It is noteworthy how powerful Tesla, the strongest electric vehicle company, will launch a low-cost offensive in cooperation with Ningdusdai (CATL), the world’s largest battery maker in China.
Expectations for the so-called half-price Tesla are high at the 2023 Investor Day event to be held at the Austin Gigafactory in Texas, USA on the 1st of next month.
Tesla plans to sell its entry-level model, known as the Model 2, for $25,000, about half that of the currently cheapest Model 3.
Last year, the development of new battery technology was not completed, so the launch of the entry-level model was delayed. However, as recently CATL, which supplies batteries to Tesla, is launching a low-price offensive in China, we cannot rule out the possibility that Tesla will also declare a price war to solidify its position as the strongest electric vehicle.
◇The core of Master Plan 3 is half price Tesla
Reuters predicted that the core of Musk’s ‘Master Plan 3’ at the Investor Day event would be low-cost vehicles. This is because expanding the market base through entry-level models is key to increasing Tesla’s production target by 2030 to 20 million units, 15 times the current level.
Already, Tesla has aggressively lowered prices to make up for sluggish sales in recent months. In particular, Tesla’s battery supplier China CATL is also launching a low-price offensive, so expectations for the Model 2 are higher than ever.
According to multiple unnamed sources cited by Reuters, CATL has significantly lowered battery supply prices through negotiations with small and medium-sized Chinese electric vehicle makers. It is a measure to gain market share. Reuters sources said that the biggest reason CATL was able to lower battery prices was based on the prospect that the price of lithium, a key raw material, would be cut in half.
According to analysts, CATL’s low-cost offensive is possible because it has already secured sufficient core raw materials by investing in lithium mining and processing business. Analysts also said that this reflects CATL’s will to block the challenges of small and medium-sized Chinese battery makers such as CALB and EVE Energy. Reuters analyzed that CATL’s ‘price war’ shows CATL’s market dominance and China’s price advantage in the electric vehicle market.
But Musk is notorious for delaying targeted deadlines, so it’s hard to be sure when the entry-level Model 2 will actually hit the market. Gene Munster, partner at Deepwater Asset Management, said Musk’s “timeline multiplied by two will give you an actual release date.”
Munster said the new entry-level model could be launched as early as 2025, years ahead of other traditional automakers.
◇Possibility of new factories in Korea, Canada and Indonesia
Given that expanding production capacity is key to launching the entry-level Model 2, there is a possibility of building additional factories. Giga factories located in California and Texas, Berlin, Germany, and Shanghai, China can be expanded, but more factories are needed for mass production.
As of the end of 2022, Tesla estimated its annual production capacity to be 1.9 million units, and Musk predicted that 12 gigafactories would be needed to produce 20 million units per year.
According to Yahoo Finance, government officials in Mexico and Indonesia announced that they were negotiating with Tesla management regarding plant construction, and South Korea continues to send love calls to Tesla. Reuters said Mexico, Canada, Indonesia and South Korea are among the preliminary candidates for new factories.
Battery production is also a key issue. In 2020, Musk said that by 2022, a new generation of low-cost batteries, 100 gigawatts, would be produced and installed in 1.3 million Model Y vehicles. However, Reuters pointed out that the battery production is only enough to be installed in 50,000 vehicles.
In addition, Musk has revealed that he will expand battery suppliers. Currently, companies that supply batteries to Tesla include CATL, Panasonic, LG Energy Solutions, and BYD.
Musk’s comments about solar power and battery energy storage are also important, given that batteries are part of a plan for a fully sustainable energy future. In addition, plans for an electric pickup truck ‘Cyber Truck’ and an unmanned electric taxi ‘Robo Taxi’ are drawing attention, Yahoo Finance added.
Source: Donga
Mark Jones is a world traveler and journalist for News Rebeat. With a curious mind and a love of adventure, Mark brings a unique perspective to the latest global events and provides in-depth and thought-provoking coverage of the world at large.