Tesla CEO Elon Musk’s recent tweets revolve around his world views to solve the Ukraine/Russia war, uncover real US border problems, critique Berkshire Hathaway, and envision life on the moon. But today was Tesla’s 2023 Investor Day. It’s always baffling to figure what’s on Elon Musk’s Most Important List, but many people were hoping to hear the announcement of a low-priced vehicle addition to the all-electric company’s catalog.
We in the media (myself included) have spent a good amount of time anticipating Musk’s Master Plan 3. The long range vision of the company seems to perseverate on Full Self Driving to fulfill Musk’s dream and promise of on-the-road safety through autonomy. Then there’s the company’s focus beyond transportation electrification to energy systems, Supercharger network expansion, ubiquitous Starlink access, additional SpaceX/NASA collaborations, and Boring Company innovations.
However, it’s really the potential of a low-priced electric car, sometimes called the “Model C” or “Model 2,” that makes audiences excited. Yes, massive production scale will be necessary for Tesla to produce a low-price vehicle, but a compact 4-door sedan with contemporary design, 200 miles of range, and Tesla’s LFP battery technology would be very appealing for many reasons. Let’s think about them.
The Appeal of a Tesla Low-Priced Vehicle
Today’s event was livestreamed from the company’s gigafactory in Texas, with the advanced hype that “investors will be able to see our most advanced production line as well as discuss long term expansion plans, generation 3 platform, capital allocation,” and other really cool and important stuff. But the announcement of a lower-priced Tesla was what people were most hoping to hear about, what they were expecting to be the most exciting of all, potentially securing Tesla’s dominant position in the EV marketplace. However, this cheaper model was not a focus of today’s presentation after all. Let’s look at why it’s such an important piece of the puzzle for Tesla and for society. An economical Tesla would:
Open up EVs to new audiences: It’s still true that EV buyers are mostly male, high-income, highly educated homeowners. A new lower-cost EV could open up markets, such as first-time car buyers, college students, and city dwellers. By introducing an affordable EV, Tesla can tap into a new demographic of consumers who are looking for an affordable and sustainable mode of transportation.
Provide a great balance between affordability, luxury, and performance: Teslas are minimalist, designed to be as simple as possible. They’re also state-of-the-technological-art. Software is at the essence of Tesla’s unique infotainment system, user experience, and autonomous driving features. Tesla has implemented over-the-air updates for years, while other automakers are just beginning to attempt them. Few segment rivals blend performance and value like a Tesla, which is fast and fuel-efficient, offers excellent range, and handles like a sports sedan.
Increase competitiveness with other automakers: A new $25,000 EV could also help Tesla dominate the legacy automakers who are now fully committed to gaining EV market share. Initially reluctant to adopt EV technology, their offerings show potential for peeling off EV sales from Tesla. An affordable EV would return Tesla to EV dominance, with the side effect of forcing other automakers to invest even more robustly into EV technology and production. EV consumers would see a win-win here.
Increase Tesla brand name recognition: A few years ago, it seemed as if Tesla’s stability across multiple industries would always reinforce its brand association. It expanded to new industries, grabbed a stake in key infrastructure sectors, worked to decentralize power distribution, and offered alternatives to the utility industry — all of which interconnect in a flywheel that incites consumer allegiance across multiple sectors and keeps those consumers coming back to Tesla for more. A person who purchases a Tesla Model C is more likely to add range at a Tesla Supercharger and eat at a Tesla restaurant. Later, when growing into other renewable energy options, that same consumer is more likely to choose Tesla Solar and Powerwalls over a competitor’s offerings. And who knows what else?
Boost Tesla stock value: A low-priced Tesla would affirm Musk’s various positive forecasts for Tesla’s future. A lower priced model would boost growth and open up more of the global car market to the EV leader. Tesla’s production scale has grown tremendously over the past 5 years. As is generally the case, its greater scale has led to greater per-unit profits. The company may generate more profits — and even widen its profit margins — by continuing to grow its production capacity and cutting prices. An economical vehicle could certainly contribute to the company’s solid stock value, as well.
Help Tesla to meet its own projected production goals: The company has expressed an ambitious goal of producing 20 million EVs per year by 2030, and a low-priced Tesla would certainly help to achieve that goal. Expanding into the mass market is critical to meeting Tesla’s goal of increasing vehicle deliveries 15-fold — to 20 million.
Enhance EV equity across demographic groups: The gift of cleaner transportation — better air quality, less noise, lower energy costs — don’t flow equitably to everyone. An executive order signed by President Biden in 2021 requires that 40% of the overall benefits of federally funded programs go to disadvantaged communities. A low-priced Tesla would introduce EVs to more people in less represented demographic groups. It should be noted that, even if a low-priced Tesla was to be made available, low-income households would still face additional social and economic barriers that cannot be solved by technology alone.
Appeal to Generation Z: Tesla’s innovative business strategies draw in Gen Z. With online purchasing, in-vehicle “Easter eggs,” over-the-air updates, and zero-emissions transportation, Teslas have a sleek appeal for Gen Z. However, most of Gen Z haven’t been able to afford the starting price of a Tesla. Saddled with student loans, many of them are craving a Tesla Model C as a starter EV.
Bring youth climate activists into the Tesla fold: Greta Thunberg drove to Iowa City in 2019 in a Tesla to lend a hand to the local teens waging their own climate strikes. “We teenagers and children shouldn’t have to take the responsibility,” the teenage climate activist said then. “But right now the world leaders keep acting like children, and somebody needs to be the adult in the room.” If Tesla was to release a low-priced EV, youth climate activists would certainly cheer the decision. The youth generation is brimming with innovators, activists, and entrepreneurs who are not only speaking out against Big Oil & Gas, but are offering solutions to lead us to a more inclusive, sustainable, and resilient world. They are a youth generation more vocal and energized than any other when it comes to climate justice, and they’ve been building resources and networks to solidify their messaging and to garner support.
Benefit everyone: With lower priced Teslas on the roads, the pendulum will swing more keenly toward a pattern of zero-emissions vehicles on the roads. Tesla has, from the beginning, sought to build increasingly more affordable cars. As early as 2011, Tesla communicated about how EVs do not burn oil as they operate, equating to zero emissions. Even when upstream sources of electricity are considered, EVs are cleaner than ICE counterparts: if plugged into even the dirtiest sector of the national grid, an EV still produces the lowest emissions per mile traveled compared to other vehicle technologies.
More Teslas on the roads means more reliable charging for everyone: The federal government is aiming to spur more investment in public charging, with $7.5 billion allocated over five years under the 2021 Bipartisan Infrastructure Law. Tesla will be producing a million cars per year in the US soon and also opening up Superchargers to other EVs. The push is on for Tesla to open enough Superchargers to fulfill the charging needs of all new Teslas plus the needs of current Tesla cars plus the needs of other EVs that will presumably gain access to Tesla Superchargers. With a known reliability quotient, more Teslas on the road means greater confidence in charging for all EV drivers.
Contribute even more to reducing greenhouse gas emissions and combating climate change: The original Secret Tesla Master Plan stated explicitly that it wanted to “help expedite the move from a mine-and-burn hydrocarbon economy towards a solar electric economy.” The company has rejected traditional advertising and relied on digital communication to spread the word about its various offerings. Policymakers are pursuing a transition to plug-in EVs with the goal of reducing greenhouse gas emissions, criteria pollution, and energy consumption. A Model C would spark additional interest in transportation electrification across the globe, enhance the transition away from fossil fuels, and usher in advancements across numerous technology sectors.
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