Tesla’s cheaper €25.000 model to be built in Germany?

According to sources quoted by the Reuters press agency, Tesla CEO Elon Musk has told employees at the Grünheide gigafactory near Berlin (Germany) that he plans to install a second production line, aside from that of the Model Y, to build the long-expected ‘affordable’ Tesla under €25 000.

Tesla declined to comment, and the ‘source with knowledge of the matter’ didn’t mention further details or a possible production start day. Tesla’s Model Y, built in Germany, is currently Europe’s best-selling EV.

In Belgium, the RWD Model Y starts at €47 940. The basic Model 3 is even cheaper at €45 970, but still far from the $35 000 car (€32 750) once promised. A smaller, more compact Tesla hatchback has been teased before as a possible Model 2, a candidate to become the cheap €25 000 model envisioned now for Grünheide.

Reuters quotes car data research specialist Jato Dynamics saying the average EV sold in the first half of 2023 in Europe was around 65 000 euros, compared to 31 000 in China. In Europe, EV sales are mainly driven by company car sales.

In Belgium, for instance, currently, two-thirds of all new cars are being paid for by the boss, and half of them are electric. Private sales of EVs are still marginal all over Europe, as most people consider the initial purchase prices of an EV still too high and not everywhere governments are giving incentives.

Momentum is now?

Musk has always said his final goal was to produce a cheaper EV once his more expensive models created enough financial room and the momentum to beef up mass production up to 20 million cars by 2030. But although the topic surfaced several times, the plan was shelved once the coronavirus and chips shortages threw a spanner in the works.

At Battery Day 2020, Musk said he was confident the 25 000-euro car could be realized by 2023. Since then, EV production has recovered, and prices of battery materials have been declining.

Streamlining production

On the other hand, Tesla is working on streamlining its technique of die-casting large parts of the car’s underbody in almost one piece and using robots intensively to assemble interiors. That would cut production costs even further, making a cheaper EV model plausible.

The Grünheide gigafactory currently builds around 5 000 Tesla Ys a week, which would mean some 260 000 a year, but plans are to scale up production to one million cars yearly.