Although Tesla sent out this image below as a teaser to a small car that Tesla might build for global emerging markets, if there is one thing I’ve learned from the Cybertruck unveiling, it is that Tesla will radically change its design to meet its objectives. As Franz said in this excellent interview with Ryan McCaffrey, while other manufactures require their designers to compromise on the design of each vehicle so that the new vehicle “looks” like part of of the family, Tesla doesn’t do that. They just design each car to be the best it can be for the target market.
The car above would be a great $25,000 Tesla if that is what Tesla wants. Benjamin Schulz and I covered in this article some ideas to get us down to that goal. But Warren Redlich thinks we might be aiming too high. The most popular cars in India and China are about $4,000 each. But that isn’t the important metric. The cost per mile is what matters more than the purchase price, since you will be able to just use the car for the miles you need.
|Warren Redlich’s YouTube video.|
A car I was a fan of a few years ago because of its low cost and long range (a perfect complement to the Nissan Leaf I owned at the time) was the Elio. This form factor should have half the wind resistance, half the weight, and about half the material costs — and be perfect for all those trips people take with 1 or 2 people in the car. It’s great for people who aren’t comfortable riding a motorcycle either from a safety perspective or a lack climate control/ getting drenched in the rain. Elio hasn’t been able to get the financing it needs, so I assume it will never get built, but you never know.
Warren speculates that we can get from the 60 cents a mile that the IRS allows us to deduct per mile today to less than a nickel a mile. In my most recent article on the 5 year cost of ownership of the Tesla Model 3, I show over $20,000 depreciation over 75,000 miles for a Standard Range Plus, or about 27 cents a mile. He proposes getting the cost down to $10,000 for a million-mile car. That would be a penny a mile.
If you borrowed the whole $10,000 at 5% interest, you would pay $500 a year in financing. Assume 100,000 miles that first year and that is only half a cent a mile — and that would go down as you paid off the loan. Fuel/electricity costs are about 3 cents a mile for the Model 3 (he said 1.7 cents assuming a very cheap 7 cents a kWh for electricity in India) but a smaller, more efficient vehicle would be about a penny a mile for fuel. According to my cost-of-ownership model, insurance costs about 6 cents a mile today, but with robust full self driving software, it is realistic to drive that down to a penny a mile. I have maintenance and repairs at about 3 cents a mile on the Model 3 today, but a much smaller vehicle should reduce tire and other costs by two thirds and get that to a penny a mile.
- Depreciation — 1 cent
- Financing — half a cent
- Fuel — 1 cent
- Insurance — 1 cent
- Maintenance & Repairs — 1 cent
- Total — 4.5 cents
In this article, Omar and I speculated that if we got the costs per mile down to 18 cents a mile, or 3.6 cents per seat mile, we wouldn’t have to pay that — retailers would pay to bring us to the store! Warren does mention that this radical reduction in costs will increase traffic and we will need to reduce the following distances between cars, possibly allowing 2 vehicles per lane and/or do something like bore tunnels to solve the problem. I encourage you to watch the 20 minute video yourself to hear Warren’s optimistic view of the future.
If you decide to order a Tesla, use a friend’s referral code to get 1,000 miles of free Supercharging on a Tesla Model S, Model X, or Model 3 (you can’t use it on the Model Y or Cybertruck yet). Now good for $250 (up from $100) off on solar, too! If you don’t have any friends with a Tesla, use mine: https://ts.la/paul92237