Low-Cost Tesla Model 2 Or ‘Model 2.5’ Could Come By Late This Year But Opinions Vary On Form

After Tesla’s first quarter earnings conference call on Tuesday, two schools of thought have emerged on the upcoming affordable Tesla vehicle (or vehicles). One school says the long-awaited Model 2 is the low-cost car that’s coming, the other says something different is in the works, call it the Model 2.5. One thing is clear, however, some kind of new low-cost vehicle is in the pipeline, despite a report to the contrary.

During the call, CEO Elon Musk did discuss the future low-cost vehicles — albeit briefly — specifying that the new “affordable” vehicles are based on aspects of both the next-generation platform and current platforms. And that Tesla will “accelerate the launch of new models to late this year or early next year.” (More here.)

Some Wall Street analysts have interpreted the remarks as Musk reconfirming the “Model 2,” a moniker given to the next-gen low-cost vehicle. “They’re not going straight to autonomy,” Dan Ives, Managing Director at Wedbush Securities, said on CNBC, in reference to the Robotaxi. “A Model 2, sub-$30K vehicle will be out and that’s accelerated,” Ives said.

“Decontent”: Other analysts are more skeptical. “Anyone expecting an all-new model from Tesla will certainly be disappointed, but alterations beyond the surface level will take place on some existing models,” Ivan Drury, Edmunds’ director of insights, told me in an email. Drury said that modifications to Tesla’s current production methods could lower costs for all cars produced but even cheaper models might also be possible by “decontenting” existing models and focusing on just the basics.

Believe it when I see it: Natalie Neff, editor of Autoweek, was more harsh in her assessment after hearing Musk’s comments. “Tesla strung potential buyers and Wall Street along for almost three years with promises of an affordable entry-level car, this so-called Model 2, which was not only supposed to put the coveted brand into the reach of millions, it was also supposed to act as a testbed for a host of new technologies,” she told me in an email. “Color me skeptical at whatever they’re promising now, new platform or otherwise. At this point it’s a well they’ve gone to once too often,” she said. Neff added the “’affordable’ $35,000 Model 3 Standard Range lasted a hot minute” and the Roadster has yet to arrive “and the Cybertruck took four years to make it to production, two full years after it was promised.” So, she remains extremely skeptical about a Model 2. “Basically, I’ll believe it when I see it,” she said.

Updated Model Y will lead: Sam Fiorani, an analyst at Global Vehicle Forecasting, said the updated Model Y may be the most significant Tesla vehicle in the near term. “Tesla has been developing methods to make their existing products less expensive,” he said. “The current market does not provide enough demand for the production capacity of Tesla, especially with the increased competition. The updated Model Y will lead this wave of improvements in 2025,” he said.

Lest we forget: Finally, let’s not forget what Musk said as recently as January when he used words like “profound” to describe the design of the next-gen vehicle during the Q4 2023 earnings conference call and said “we’re very far along on our next-generation low-cost vehicle.” He also discussed Tesla’s future “revolutionary manufacturing system” that will be used to build the car. He described it as “far more advanced than any other automotive manufacturing system in the world.”