- Elon Musk said last month that Tesla will sell a $25,000 car “about three years from now.”
- The company has long worked to bring down its prices, and announced multiple innovations to help it get there at its “Battery Day” presentation last month.
- But those innovations may not be enough to create a vehicle customers are still willing to pay for, says auto manufacturing expert Sandy Munro.
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Elon Musk had plenty of innovations to show off at Tesla’s Battery Day in September.
Advancements in battery design, chemistry, and even manufacturing processes should help the company bring down costs while producing more total power output and increasing factory efficiency. Coupled with factory automation improvements from the days of “production hell” and the infamous tent, Tesla should be able to produce a car that sells for $25,000 in around three years, Musk said.
It would be the culmination of years of effort toward his goal of reducing the cost of electric vehicles to affordable levels, but at least one manufacturing expert is skeptical of Tesla’s ability to actually do it without compromising in a fundamental way.
“We were at $158 per kilowatt hour when we did the Model 3,” Sandy Munro, CEO and “design prophet” of Munro and Associates, said on a conference call hosted by Bernstein analysts of his estimates when analyzing the vehicle.
“Now for the Model Y we think that it’s around $108,” he continued. “$108 is a big drop in two years, and that’s because of the changes that they made to the chemistry and things like that. This one here might drop down to — I don’t know — maybe $70 or something, $70 or $75 per kilowatt hour. That’s a big move too, but at the end of the day, $20,000 vehicle or $25,000 vehicle, I don’t see that.”
Essentially, Munro argued there are only so many things to strip off of a Tesla before it’s no longer an attractive purchase. And as well-heeled competitors like Volkswagen look to the mass-market electric vehicle segment, Tesla needs to ensure its future offerings continue to convince people in the market for an EV to choose it over an increasing number of options.
“We could always get down to that number,” Munro said, “but would the customers be happy with that number? That’s the thing.”
Musk, who’s long said Tesla’s mission is to help shift the world to sustainable energy, might not agree.
“We need to make more affordable cars,” Musk said at the battery event. “One of the things that troubles me most is that we don’t yet have a truly affordable car, and that is something that we will make in the future. But in order to do that, we’ve got to get the cost of batteries down.”