Tesla Will Build a Model 2, Then a Model 1: Each Half the Cost Of the Prior Model

If you watched Tesla Investor day, you can deduce something about the future of Tesla vehicles. They will keep driving down costs on future models.

The Tesla Model 2

Tesla Investor Day is over and if you were paying attention, you can predict what Tesla is going to do in the future. You may not be able to predict when, but you can bet that Tesla is going to push forward to one very important mission.

This mission is: Cost reduction and affordability of its vehicles.

Tesla vehicles are amazing, but not everyone can afford them. Until they become affordable, Tesla will not be able to scale to 20 million vehicles per year. I gave a brief overview of how Tesla will scale to 20 million vehicles per year. There are two important vehicles that will come into existence to make this happen.

The first is the Model 2 - or the Model C - or the Model Q - or the compact car. It has been called many things, and nobody knows what it will be called. What we do know is that Tesla is pushing manufacturing and engineering limits to get this vehicle to 30% to 50% of the cost of the Model 3 RWD. The Model 3 RWD base price is $43,000. This vehicle will get to about a $20,000 to $25,000 selling price.

The Model 2 will be smaller than the Model 3 and likely have only 2 doors. I don't think this vehicle will cannibalize the Model 3 RWD because the Model 3 RWD will have four doors, more luxury, and more range.

I expect that the Model 2 will have about 240 miles of range and be much more efficient than any of Tesla's other vehicles. It will get about 6 miles per kW with a 40 kWh battery pack and weigh much less. It will use LFP batteries. Tesla will sell more of these vehicles than the Model 3 and Model Y platform combined.

I believe this vehicle is one of the vehicles that was covered in Tesla's future vehicle lineup. You can see that lineup here. I believe the other vehicle that was covered up was a Tesla Robo van.

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The Tesla Model 1

Now that we've covered the Model 2 or compact car, we have ANOTHER vehicle that is going to be even cheaper to buy than that. This vehicle is going to come out 3 or 4 years after the Model 2 and I will call it the Model 1 - I wrote about this vehicle a while ago and nobody knows what it's going to be called or what it will look like.

We do know this, though: It will be about 30% to 50% the cost of the Model 2. This puts this vehicle at a $10,000 to $17,000 price point. This vehicle will be a little bit smaller than the Model 2 and I believe it will be made just like a toy car. It will have a single casting and all the insides will easily be put inside through advanced manufacturing techniques of Tesla engineers.

If you saw Investor Day, Tesla showed you that it is improving its manufacturing processes. Tesla HAS to do this in order to reach a scale on its upcoming vehicles that gets it to 20 million vehicles per year. One of these manufacturing techniques was having more stations to put more pieces of the vehicle together in parallel. This creates less backlog and then the final assembly can simply put all those parts together.

I believe in about 5 to 6 years, we will see a video from Tesla that shows a presentation of a single cast that then has 2 doors put on it, and then it has seats put in it. There will be nothing else in the vehicle except seats and a screen. Wheels will be put on as well as cameras. This vehicle will be simple to manufacture and won't require much human intervention to make. This is one version of the Model 1 and, I believe now, that it will be a dedicated Robotaxi vehicle.

The reason I think this is that in 5 to 6 years, Tesla is going to have autonomy solved. The chance that in 5 to 6 years, FSD is still in beta and hasn't been solved is small to me because Tesla is getting huge amounts of data. There are 400,000 FSD beta testers right now, and there will be millions of them in a couple of years.

Tesla will also continue to reduce the costs on their Model 3 and Model Y vehicles, which will still be sold in high volume. The Model 2 and Model 1 will reach markets in South America, Asia, and India. I think Tesla will get higher than 20 million vehicles per year, eventually.

What do you think of the Tesla Model 2 and Model 1? Will Tesla make these vehicles eventually?

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Jeremy Johnson is a Tesla investor and supporter. He first invested in Tesla in 2017 after years of following Elon Musk and admiring his work ethic and intelligence. Since then, he's become a Tesla bull, covering anything about Tesla he can find, while also dabbling in other electric vehicle companies. Jeremy covers Tesla developments at Torque News. You can follow him on Twitter or LinkedIn to stay in touch and follow his Tesla news coverage on Torque News.

Image Credit, Tesla, Screenshot