During a presentation at the 2015 EIA Conference earlier this week, JB Straubel, Tesla’s Chief Technology Officer, confirmed the Model 3 is “planned for 2018”. There’s been a lot of speculation around Tesla’s upcoming vehicle, which is set to be priced at around $35,000 before any EV incentives and have at least 200 miles of range. Just a few weeks ago at Tesla’s shareholders meeting, Elon Musk, Tesla CEO, said the Model 3 could be ready by 2017, but Straubel’s presentation indicates that 2018 might be more realistic.
The availability of the Model 3 depends on Tesla lowering the cost of batteries and in the presentation, which addressed the impact of EV’s and energy storage on the electric grid, Straubel made the case that battery costs are falling faster than anticipated and that Tesla seems ahead of the curve. Battery costs are often estimated by cost per KWh. The Model S is offered with a 70 KWh or 85 KWh battery pack. The exact cost Tesla is paying for their batteries is unknown, but experts are currently estimating it to be anywhere between $200 and $350 per KWh .
Tesla’s battery factory currently under construction in Nevada is expected to reduce the current cost by 30% due to economy of scale and by tuning the chemistry of the battery cells.
Lower battery costs would not only help Tesla’s electric vehicle business, but also the recently launched “Tesla Energy”, which offers a series of stationary energy storage products for residential, commercial and utility-scale applications. Tesla announced it will sell the 10 KWh Powerwall, a residential battery pack for power backup, for $3,500. Which means a sale price of $350 per KWh.
A slide of JB Straubel’s presentation shows that Tesla estimates that the price per KWh of the Powerwall could fall to $100-$200 by 2020.
If Tesla can achieve those costs, the company estimates an annual vehicle production of 500,000 per year by 2020. Tesla is on target for 55,000 vehicles in 2015.
You can view a PDF of the presentation here.
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The big question I have is with the significant battery cost reduction that will make the model 3 a possibility at $35k, will we also see a lower entry level price for the Model S in 2018? If I have the choice of a Model 3 for $35k or a Model S for $50k, I’m taking Model S all day. And if the savings does carry over, current S owners are going to see quite a hit in resale value.
I doubt you’ll ever see a brand new Model S at $50,000. They will either add more options to the base model, make the base model with a bigger battery pack or even simply take bigger margins, but I doubt the last one. I think they will make it an higher value offer.
I’ll be amazed to see a Model 3 available for sale before 2019.