From the inception of his company, Elon Musk has been determined to build an exceptional electric vehicle priced at just $25,000. Now, a New Street Research Managing Partner and Tesla Bull, Pierre Ferragu is predicting that Musk will unveil this car on Investor day.
According to Ferragu, the upcoming Tesla Model 2 will boast a 15% decrease in size, 30% reduction in weight, and 25% smaller battery when compared to its predecessor. Furthermore, due to design alterations as well as innovations in architecture and construction techniques - all of which are expected collectively reduce costs by around 37%.
We expect Model 2 15% shorter, 30% lighter and 25% smaller battery than Model 3. We looked at how ICE compacts compare to mid-size ICE sedans and extrapolated the comparison between Model 3 and ICE mid-size sedans to reach this conclusion. pic.twitter.com/csDfINpBik
— Pierre Ferragu (@p_ferragu) February 27, 2023
If Ferragu's model is correct, it could mean a gross margin of above 20%, much greater than the less-than-10% profit Toyota earns from every Corolla. By 2030, he reckons this would lead to 12 million units sold and revenue reaching an unprecedented $400 billion.
An expert from Guidehouse Insights anticipates that Musk will announce the Model 2, but only for Chinese consumers. This reduced-size car, with a smaller battery and fewer miles per charge could be successful in Chine due to its convenience; however, it would need more range if Tesla wanted similar success within the U.S. market before introducing a version of this model here as well.
As the world knows, Tesla CEO Elon Musk has a history of setting expectations too high. Nevertheless, if he and his team at Tesla successfully accomplish Ferragu's predictions as anticipated, it would cause an immense stir in the automotive industry.
