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Tesla Model 2 to come with 250-mile range and cost $20,000 to make as FSD HW5 is optional

Model 2 to look like a mini Model Y not a hot hatch (image render: Autocar)
Model 2 to look like a mini Model Y not a hot hatch (image render: Autocar)
Tesla may eschew some of its design and range staples to reach the $20,000 price point of its cheapest EV. The Tesla Model 2, however, is not expected to hit the desired production rate before 2027.

Tesla may eschew the iconic glass roof and potentially even the Full Self-Driving hardware in its first electric vehicle for the mass market, tentatively dubbed the Model 2.

After a tour of the Gigafactory in Texas where Tesla will be making the first Model 2 batches, automotive industry analyst Chris McNally is now convinced that production won't ramp to the million units level in 2026.

Model 2 production rate

According to him, Tesla's next growth phase will come three years from now. Elon Musk's automaker “increasingly is a 2027 story,” added the Evercore analyst, referring to the first full year when the Model 2 is expected to hit the million units production mark.

Previously, the Model 2 was expected to be made in the upcoming Mexican Gigafactory at a rate of 2 million units annually.

His team now forecasts Tesla will only ship 2.7 million vehicles in 2026 even when including the projected 500,000 Model 2 units. That's a far cry from the financial analyst consensus, hence Evercore's earnings per share estimate for Tesla's stock that year is 20% lower than Wall Street's.

Tesla Model 2 costs and features

On the other hand, the analyst forecasts that Tesla will be able to bring the Model 2 costs down to $20,000 when production starts ramping up.

Elon Musk already teased that the Model 2 will be a revolution in low-cost car manufacturing. At one point in the early days of the Model 2 development, dubbed Project Redwood, Tesla's engineers reportedly took apart a Honda Civic for inspiration on how to make affordable cars.

In order to reach that coveted $20,000 Model 2 price of manufacturing, however, Tesla is likely to part with some specs and features it is now known for. As per McNally, first to go might be the glass roof that Tesla now installs on all of its vehicles.

Model 2 range

The other Model 2 tradeoff might be the range on a charge. Elon Musk has talked about a 300-mile range as sufficient for daily driving without Supercharger anxiety, and most Tesla vehicles are gunning for that mark, depending on the trim.

The 53 kWh battery capacity that Tesla lists for its category of vehicles where the Model 2 will likely be classified in may not be enough for 300 miles of range on a charge. The Evercore analyst now predicts that the Tesla Model 2 will offer 250 miles (402 km) of range from said 53 kWh battery pack, despite that it is expected to be 30% lighter than the Model 3.

Still, a 50-mile range reduction is a tradeoff that many might be willing to accept if the final Tesla Model 2 price hovers around the $25,000 mark before any potential tax credits or subsidies.

Model 2 FSD

What could raise some eyebrows, however, is if the Model 2 ships without Full Self-Driving (FSD) hardware. Tesla has been rumored to ready a HW5 FSD kit in time for the cheap EV's release next year, but McNally's team is now of the opinion that it might be optional.

They estimated the price of the next 3 nm FSD computer, cameras, and sensors to be up to $3,000, which would add significantly to the production costs of the Model 2. Needless to say, this doesn't mean that the Model 2 won't support Autopilot or FSD at all, just that the full autonomous driving experience might be offered as an option from a hardware standpoint.

In any case, Evercore's Chris McNally is usually bearish on Tesla's prospects, while his economics analysis comes from a pure automotive industry perspective and missed the tripling of Tesla's share price since he initiated coverage. Hopefully, Elon Musk will be able to pull another production rate and manufacturing cost wonder with the Model 2 so that Tesla can enter its next growth phase earlier than predicted here.

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> Expert Reviews and News on Laptops, Smartphones and Tech Innovations > News > News Archive > Newsarchive 2024 03 > Tesla Model 2 to come with 250-mile range and cost $20,000 to make as FSD HW5 is optional
Daniel Zlatev, 2024-03-12 (Update: 2024-03-12)