Lower Priced Tesla “Model 2” Production To Begin In 2025

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Autocar is one of the most respected news organizations in the automotive space. In a report published on March 15, 2024, it said the Tesla “Model 2” — the long awaited less expensive car from Tesla — will enter production next year. Note that CleanTechnica‘s Zach Shahan termed the coming affordable car the “Model 2” as a joke for a while, but Elon Musk eventually replied that it won’t be called the Model 2. Elon Musk loves letters — Model S, Model X, Model Y. The only reason the Model 3 exists is because Ford had the rights to the Model E name. Whatever it is called (it could be called the BtfSplkX!), it is widely expected to start at $25,000 or less.

The report suggests the Tesla factory in Germany will be the first to produce the Model 2 since small, inexpensive cars are quite popular on the Continent but anathema to Americans. Building the cars in Grünheide would save lots of money in shipping costs from Austin, Fremont, or Shanghai.

Being developed under the codename Project Redwood, the secretive new model has a crucial role to play in helping Tesla defend its hard-won position among the world’s leading electric car manufacturers, having been knocked off the top spot in the final quarter of 2023 by BYD. In January, CleanTechnica reported that the company had notified its suppliers it wants to start production of a new mass-market electric vehicle codenamed “Redwood” in mid-2025. That information came from four people familiar with the matter who spoke with Reuters.

Two of those sources described the new model as a compact crossover. Tesla sent “requests for quotes,” or invitations for bids, to suppliers for the Redwood model last year and forecast weekly production volume of 10,000 vehicles, two of the sources said. Three sources told Reuters production would begin in June of 2025.

What we missed at that time that Autocar picked up on was a prediction by the company that 700 million Model 2 cars would be sold over the model’s lifetime. That is an extraordinary number, considering that the Toyota Corolla has sold a paltry 50 million copies over the past 58 years. How typical for Tesla to make such outrageous claims. We asked our resident guru — the Zen Master — what he thought about that prediction and he replied with Delphic clarity, “‘We’ll see.”

Two Reasons To Get The Model 2 Into Production Soon

The pressure to produce lower-priced electric cars comes from two distinct sources. First, consumers want less expensive EVs. Second, Chinese automakers have now gotten their production costs down to the point where it costs about a third less to manufacture an EV in China than it does anywhere else in the world. The rest of the industry is looking over their shoulders and wondering how in the world they are going to compete when Chinese cars start flooding their traditional markets. It’s an excellent question.

Crucial to the Tesla’s viability in this context is a radical new production process that, the firm says, could save as much as 50% in build costs and speed up production times. The ‘unboxed’ process essentially revolves around reducing the amount of work done at each stage of the production line, avoiding any unnecessary movement or disassembly of the car or its components during its journey down the production line, Autocar says.

It is also widely believed that some (or all) of the chassis components for the Model 2 will be high-pressure castings, a process that not only lowers production costs but also saves space on the factory floor. Traditionally, the chassis is formed from hundreds or thousands of metal stampings that are then spot welded, screwed, bolted, or bonded together to create a completed shell.

For example, the seats will be mounted directly to the underfloor battery pack so that the entire unit is then raised into a body that has been painted in sections to avoid the need for door removal and re-installation. Next-generation powertrain and battery technology will be crucial to keeping costs down, too. Tesla says it will achieve a 75 percent reduction in silicon carbide for its next batteries and eliminate the use of rare earth metals in its motors.

No powertrain details have been revealed for the Model 2, but it is likely to follow Tesla’s other models and be offered in single- and dual-motor versions, with the potential for high-performance versions to be introduced later on, Autocar says.

Model 2 In 2025?

All predictions from and about Tesla must be qualified by past experience. Three years ago, the rumor was that the Model 2 would begin production at the Gigafactory in Shanghai in 2021. At that time, Chinese news source Sina.com said the car would be the first new model designed at Tesla’s China Design Center and would be manufactured on a new assembly line being built at the Gigafactory in Shanghai. The sale price reportedly would be 160,000 yuan, or just under $25,000.

A year ago, reports surfaced of a new Tesla factory in the Mexican state of Nuevo Léon, where the Model 2 would be the first car produced. Then came interest rate hikes that caused Elon to suggest the Mexico factory might be delayed until economic conditions improved. Then there was speculation followed by statements from Tesla that Model 2 production would in fact begin first in Austin.

Last fall, Paul Fosse said there were four reasons why manufacturing the Model 2 in Texas made sense:

  1. Tesla already has a lot of engineering talent at Austin. And it would be difficult for Tesla to convince many of those people to move to Mexico.
  2. Tesla doesn’t seem to have any problems getting permits in Austin and construction there is very quick.
  3. Tesla already has significant infrastructure in Austin and can likely test production in an existing building.
  4. The company can build a sprung structure (or “tent” ) in a few days as it did in Fremont previously if it needs more space quickly.

Musk has not been firm on a launch timeline for the new car but recently said he is “optimistic” about building the first car late next year. Tesla is said to already be in conversations with parts suppliers for the new car and has acknowledged that its volume growth is expected to slow this year “as our teams work on the launch of the next generation vehicle.” But Autocar has a very cogent reason why the Model 2 is understood to be Tesla’s primary engineering focus. Commercially, it is much more important — and urgent — than the Roadster or Cybertruck, it says.

The Takeaway

Everyone in the car business sees China as a threat to their business model, and they have every right to think so. The Chinese government has invested billions — maybe hundreds of billions — to make the country a leader in electric car technology. Now, Chinese companies are casting covetous eyes on foreign markets, where industry leaders see a flood of cheap Chinese cars coming ashore in the near future. BYD is even building its own fleet of ocean-going car carriers to deliver its cars to foreign markets.

Even if Tesla creates a low-priced Model 2, there is no guarantee it will be able to compete head to head with Chinese models. And then there is the problem with Elon Musk’s well known tendency to over-promise and under-deliver. Does a 2025 start date for production of the Model 2 mean volume production or does it mean prototype production like what is happening with the Tesla Semi? The Class 8 tractor from Tesla theoretically entered production in 2022, but the world is still waiting for volume production to begin.

Sometimes it seems Elon says things that are more designed to pump up the company’s share price than reflect reality. No one can deny he has accomplished amazing things, but his schtick is getting old. Now would be a good time for him to actually deliver on a promise, not years from now.

Once again we asked our resident guru what he thinks of Tesla’s plan to introduce a new model next year and he gave us two thumbs up and said, “We’ll see.” That’s about as enthusiastic as he ever gets, having seen it all before.


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