Musk Sets Lofty Goal for $25,000 Model With Tesla-Made Batteries

Tesla Inc. laid out a road map to build a $25,000 car by 2023 and eventually 20 million cars a year, part of a highly anticipated presentation that was short on the sizzle from Elon Musk that investors have come to expect. The cheaper car will come from cutting the cost of batteries in half, the chief executive officer said at an event Tuesday, based on a series of innovations that include using dry electrode technology and making the battery a structural element of the car.

Those incremental and longer-term advances belied expectations for a blockbuster leap forward, which Musk himself played up in the weeks ahead of his company’s first-ever “Battery Day” event, then walked back on Monday. Tesla shares fell as much as 7.7% in postmarket trading Tuesday after closing at $424.23.

“The challenge with the stock is that everything they are talking about is three years away,” said Gene Munster, managing director of Loup Ventures. “I think traditional auto is in an even tighter spot, but Tesla investors want this tomorrow.”

Vertical-integration improvements — from making its own battery cells on a pilot line at its factory in Fremont, California, to owning rights to a lithium clay deposit in Nevada — are designed to allow Tesla to cut costs and offer a cheap car as soon as 2023.

“This has always been our dream from the very beginning,” Musk said at the event showcasing Tesla’s battery technology. “In about three years from now, we are confident we can make a compelling $25,000 electric vehicle that is also fully autonomous.”

Halving Battery Costs

Musk, 49, is teasing prospects for a cheaper mystery model without ever having really delivered on the $35,000 price point he had long promised for the Model 3. Three years after Tesla started taking orders for the car in early 2016, the CEO announced plans to close most of Tesla’s stores as a cost-saving measure, allowing him to offer the car at that cost. He backtracked 10 days later, and the cheapest Model 3 available now is $37,990.

Making a truly mass-market electric car and boosting Tesla’s current annual production to 20 million cars will require vastly more batteries than are currently being produced from a handful of suppliers around the world. So Musk plans to expand global capacity by manufacturing battery cells in-house to supplement what it can buy.

“Today’s batteries can’t scale fast enough,” said Musk, who is driven in part by the need to find sustainable energy sources. “There’s a clear path to success but a ton of work to do.” Musk said the gasoline-powered internal-combustion engine will one day be obsolete.

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