Tesla Plans to Offer a $25,000 EV in 3 Years, With Improved Battery Technology

CEO Elon Musk says Tesla has developed a faster, cheaper battery manufacturing process to pave the way forward

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On the heels of Tesla’s shareholder meeting Tuesday afternoon, founder and CEO Elon Musk had a big announcement at his Battery Day event: Tesla’s gigafactory is going to be eclipsed by a terafactory. Make that multiple terafactories. Musk told his audience that he wants to kick battery production up to a scale that will bring electric vehicles into a price range more consumers consider affordable.

“About three years from now, we’re confident that we can make a $25,000 electric vehicle that’s also fully autonomous,” Musk told his audience, all sitting inside various Tesla cars arrayed around a parking lot in front of a stage. When the vehicle occupants liked what Musk said, they honked the horns in lieu of applause. That comment, which came at the end of his presentation, garnered some honks.

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A $25,000 model would count as Tesla’s least expensive offering. Currently, its priciest sedan, the Model S, starts at $74,999. Tesla’s least expensive car right now is the Model 3 sedan, which starts at $35,000.  

Musk said his engineering team already has its plan in the works with the development of a new type of lithium battery that can be produced more quickly, and which is more resilient to fast charging.

“This is not just a concept or a rendering, we are starting to ramp up manufacturing of these cells at our pilot 10-gigawatt-hour facility around the corner,” said Drew Baglino, senior vice president of Tesla’s powertrain and energy engineering program. “This is just a pilot plant. The real production plants will be around 200 gigawatt-hours.”

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Musk said it would take a year or two for the pilot factory to reach its full manufacturing capacity. As a result, Tesla’s gigafactory—the company’s massive battery manufacturing facility in Nevada—opened only four years ago, now appears to be obsolete. “The gigafactory is too small, and it costs too much,” Musk told the audience.

Baglino said that his team had developed a “tabless” lithium-ion battery—an innovation that he said would allow for more seamless assembly of battery cells using less machinery, fewer moving parts, and less water. What that means from a battery manufacturing perspective is a 76 percent reduction in process costs, Tesla says. How that could benefit consumers depends on how quickly Tesla might have such a full-scale factory up and running.

Promised Innovations

Along with a significant reduction in manufacturing costs, Musk said that Tesla would begin mining lithium and silicon locally to avoid some of the supply chain costs that come from sourcing raw materials overseas.

“There really is enough lithium in Nevada alone to electrify the entire U.S. fleet,” Baglino said, adding that Tesla had obtained mining rights to a 10,000-acre lithium clay deposit in the state.

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At the Battery Day event, Musk touted other innovations, too, including a new aluminum alloy the company had developed that would allow it to cast the front and rear sections of its cars in giant chunks, with the battery pack serving as a structural element in between. He predicted that some day, internal combustion engine-powered cars would go the way of the steam engine. But he allowed that plenty of work remained between now and his dream of a fully electrified future.

The way forward, he said, is through efficiency.

“Eventually, every car company will have electric cars, but not every company will be great at manufacturing,” Musk said. “Tesla is aiming to be the best at manufacturing of any company on Earth.”

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