What Would it Take to Make Tesla Model E Desirable and Profitable?


What Will It Take To Make Tesla's "Next" Car A Success?

What Will It Take To Make Tesla’s “Next” Car A Success?

Elon Musk mentioned in his Q&A in Germany, that the prototype of the Model E will be coming in 12 – 18 months. He also re-confirmed that 200 mile range would still be the base model, with larger batteries/ranges as available upgrades. So what gives to cut the starting price in half form the current $70k Model S? Size and content…

It is well known that the future Tesla platform will be a smaller and likely not have the 5+2 seating of the current Model S. Musk has implied several times that the size will be similar to a BMW 3 series. Let’s hope they remember to keep the roofline high enough for non-decapitated humans in the back seat.

So lets get down to business, where will the savings come from? Forget no air suspension and no tech package, these are already excluded to drop the Model S price down to the lofty $70k. We need to cut deeper…

1. Only one screen

Tesla's 17" Infotainment Screen Has Never Looked So Good!

Tesla’s 17″ Infotainment Screen Has Never Looked So Good!

This comes straight from the bosses mouth. In the same interview mentioned above, the first example Musk used was to only have one screen instead of two.

All the attention in the Model S interior goes to the large 17” display powered by the Nvidia Tegra 3 processor. Some people may not realize there is an equally beautiful, interactive, and customizable screen that displays the gauge clusters behind the steering wheel, and powered by yet another Tegra 3 processor.

Dropping one screen and one processor seems like a logical place to lop off a few grand. Which screen would you rather lose?

Tesla Model S Instrument Cluster

Tesla Model S Instrument Cluster

2. Smaller Battery

Wait, Wait… Before you start yelling at me, “you told me the range would still be 200 miles on the base version”, our old friends (or foes) weight and aerodynamics come to the rescue here. We are talking EPA range on the 5 cycle test (http://www.fueleconomy.gov/feg/fe_test_schedules.shtml), so weight and aerodynamics help the stop and go driving and highway cruising range, respectively.

It Is What's Underneath The Tesla That Makes It Special

It Is What’s Underneath The Tesla That Makes It Special

By cutting down on the wheelbase of the car, you are automatically removing the amount of structure you need, hence reducing the weight. If the car can get a little narrower and shorter, without sacrificing the outstanding coefficient of drag the Model S has (0.24), the total drag force at highway speed will be reduced and range increased.

Now that we have improved over the Model S in stop and go (with weight) and highway range (with aero), a battery smaller than 60 kWh will still give a 200 mile EPA range. But wait, that means we have less weight again….rinse and repeat.

I think we will end up with a 48.873 kWh battery. I did exactly no math to come up with this very exact number.

3. “Wheelz of Steel”

1996?  Can That Be Right?

1996? Can That Be Right?

Who knew, back in ‘96, OutKast had the secret for Tesla in their quest for mass market electric vehicles?

I know steel wheels and hubcaps (that relentlessly fall off) doesn’t sound like the “Premium Electric Vehicles” that Tesla promises in their tag line, but there are savings there and it helps to advertise the low introductory price.

Remember all the stories of fancy wheels flying on planes from Italy for the end of year production rush in 2012? Tesla spared no expense on the wheels for Model S, even the base 19” wheels. I can see them getting creative on the cheap steel wheel w/ cover idea, to save a couple grand on the base sticker price.

4. Watt do you need?

Remember all the magic we pulled on number 2 to reduce the weight? Now it really starts to pay off. Musk, former McLaren F1 owner, loves performance and knows it sells cars. Tesla has pretty much always touted their top of EV industry acceleration numbers.

60 kWh Model S Uses A 225 kW Powertrain

60 kWh Model S Uses A 225 kW Powertrain

Just to put it in perspective, the 60 kWh base Model S has been clocked at 0 – 60 in 5.3 seconds (1 ft roll-out), which is faster than any current production plug-in, ironically excluding the $1 million+ McLaren P1.

This one can be explained with elementary math: Acceleration = Force (power) / Mass (weight). Special thanks to Newton for that second law. We just dropped the weight, so we can drop the power by exactly the percentage. The 60 kWh Model S uses a 225 kW powertrain (302 HP for engine guys). 60 kWh Model S is 4464 lbs, so at 3800 lbs the Model E could hit the exact same 0 – 60 numbers with 190 kW. They might even drop that further to make sure it isn’t faster than the Model S. So lets say 175 kW.

That is a 22% reduction in the drivetrain power. This has a cascading effect on costs. The electric motor can have less copper windings, the power electrics scale down, and even the high voltage cables carry less current (which means less copper). Do not underestimate how expensive all those copper items are.

Oh, and that drops more weight, go back to item number 2…

5. Tipping the Scales

Is It About Weight?

It Is Not Just About The Weight Of A Vehicle (photo via Car & Driver)

You thought I was going to talk about weight again didn’t you? Gotcha!

It is time to forget about car design for a bit and talk to the desk jockeys in the procurement department. Making low cost vehicles is all about economies of scale. If I gave you $100k, you couldn’t build me that Geo Metro (right) to spec from scratch.

Before the Model S, Tesla was pretty much ignored by every automotive supplier not named Lotus. So much so, Musk placed almost sole blame of their slow ramp up on sub-supplier issues in fall 2012.

I have a feeling this time around, suppliers will not take Tesla so lightly. They will be negotiating their supply pricing based on 10x volumes of where Model S started. 200k parts/year vs. 20k parts/year makes a significant difference in how the suppliers can spread their tooling costs.

In addition, Tesla’s hype and innovative designs will give them an upper hand in supplier negotiations. Suppliers use their current client list and complex projects as their prime advertising in obtaining new clients. Having Tesla on their client list will have value to suppliers beyond the invoices addressed to Fremont.

Let’s sum it up

Less Talking, More Get With The Doing - We Are Impatient Around Here!

Less Talking, More Get With The Doing – We Are Impatient Around Here!

It only took just over 1,000 words for us to completely design the Tesla Model E. So what is this 3 – 5 years nonsense Elon? You can have every bar napkin I just drew this out on, no charge. Actually, I will take one of those Model Es as fair compensation.

In all seriousness, I skipped over the most glaring assumption in the concepts above and that is the “better battery”.

Every automaker either complains about it or brags that they are bringing it. As it stands right now, Tesla has the best and claim to have a path to a battery that will enable the Model E. The generic improvement number used for lithium battery improvement over last decade or so is 8% annually.  That is a combination of performance and cost. It isn’t the famous rate of transistor improvement (Moore’s Law), but it is probably better than your retirement account is doing.

If you say a 2017 release of Model E, that is five years of battery improvement over Model S. Compounding the annual battery improvement, baseline * (1 + 8%)^5 years, you get a 47% better battery. You can split that between energy density and cost and get a great starting point for Model E.

Are there any features in the base Model S that are excessive and ripe for removal? Did I totally swing and miss on any of my Top 5 cost reductions? Fire away in the comments.

Categories: Tesla

Tags: ,

Leave a Reply

70 Comments on "What Would it Take to Make Tesla Model E Desirable and Profitable?"

newest oldest most voted

I don’t know how much they will want to deviate from the current drive train since more of the same parts allows them to spread costs.

Another way to reduce cost is charging say ~$5k to use the super charging network for life. Elon has said the price of the super-charging network is baked into the Model S. Removing this and then charging for access would help reduce the price.

Good point. And Tesla seems fully aware of money that can be made away from purchase. It could be an exercise in decontenting: steel wheelz, much cheaper synth fabrics, gasp: regular door handles, degraded charging equipment, or any other option many would see as required (Nav, etc) that simply gets more expensive if they’re challenged to deliver on time, and budget. We’ve seen this movie.

Agreed about the drivetrain. I predict:
– an equal sized battery pack, even if part of it is empty
– battery-swapping allows the car to effectively rent a larger 85 kWh pack
– nearly equal 116-inch wheebase as a consequence (doable, as BMW’s F30 wheelbase is 110 inches, and they have a 115-inch version in china)
– same motor as the Model S, as performance is what will make it worth 328i/335i pricing, and a smaller motor saves Tesla only a few hundred bucks (I bet the Model S 60 and P85+ have minimal motor differences)
-$40-45k price before tax credit. I know Elon says less, but they want margins and it’ll be a premium car competing with the 3-series, so they’ll cede the $30k market to Nissan/GM until later
-$5k discount if you rent the battery for, say, $70/mo, as this strategy makes too much sense not to happen

If I ever came across a idea where you had to lease a electric car’s battery for the life of the car I wouldn’t own one. In that with my gas car as if now I own it but don’t have to worry about leasing the gas tank. Not to mention if I bought a used EV for $9000 I wouldn’t pay $100 a month to own it’s batteries.

So you would rather buy a $9000 used gas car and pay $150/mo for gas? Don’t be silly.

The EV’s primary competition is the gas car, and main reason it loses that battle for most customers is up front cost. Most will only look a few years down the line for savings, and don’t give more than token consideration to depreciation. The EV’s strength is lifetime cost and reliability. It’s up to manufacturers to turn that consumer shortsightedness into profit.

You are not leasing the gas tank, but you are paying periodic rents for the contents.

After the rent period is up you have released the spent content for society to pay up for atmospheric and habitat damage, and you pull into a gas station to rinse and repeat.

Great article Josh…I wonder if at some point a cheap Tesla just isn’t a Tesla anymore. In defining the brand, Tesla needs to decide what it is. Is it everything electric? Only high-end electric? I really cheapened down Tesla just might not feel right/fit into Tesla brand image. Tesla can decide this on its own and will do so as it gets more models out there.

What makes a Tesla a Tesla?

A Tesla is any car manufactured by Tesla. Let’s not mystify it. Since the large majority of people will never drive, let alone own, a low volume $80,000 Tesla, they will not have anything to compare a $35,000 Tesla to, except maybe their Honda or Chevy. Tesla just has to be better than a $35,000 Honda or Chevy to be successful, and then to manufacture them in volume. Only then will we know what Tesla is.

A great number of those “buying” a 35K Honda or Chevy are leasing them to keep the monthly cost down over buying. Leases are such a widespread auto buying (or “renting”) style that Tesla has to be well established with a bank or two which will handle the Tesla leasing from the outset. If they do not get actual 3-year leases ready before Model-E comes out, the numbers people say that Tesla “will” sell the cars at will be quite limited. People who have not yet experienced electric cars will need incentive to take a short-term plunge first before committing to a many-year ownership experience with something new. I do expect that the Model-E will come in at higher cost for a well-optioned model and thus take its nominal price up well above $40K. And there, you are in the mid-range luxury market of today such as BMW 530, Lexus, low-end Cadillac and others. Cars are transportation first and hobby second. However, the EV marketplace is currently mainly in the hobbist mode and not really and truly anywhere near mainstream. Tesla has a lot of fans and many expect them to be turning out hundreds of thousands of cars in… Read more »

Interesting and good point. Remember when Honda, Toyota, and Nissian all released their premium brand names (Accura, Lexus, and Infinity)? They did this because they figured nobody would take a high end luxury car called a “Toyota” seriously.

For Tesla, maybe the option is a reverse strategy of that. Keep the Tesla named associated with high end premium cars and introduce a new brand name to tag the economy line?

E for Edison?

Edison would be a clever name for their mass market brand, except it sounds too much like Edsel. 🙂

Edison and Tesla despised each other

They already have found two economy brands. Mercedes and Toyota.

Well said!


Tesla planned this on purpose. Would you buy a cheap car from a company you never heard of and deal with low margins and take forever to fuel future development or start at the top and work your way down. “We now have the best technology and experience to make a car for everyone”

100% electric

There is no reason why these things are only possible in a high end model.
High end is more gadget, new electronic systems and comforts.

As long as they don’t pressed on hub-caps (are they really STILL used???) the brand will not lose any of its shine.

Not having a high-tech and amazing, but IMHO unnessesary, unergonomic, distracting and theft-inducing center console mega-screen will sever only to show that it is mid-level.

As long as it delivers ev-performance and high range, without malfunctions, and is the only thing damaged in an unwanted event, all while looking good, it will deserve to wear the Tesla badge.

Love your last paragraph David!

I think Tesla’s quality speaks for itself.

And as most pilots would agree,
“A good landing is any landing you walk away from!”

Steel wheels might be cheaper, but you’ll be adding a lot of “unsprung weight”, which would violate point #2.

Also, I don’t like the idea of eliminating either screen, but you could save money by making them the same size, by using a smaller instrument-sized screen for the entertainment screen as well.

# 0 on this list should be – Cheaper ($/kWh) cells from Panasonic

I don’t care about the other stuff on this list. The Model E doesn’t happen without much cheaper battery cells.

So you don’t believe Elon Musk when he says that no breakthroughs are necessary for the Model E?

The easiest way to sell the $35K Model-E is price it at $40K. His only promise lately has been to say that the Model-E pricing will be “about half” of the Model-S. So, since the Model-S has an average selling price (ASP) of just under $100K – I doubt we will see an average price out the door of a Model-E below $40K due to optioning and high-margin options can make up for battery costs.

You’re wrong about that Anthony. You can get cells now for less than 200$/kWh. The easy way to make E cheaper than S is to halve the weight. Model S is a fatty at 2.1ton.
It could readily be halved in a slightly smaller car and that means you need much less capacity. Something like 42kWh for 320km range should be doable. That’s 8000$.
Will it be a 35k$ car? I very much doubt it. 35 after rebate is closer but probably not that either.

Removing the digital dash doesn’t save any money and I do’nt see how they can do with a single display anyway. That’s largely cost irrelevant.
Halving the weight makes everything easier but maybe losing those advanced and heavy suspension struts might save a lot. Maybe the door handles.
But Elon likes his luxury features so I’m not sure any of them will disappear, he will just keep the price up. It’s named model E so expect it to be classed like a Mercedes E class.

42kWh is not going to give 320km range. It’ll be 50 kWh minimum, and maybe 55. 200-mile EPA is key for marketing. They’re not going to halve weight, either.

You’re right about price and the digital dash, though.

>>It could readily be halved in a slightly smaller car…<<

Oh, "readily," huh?

Have you seen the weight of the new i3 with it's incredibly high-tech carbon-fiber everything (a technology that– as far as we know– Tesla doesn't have)? With 100-mile range batteries it weighs around 2800 pounds. Yes, the Tesla battery is a bit more efficient than BMW's current battery, but a 200-mile carbon fiber i3 with Tesla batteries would still come in at around 3100 pounds, but again, Tesla doesn't have access to that carbon fiber tech and if it did it wouldn't be able to produce it in a $35,000 car and still be able to afford to put in a 200-mile battery.

A Leaf-like lease deal.

I think a ZOE-like battery rental is more likely.

The smartphone model makes too much sense for EVs. Consumers like paying monthly fees instead of up-front money. That’s how the iPhone is marketed as $199 despite being attached to a $2000+ contract.

And with most new car buyers paying $150/mo for gas, charging $100/mo will be an easy sell when they get free supercharger access and cheap home charging. Over the life of an EV, that has a present value of $15k+.

I don’t believe having a center screen costs that much. If I had to give up one screen, obviously I’d rather give up my center screen than the instrument cluster screen. But there are other alternatives. For example, use a smaller, cheaper screen for the center console. The Prius, Volt, and Leaf get along just fine with their smaller screens. But the best idea is to make some kind of deal with Apple where they could just design a system where you could snap in an iPad or iPad Mini into the center console.

Personally I would really like a radio with regular push buttons then a driving I phone considering driving and suffering the web is becoming angst the law in a lot of states.

One screen behind the wheel and a dock for an iPad in the center. iPad runs apps for Nav, audio, and car control like the current 17″ screen.

I’m guessing that the base Model E will be sold at a very slim profit margin – much like the Leaf S – in order to advertise a “starting at” price. Very few will buy a base Model E. I’m guessing the feature packages will quickly push up the price such that the average price is somewhere around $50k. This is in line with the Model S, where the average price paid is close to $90k.

The MS cluster screen has poor resolution, in fact at night the lack of deep black contrast is bothersome, I don’t think the screen is more than $100 mass market.

A $35,000 new car is not a cheap car. My definition of an inexpensive car is a new Nissan Note at about $16,000 sticker. My definition of a cheap car is a used Miata for $2,000. However, having said that, I certainly want to see Tesla build something south of $35,000 to appeal to a larger group of buyers because I believe sparking the sales of EVs will change everyone’s life for the better. But, the writer has it right, What is really needed is “The Better Battery” because all the other tech is widely known and mature.

Do we really need computer screens and infotainment ports and all that other stuff in automobiles? It’s just gingerbread and in fact they are dangerous driver distractions. Going back to gauges and an AM radio might be a welcomed safety move. Perhaps we should start a movement to remove all that electronic junk from automobiles. Just think how much that would knock off the cost!

Personally I think a car has to between $20,000 and $25,000 without any tax gimmicks for me to want to buy it new. What is worrying me about Tesla is I think it’s starting to break up in that I’m going to suspect that the model E will be at least a $40,000 dollar car.

Not to mention all the E junk on these cars likes to break down a lot with their systems glitches or have some fat guy name B, J hack into the car’s on board systems and steal it with out having to leave the confront of his grandmas basement.

There will always be ‘tax gimmicks’ if that is what you call them for electric cars. Asside from the government credit of $7500, Many states collect gas taxes which go back into repairing roads and such. I thought I was getting off scott free with my Leaf in Washington state since I wasn’t paying for gas yet I was driving on the pavement, did I skirt the system by not having to pay the tax? Wrong! I was sorely mistaken when it came time to pay my license tabs for the first time. I had to pay about $250 a year in extra taxes because of my electric vehicle. That is actually more tax than I would pay buying gas for a 35 MPG car.

Why do you think you should not have to pay taxes to maintain the roads you drive on?

Just gauges.

You should not have to pay for a radio that is usually sub-par and costs more than if you bought it yourself.

Those who don’t want a radio (yes I know, not many more than me) would be best off.
But many who do would prefer a better one, and end up paying for two.

There is another way to get a cheaper power train. Just reduce the gear ratio and sell max. speed for torque. With 100 mi/h instead of 120 (60 kWh model S) torque and acceleration gets a boost by 17%, at least in the lower speed range up to 50 m/h.

No one really needs the speed above 100 mi/h, except on the German Autobahn!


Quite a few people need speeds above 100 mi/h.
It is only on the German Autobahn that they are legally allowed to drive as fast as they need 😉

I disagree with your definition of “need”. That sounds like a “want” to me.

Well, sometimes you need to get somewhere fast, and if the road conditions would allow safe higher speeds, there should be no problem.

Most speeds are ‘want’ and not ‘need’, even city travel at 30mph.
That is a higher that the 20mph that I find completely sufficient on my (human-powered) bike 🙂

Still, you are confusing want and need. People rarely “need” to get somewhere that fast. The only real exception is getting to the hospital when someone’s life is in jeopardy. Racing to get to work on time because you failed to leave early enough is not a need. Nor is getting to Grandma’s house in 3 hours instead of 4.

What makes a Tesla, is their engineering… If the same care in design and thought are put into Model E, and they can produce a desirable above average quality vehicle while keeping control of their costs– they’ll have a winner on their hands.

Just keep the E “KISS”.

In terms of Tesla’s problems of making a long range cheaper car most likely half of Tesla’s problems can be solved if battery tech advancements allow a battery pack to get the same range as a 60 kilowatt model S but thanks to improvements in battery chemistry has the same range but is 25% smaller and 25% then the previous battery. That alone could free up a lot of problems Tesla is facing with a mass marketed car. Also the idea of a 25% better battery between now and 2017 seems the most realistic idea if not it’s most likely already happened or in the works.

Aluminum! The whole body of the Model S is pretty much aluminum, pretty expensive. I wonder if they’ll do more steel with this model (aside from the wheels you mention). OTOH, maybe the Tesla factory isn’t even tooled to do much with steel. The Nat Geo documentary is pretty awesome – you get to see just how much they do with the aluminum!

Cloth seats, off the shelf DIN radio, incandescent bulbs….

That is what an “American” car is in a rental fleet!! No thanks.

Is it actually going to be called the Model E? I was hoping for something…. better. Sounds too much like Model T.

I think the 55-60KWh battery is a given in order to get a 200 miles EPA range. Remember that weight helps. But a 15% weight reduction will only improve efficiency by about 9%. So, if you count on a 20% weight reduction, then the efficiency will only improve by about 12%. Current 60KWh battery will do 206miles. That is a 3.43 miles/KWh. A 18% improvement is only 3.84 miles/KWh at BEST. To add heat and speed factors in the real world, it would need at least 55-60KWh to get close to 200 miles real world range.

Performance needs to be sub 5 seconds in 0-60mph for the 60KWh and sub 6 seconds for the 45KWh version. (I think there will be two versions)

I agree with your assessment of battery sizes, but keep in mind that Tesla is most likely shooting for 200 miles on the EPA cycle. There are cases today where the 60kWh Model S would not get 200 miles in the real world – like driving on the highway in a Minnesota winter – yet Tesla is content calling in a 200-mile car. I suspect the same will be true for the Model E.

I disagree that a sub-5-second 0-60 time is necessary for the Model E. It needs to be fast, but they won’t want it to be as fast as the Model S (which costs twice as much). Also remember that a smaller battery cannot source as much power, so the motor will have less power than in the Model S as well.

While developing an “inexpensive” car, Tesla will still wish to progress their battery tech across the entire lineup. Elon spoke to a product refresh around the Model E release timeframe (sorry, don’t have a reference here but IIRC InsideEVs had an article in the past year that included this) because by that time the stylings of the Model S will be 5+ years along. I think it is reasonable to expect Tesla to “update” the Model S to higher capacity batteries (perhaps 10%, so 66 kWh and 93.5 kWh?) with the same or lesser battery weight. If they are using higher capacity/lighter weight cells in the Model E, they almost HAVE to include in the higher end models. Similarly, they won’t necessarily change the form factor of the battery so capacity more likely will go up. Isn’t Performance relatively easy to adjust and potentially a “software upgrade away” by reprogramming the output maximum on the power controller? Battery size affects max power output from the battery and, if Tesla is actually serious about battery swapping, wouldn’t it be reasonable to put the same power controller into both cars (and perhaps the same motor as well)? Or have performance vs standard… Read more »

What is Tesla?


It’s the only manufacturer that I trust on two fronts simultaneously:

1) Tesla is committed to the EV model for the long term, not a test, or compliance. This gives me security and peace of mind that they won’t round them up and junk them.

2) Technology thought through. They are the Apple of Cars, inovating ahead of their peers.

There will always be cheaper Android cars to pick from. I lease a $35K Ford Focus EV currently for reference. The only reason the Model E might not have my business in 3 years is if there is a decent $20K-$30K 200 mile competitor (Nissan? Ford?). I would not even consider a cheaper GM if they do not come out publicly and admit their sins with the EV1.

Not sure that a lease is needed on the model E. I leased the Ford because the range is not where I want it to be, and I know it IS coming. If it was, I might have bought. But a lease would sure help.

I can get 200+ miles in my Tesla Roadster when driving efficiently (and not like a racecar :D) with a 53 kwh battery and the car weighing in at just under 2700 lbs. A lighter Model E with a 60 kwh battery and great aerodynamics might even do 260 miles, thus competing with the 85 kwh Model S in range.