Tesla prices are still not cheap - even after lowering prices many times. In the future, however, prices will be absurdly cheap. Here's what that price will be and how it will happen.
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Tesla Prices Are Headed Way Down Over Time - Why This Is Inevitable
I'm going to share something that came to me in the shower today when thinking about Tesla and what I should share about it. It got me thinking about my own Tesla vehicle that I own and what I paid for it, as well as what Tesla prices would be in the future.
As I thought about it more, one phrase kept coming to me: "One day, Tesla prices are going to be absurdly cheap." I thought to myself about how expensive even my car is for most people - and it's the cheapest Tesla on the market, so why would my brain think that Tesla vehicles would one day be absurdly cheap?
I thought, "If a Tesla Model 3 RWD were $15,000, then it would be absurdly cheap." I began to explore what would make this true and then see if that is likely to happen.
Tesla has lowered their prices this year and done it by a lot. I bought my 2022 Model 3 RWD for about $44,990 + several thousand dollars in taxes and fees, and that same car with improvements is now $38,900. I had to get a loan for my car, but did put some money down.
This made me wonder if high interest rates were the reason Tesla was lowering prices. If you were to ask Elon Musk, he would say that interest rates are definitely affecting the prices of Tesla vehicles and the economy overall.
Take a look at how much Tesla has reduced prices this year for their vehicles in the U.S. There's a definite downtrend, however, the prices of most of Tesla's vehicles have not gone below their lowest price ever in the past. It does seem at the time interest rates were really low a few years ago did cause Tesla to raise prices. In the short-term, interest rates and the economy ARE affecting Tesla prices to go higher or lower. As interest rates go up, prices go down and vice versa.
The Model 3 RWD, which I own, was at its lowest price when it was $37,000 at release in 2018, and it got as high as $46,990 in 2022 to where it is now at $38,990. That's about a 13.5% drop. Other Tesla vehicles dropped in price from their all-time high by around that percentage or more, but aren't back to their lowest price ever. If interest rates stay high, how will Tesla prices get absurdly low?
The Current Situation With Tesla Prices
The current situation with Tesla prices is that they are going down, but not cheap. Tesla cannot sell the Model 3 RWD for $15,000 like I mentioned above because they would lose money and eventually go out of business. If Tesla can't produce the Model 3 for less than what they sell it for, then they will most likely not sell it for less than what it costs to make.
There's a lot more at play here than that. Here are the reasons that EVs are still expensive in the U.S.
* There is an UNDER SUPPLY of electric vehicles right now
* It costs too much to make an EV (castings, batteries, parts, and labor)
* Interest rates are high, making loans more difficult to get
What is the opposite of these statements? To me, that is what it will take for prices to come down. Let's take a look at that now. Here are those statements in the opposite.
* There is an OVER SUPPLY of electric vehicles right now
* It costs very little to make an EV (castings, batteries, parts, and labor)
* Interest rates are low, making loans very easy to get
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How Tesla (and the World) Get to Absurdly Low Prices
I thought about those three statements and realized that the world, barring a catastrophe, is going to get to the point that those statements are true. And the reason is Tesla and their investments in manufacturing and batteries.
There cannot be an over supply of EVs right now because batteries are still a scarce resource as is the current total number of EVs - they are still far fewer than gas cars.
Because the total market of cars in the world FAR exceed the current supply of current and in progress electric vehicle batteries, batteries will remain expensive.
In fact, some have been quoted around $15,000 or more to change their battery at a Tesla service center. This is FAR out of reach of most people and just doesn't make sense to do economically.
However, what would happen if battery technology were improving greatly, and there came a time of over-abundance of batteries, and it cost $1,000 to upgrade your battery at a Tesla service center, and you just had to wait an hour or two for it to get done.
I bet people would find that very compelling and probably only ever having to do that once after hundreds of thousands of miles of use. But that scenario is not going to happen until the total supply of electric vehicles reaches around the 80% of all vehicles mark or more. At around that point, we'll have hundreds of millions of EVs on the roads. To get to that many EVs, there is going to need to be a hoard of batteries made. At that time, battery supply should be reaching a point that old EVs can have their batteries recycled and reused - in huge amounts.
Those recycled and reused batteries are a very important step for prices to come way down for EVs. When most new batteries come from recycled batteries, now you just have the cost of battery recycling and putting it back together in the cost of a battery. Materials and minerals cost, along with labor to get and transport those minerals, goes away largely. There'll still be some material mining, but it will be minimal - assuming battery recycling grows as well - which I believe it will because it is so economical to do so.
We now have a picture of what it looks like for a battery to be cheap to replace at $1,000. When you think of that price, how much would the EV cost then? If a Model 3 RWD can have its battery replaced for $1,000, then the cost of the vehicle should surely be much cheaper. Couldn't it reach $15,000? Maybe not for the Model 3.
But what about a future Tesla vehicle - some car in the future, say the Tesla sub-compact car that uses greatly improved and simplified manufacturing with a smaller and simpler battery that costs very little to produce due to battery minerals and supply abundance.
At this point, two of the criteria are satisfied. There is an over-abundance of EVs, at 80% or more of the market, and there is an over-abundance of batteries such that most are being built from recycled old batteries. At this point, interest rates matter much less due to the greatly lowered cost of an EV! I think interest rates will come down because the U.S. cannot afford debt repayments so high.
When Do We Get To Absurdly Cheap Tesla Vehicles?
We know that Tesla is in the beginning phase of its compact car, also known as the $25,000 vehicle. This will be smaller than the Model 3, but it does represent a price decrease if Tesla can match this price. It makes the compact car about $14,000 less than the current Model 3 RWD. This car will use fewer materials and batteries to be made. It's progress in the right direction. I expect this will happen around 2025 to 2026 and reach volume production around 2027.
We haven't heard this from Tesla, officially, but Tesla isn't going to stop with the compact car. They are going to make a sub-compact car and I believe THAT car has the chance to one day reach $15,000. This sub-compact car will be more the size of a Mini Cooper, but have all the technology of a Tesla. Due to the small size of this car, I believe there will be a giga press that can make a SINGLE CASTING that contains the ENTIRE FRAME for this car.
This isn't too far-fetched. There was recently a video of the 16,000 ton giga press that will be used for single castings. In another decade, we'll have an even bigger and more effective giga press than this - maybe even a few versions beyond it.
Tesla will be able to sell their sub-compact car for $15,000 when there is an abundance of EVs and batteries in the world. I expect this to happen toward the end of the decade around the year 2028 or 2029 and then volume production around 2030. This will happen because of Tesla's progress in manufacturing and investments in factories, minerals, and batteries.
This sub-compact car will be smaller than the Model 3 and compact car, so if you're 6 feet 4 inches like me, it may not be a car you want. However, if Tesla makes a version that is only a front row seat and that's it with space for my legs, then I would consider it for a daily commuter.
What happens if Tesla gets FSD as they have promised and their robotaxi network comes online? I don't think this affects things too much, actually. These robotaxis will still require maintenance - new tires, being washed, having repairs done, etc... and Tesla would be smart to have other people and companies use Tesla's vehicles as part of their own robotaxi network.
I do believe Tesla will make a dedicated robotaxi vehicle one day without pedals, steering wheel, or many of the things that are in Tesla's today - but it will still have a screen, cameras, and be safe. This vehicle could cost Tesla even less to make than the sub-compact car due to its increased simplicity and having less parts.
This gets me the most excited about Tesla: a $15,000 car that costs $12,000 or so for Tesla to make that functions just like Tesla vehicles do today. These are going to flood the world and Tesla will make hundreds of millions of them. But most people aren't thinking about this because it's too far in the future.
However, the day is coming because soon it will be 2024 and then the years will continue on. Tesla has proven they can reach volume production with EVERY vehicle they've ever designed. These vehicles will be no different and they will be much simpler than the advanced Cybertruck about to be released.
In Other Tesla News: Elon Musk gives his famous "two weeks" response to when FSD v12 will be ready for customers.
Are you as excited as I am about a $15,000 Tesla? Or is it too far in the future for you to even care? Or, could Tesla make an even CHEAPER car than this?
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Hi! My name is Jeremy Johnson, and I am a Tesla investor and supporter. I first invested in Tesla in 2017 after years of following Elon Musk and admiring his work ethic and intelligence. Since then, I've become a Tesla bull, covering anything about Tesla I can find, while also dabbling in other electric vehicle companies like Aptera. I cover Tesla and EV developments at Torque News. You can follow me on X.COM or LinkedIn to stay in touch and follow my Tesla news coverage. Image Credit, Tesla, Screenshot and Leon Wei.
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