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Tesla to build $40K affordable ‘Model 2’ EV in Germany: report

Olek Novak

Long awaited plans for an affordable electric car by the US maker are progressing with reported plans for European production

A highly anticipated budget-friendly electric small car from Tesla appears to be closer to fruition, with reports emerging that plans are afoot for European production.

According to a Reuters report citing an unnamed source, staff were informed about the plans for production of the car – which will reportedly cost in the vicinity of 25,000 Euros (roughly AUD$40,000) – by Tesla CEO Elon Musk during a visit to the US automaker’s German factory in Gruenheide last week.

Tesla Model 2 teaser
Tesla previously related a teaser image of its so-called Model 2

The expected $40K price tag of the long hyped but as yet unrevealed car would pit it against new affordable Chinese EV rivals such as the MG4 and BYD Dolphin which are priced at just under the forty thousand dollar mark for their entry-level models.

It remains to be seen if the so-called Model 2 will make its way to Australia and if it does, where it will be built. Tesla’s Chinese factories are a likely candiate for our right-hand-drive market, where the Model 3 sedan and Model Y midsize SUV are currently built

Compact Tesla vital for global expansion plans

Referred to unofficially as the ‘Model 2’, the small car will be a crucial part of Tesla’s global expansion plans which involve having a 10-vehicle lineup by 2030 and increasing sales to 20 million units annually, up from the current 1.8 million.

The as yet unnamed compact car – which will sit below the Model 3 in Tesla’s lineup, potentially taking the form of a small sized hatchback with a single electric motor fitted to the front or rear axle – would be the second Tesla model to be produced at the German plant, which is targeting increasing production outputs to one million per year.

2023 Tesla Model Y Performance red side driving
2023 Tesla Model Y Performance red side driving

Despite the absence of a value-focused electric car, the Model 3 and Model Y are both performing extremely well on Australian sales charts, year to date as of the end of October delivering  8680 and  24,267 units respectively. 

However, strong-value focused challengers from China are now providing compelling alternatives for those looking for an electric vehicle at a cheaper price point. 

Where else would the Australian ‘Model 2’ be built?

Tesla currently builds only the Model Y SUV in Europe, however given the scale of Tesla’s global targets, production of a high-volume small EV would be expected at various plants across the globe including Tesla’s factories spanning China and the US.

Plans were also previously afoot for a new factory in Mexico, though this has been delayed. As well as this, recent months saw speculation that the Model 2 could be built in India to take advantage of lower labour and raw material costs. 

There have been previous reports the new Tesla could be built in India. Pictured: the Model 3

However, equally as crucial as expanded production of a cheaper Model 2 to Tesla’s expansion plans are various manufacturing and technological innovations like gigacasting which the brand has previously detailed as necessary to ensuring the efficiency required to reduce production costs and meet market demand. 

There is no current confirmed timeline for production of the new model, with a full reveal having been expected for some months. 

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