How Much Will the Tesla Model ≡ Electric Car Cost? Analyst Disagrees With Tesla’s $35,000 Promise

With a promised range in excess of 200 miles, Supercharger capability, and even the possibility os some autonomous drive technology fitted as standard at launch, the 2017 Tesla model ≡ promises to be one very important plug-in car. Add a claimed $35,000 price tag after rebates, and the Tesla Model ≡ has the potential to be a truly revolutionary ride.

Tesla's third generation car is promised to sell for just $35,000. But will it?

Tesla’s third generation car is promised to sell for just $35,000. But will it?

But will the Tesla Model ≡ actually retail for $35,000 when it launches in 2016? Or will market forces mean that Tesla just can’t bring the cost of lithium-ion battery packs down quickly enough to hit that golden price in time for the car’s promised launch?

While Tesla Motors and its large fan base say Tesla’s massive Gigafactory in Reno Nevada — currently little more than a very large set of ground works — will not only be built and working by 2016, but producing battery packs in large enough quantities to make the Tesla Model ≡ hit the magic $35,000 price point, automotive analyst Menahem Anderman disagrees.

Whichever way you look at it, he argues, Tesla’s goal of a $35,000 2017 Model ≡ won’t happen. Instead, he predicts, Tesla’s Model ≡ will sell for between $50,000 and $80,000 when it initially goes on sale, simply because battery packs won’t be as cheap as Tesla hopes.

As our friends over at GreenCarReports point out, Anderman’s report — entitled The Tesla Battery Report — dishes out a large dose of scepticism to Tesla CEO Elon Musk’s upbeat predictions about Tesla battery costs in ten years’ time. While Musk predicts Tesla’s Gigafactory — operated by Tesla in collaboration with electronics giant Panasonic — will bring the cost of lithium-ion battery packs down to $100 per kilowatt-hour, Anderman says a more realistic price to expect would be nearly two thirds more.

Tesla's batteries might be swappable, but it's price that matters.

Tesla’s batteries might be swappable, but it’s price that matters.

“Our assessment shows that pack pricing for the 2025 time scale could be as low as $167/kWh,” he says in the report. “Pack cost much below $200/kWh is unlikely before 2020.”

Anderman, a known battery skeptic and long-time organiser of the Advanced Automotive Batteries Conference, has made himself a fair few enemies among electric vehicle advocates and pro-electric car industry insiders. But as John Voelcker at GreenCarReports notes, his pessimistic outlook on battery pack prices often serve as a counterbalance to over-enthusiastic and occasionally unbelievable claims from battery manufacturers, analysts and industry insiders.

Using Anderman’s predicted prices, it’s hard to see how Tesla could realistically deliver on its promises to bring the $35,000, 200+ mile Tesla Model ≡ to market on time and on budget.  Even with some basic mathematics, Anderman’s prices seem to suggest a much more expensive vehicle, pushing the Tesla Model ≡ out of the affordability range of many car buyers — and more importantly out of the competitive price zone for cars like the BMW 3-Series Tesla so desperately wants to cross shop against.

But while Anderman’s caution should be heeded, a factor not yet examined is the way in which Tesla and its CEO Elon Musk are willing to take calculated risks in order to bring a vehicle or technology to market, with the expectation that customers will follow.

Tesla's Gigafactory will reduce the cost of lithium-ion battery packs -- but will it be enough?

Tesla’s Gigafactory will reduce the cost of lithium-ion battery packs — but will it be enough?

Like Toyota’s first generation Prius, it’s conceivable that Tesla will essentially underwrite a large proportion of its initial Tesla Model ≡ sales in order to build the market and drive customers towards its first affordable plug-in. While Tesla’s long-term goal must include financial stability, underwriting the first few years of production in order to capture the market is a move we’ve seen time and time again across the automotive world.

Let’s not forget too, that rival automaker Nissan is playing a similar game, underwriting the cost of its LEAF battery packs in order to keep the price of its electric hatchback at a point where it can sustain a high demand.

What’s more, unlike building internal combustion engines, Tesla knows that its Gigafactory doesn’t necessarily have to solely rely on vehicular production to keep it running. With demand for lithium-ion battery packs for everything from smartphones to laptop computers, gadgets and medical appliances, Tesla’s Gigafactory will be able to use a far wider market demand to help bring the cost of its automotive battery packs lower and lower.

In that situation, as long as demand continues in the long term, making an initial loss on the first few tens of thousands of vehicles is a safe bet.


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  • WeaponZero

    Musk has specifically said, the 35k price tag is BEFORE tax credits. Not after.

    • Surya

      Indeed. And the fact that Tesla and Elon keep repeating the $35k figure to this day must mean they are very certain about it. And until now they have been very good at keeping those kinds of promises even though they missed some of them.

  • There is no reason for Tesla to underwrite the price. If the Model 3 comes out at $45K for a reasonable specification including 200 mile range, supercharging and performance comparable to similar priced gas+luxury rivals, they will sell bundles. The $35 cost is a fantastic target, and would capture a large base, but again, Tesla could ship the first 100,000 Model 3 as signature versions with all the bells/whistles, and the profit margins on those could help them sell lower priced models as you suggest (ie underwrite) but perhaps a year later.nnnWith 350,000 electric car owners worldwide (from 250,000 today) expected to be on the car market at that time, selling 100,000 Model 3 is a given, as there are a goodly number of folks just like me who are into their first EV as a second car, and looking to go completely electric when Tesla releases their next gen car!

  • Matt Beard

    Hang on… these maths don’t seem to work.nnAnderman claims the Model u2261 could cost $80,000 rather than $35,000 because the batteries needed to achieve 200 miles would be too expensive.nnnLet’s look at what it takes for that to be true. His claim is batteries alone would account for the differnce between $80k and $35k, so an extra $45k. The 60kWh Model S has a 208 mile EPA rating, so 60kWh is bound to be enough to get a smaller car 200 miles. That means the batteries would need to be $45k / 60kWh more expensive. So, $750/kWh more expensive than Elon claims.nnnThe current claim seems to be that the gigafactory will eventually bring the price down to $100/kWh. This means that Anderman thinks the actual cost will be up to $850/kWh.nnnAt that price Tesla can’t even afford to make the model S as an 85kWh battery pack would be $72,250 before adding the rest of the car!

    • vdiv

      Let’s look at it from a Leaf perspective and apply a simple addition that everyone, even I understand. A basic Leaf S starts at $29k, and a new Leaf battery is what, $6k5? Put the two together and we have our $35k 200-mile EV. Obviously not quite, and it is not that simple, but the technology in the Leaf is 6 years old. It seems quite possible to me.

      • Surya

        But to be fair: a new leaf battery doesn’t cost $6.5k, Nissan makes a loss on the swap. But they won’t tell you how much of course. My guess is the pack costs them somewhere between $7.5k and $10k

  • Fred Johnson

    tesla bankrupt within 5 years

    • Matt Beard

      Care to walk us through the logic?

    • austropithicus

      Fred is a naysayer. He has no hope.