesla now prepare to unveil their ride-hailing product, Robotaxi this August. Or, as Musk called it on Tuesday, Tesla CyberCab.

Early Days

Five years ago, during Tesla’s Autonomy Investor Day in April 2019, Elon Musk said he felt “very confident predicting autonomous robotaxis for Tesla in the following year [2020]”. At the time, Musk added a bolder claim, predicting that Tesla wouldn’t even make cars with steering wheels or pedals by 2022. While timeliness may not be Musk’s strong suit, he has a track record for getting things done that others were unwilling to try or thought were impossible. Musk later admitted he can be overly optimistic and said “sometimes I am not on time, but I get it done.” 

Now, 5 years later, we have the robotaxi unveiling scheduled for August 8th. After the release of FSD v12, it’s clear that we’re much closer to autonomy than we were in 2019, although FSD v12 is still a far cry from full autonomy.

While Tesla still has the robotaxi unveiling scheduled for August, Tesla announced yesterday that it’d be prioritizing a simpler “next-gen” model that could be released by early 2025.

Latest Updates

On the conference call, Musk added that Tesla now has over 300 million miles driven with FSD v12 since it was launched just last month. He added that it's becoming “very clear that the vision-based approach with end-to-end neural networks is the right solution for scalable autonomy”.

Tesla said it has been investing in the hardware and software ecosystems necessary to achieve vehicle autonomy and a ride-hailing service. The company is confident that it can establish a scalable and profitable autonomous driving business by employing a vision-only architecture.

think of it [Tesla] as combination of Airbnb and Uber meaning that there will be some number of cars that Tesla owns itself and operates

Tesla = Uber + AirBnb

Later on, Elon Musk unveiled that the new service will operate and result in a mix between Uber and Airbnb where the Tesla driver decides if and when he wants his Tesla to be used and by whom. Tesla stated:

“We believe the Tesla software experience is best-in-class across all our products, and plan to seamlessly layer ride-hailing into the Tesla App.”

Tesla’s CEO clarified that the owners will be able to add or remove their car from the fleet “whenever they want” adding that it will be up to them to decide if they want to only let the car be used “by friends and family or only by five-star users or by anyone at any time”. The flexible program will, just like Airbnb, allow the owners to take the car out of the market when they want.

The upcoming ride-hailing service will enable users to easily request a Tesla vehicle, control the car's temperature, monitor its real-time location, and adjust the audio system. The only question is when.

Follow

Follow

Follow

Musk Teases New Model for Early 2025 That Will Use a Mix of Next-Gen and Current Platforms

“We have updated our future vehicle line-up to accelerate the launch of new models ahead of our previously communicated start of production in the second half of 2025”. This was one of the key sentences that were part of Tesla’s deck shared on Tuesday directly before its financial results.

Since Reuters’ report a few weeks ago saying Tesla had “scrapped” the highly expected cheaper model— which Elon quickly denied on X —retail and institutional shareholders started asking for more details on Tesla’s product roadmap for 2024 and beyond.

In the earnings conference call, Elon Musk reiterated that Tesla expects to launch the next model in “early 2025, if not late this year”.

“We've updated our future vehicle lineup to accelerate the launch of new models ahead of previously mentioned start of production in the second half of 2025. So, we expect it to be more like the early 2025, if not late this year. “

Over concerns of temporary production halts to update the factories for these new models, Musk said that Tesla will produce new models with certain aspects from their next-generation platform and current models. This will reduce the number of changes needed on production lines and allow Tesla not only to ramp up production faster but also to get the vehicles to market quicker.

Model Y Redesign

Tesla appears to hit that their next-gen vehicle will be less “next-gen” than they were initially aiming for, but to get a new vehicle out the door by late 2024, the process would already have to be in motion. Tesla may likely be referring to the redesigned Model Y, which is expected to reuse many parts from the new Model 3. Earlier this year, Tesla said that the redesigned Model Y will not be released this year, so it makes sense that they’re looking to speed up that production.

Tesla CEO concluded by saying that these measures will allow Tesla to reach a capacity of over 3 million units. Tesla produced 1.84 million vehicles in 2023. However, this year they’re ramping up Cybertruck production and introduced the new Model 3 into new markets.

And we think this should allow us to get to over 3 million vehicles of capacity when realized to the full extent.

Tesla reported on Tuesday its earnings results followed by a conference call where it teased its upcoming Robotaxi and its next-generation platform saying its “purpose-built Robotaxi product will continue to pursue a revolutionary ‘unboxed’ manufacturing strategy”.

Earlier in the day, Tesla announced the new Performance variant of its sedan Model 3 with deliveries in the United States starting already next month. The new version starts at $45,490 (after applying the $7,500 Federal EV tax credit) and goes from 0 to 60mph in 2.9 seconds.

Follow

Follow

Follow