Here's How Tesla Could Go About Making Its $25,000 EV A Reality

Tesla Inc TSLA could get the pricing of its rumored Model 2 vehicle down to $25,000 by downgrading costs associated with batteries, exterior trim and the interiors of the vehicle, according to analysts at Sinolink Securities, CnEVPost reported Monday.

What Happened: The Chengdu, China-based analysts looked at existing Model 3 bill of material (BOM) costs and estimated price reductions for the future vehicle widely believed to cost RMB 160,000 or almost $25,000. 

The breakdown estimates an RMB 5,000 ($768) reduction on costs of battery, RMB 26,000 ($3,994) for body and interior/exterior trim, RMB 2,000 ($307) for the electric motor, and RMB 1,500 ($230) for thermal management. 

The analysts said that taking into account the “appropriate compression of gross margin level,” the selling price could be lowered to RMB 165,000 ($25,345). 

See Also: Why Tesla Autopilot Safety Concerns Are Unfounded
Why It Matters: The appetite for economical EVs can be gauged by the fact that a $4,500 two-door EV made by a joint venture between General Motors Compay GM and state-owned SAIC outsold the Model 3 in China two-to-one in February. 

Last month, Tesla denied it was working on a $25,000 vehicle aimed at the mass market. The denial came after several media outlets in China reported otherwise. 

Reports had emerged that Tesla planned the vehicle to be sold globally. 

If the Elon Musk-led company were to launch a $25,000 model, the price range would cover 34% of the Chinese market, as per the analysts, CnEVPost reported.

The analysts reportedly expect Model 2 sales in such an eventuality to exceed those of the Corolla made by Toyota Motor Company TM, a vehicle that sells more than one million units a year worldwide. 

Price Action: Tesla shares closed nearly 2.3% higher at $670 in Monday’s regular session.

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