Model 2? Musk reveals new electric car plans and fast-tracks 30 million production target

Tesla will make new, original electric vehicle models at both its Shanghai and Berlin gigafactories, CEO and co-founder Elon Musk said on Monday (US time), also confirming that the $US25,000 vehicle touted at last week’s Battery Day would not be the Model 3, but a future, smaller car.

In a series of tweets in response to Tesla market analyst Cathie Wood, of Ark Invest, Musk divulged some more details about the numerous revelations of Battery Day.

Battery Day was met with some disappointment by those expecting a “million-mile battery”, resulting in a share fall, but Wood joined other analysts in saying that investors who downgraded their price targets missed the point of Battery Day. See: Did Battery Day live up to the hype? Some say yes, others say no

“Predictably, when Elon Musk announced at Battery Day last week that $TSLA would cut the price of a Model 3 to $25,000, several financial analysts panicked, downgrading the stock and/or cutting their price targets. In our view, traditional financial analysts have missed the mark,” Wood wrote on Twitter.

Musk jumped in to correct the statement about the $US25,000 EV, saying that it will not be a cheaper Model 3 but a newer, smaller model.

He then went on to add, in response to another tweet, that both the Shanghai and Berlin design centres would turn out original new models, signalling that there is more on the cards for Tesla’s future models than just a “Model 2” electric hatch (which has been rumoured based on a sketch published by Tesla China on Wechat).

This is not exactly a massive surprise, given that like all other car makers Tesla is making plans to extend its reach into other vehicle segments as it ramps up its production capacity.

It does, however, reflect Tesla’s top down approach, having started with the Roadster, then thenpremium Model S and Model X vehicles, followed by the “mass-market” Model 3 sedan, and now the Model Y crossover.

The negative reaction by investors is due to a misunderstanding of the electric vehicle market, says Wood. She says they are thinking of Tesla as a car maker, when in fact they should be thinking about Tesla as a disruptive tech company.

“Traditional auto analysts are analyzing a mature industry in which lower prices signal trouble: higher inventories and lower sales. Led by #Tesla, electric vehicles (EVs) are in their infancy, and BECAUSE of lower costs and prices, are moving into exponential growth trajectory,” she wrote.

“According to Wright’s Law, for every cumulative doubling in the number of EVs produced, costs will drop by 28%, suggesting that EV prices will drop below those of gas powered vehicles on a like-for-like basis during the next two years.

“Analysts following $TSLA should be expert in energy storage, robotics, artificial intelligence, and software-as-service. While they are expert at the internal combustion engine, traditional auto analysts are not equipped to analyze EVs, particularly $TSLA,” she said in the Twitter thread.

As Tesla puts its plan to reduce the cost of making batteries into action, Wood estimates the growth of the entire electric car market (not just Tesla) will reach 30 million new EVs a year in the next five to six years.

Musk agrees, although he was (perhaps uncharacteristically) a little more conservative in his estimates.

“Seven years for sure to 30M+ new fully electric vehicles per year, six years maybe. Five years is possible, but unlikely. An extra year makes a giant difference when it comes to exponentials,” he said.