> I don’t think they want to dilute their brand with a Subcompact car

The affordable EV for everyone will be the making of Tesla's brand. It will increase Tesla's footprint on earth 100 fold, and realise Musk's ambition to impact society as much as Henry Ford did 100 years earlier.

But your point about branding strategy is a different one.

It used to be the case that brands would try to isolate and hone their identities to specific niches, particularly in the luxury class. In the case of automobiles, Mercedes Benz moved on from there to become a very large car maker, whilst retaining its luxury mark. It had to, because sustaining a lead in an expensive manufacturing and design product category requires scale that is commensurate with the capital requirements of the industry.

In the case of EV, that capital requirement is huge, and Tesla already has it. But to achieve ROI on all of that capital, Tesla needs scale to monetise its technical leadership. If Tesla doesn't produce the mass market affordable EV of the future asap, one of its competitors will leapfrog it one way or another.

Traditionally the competition and thus margins on ultra cheap cars where so low they basically acted as loss leaders to get people into dealerships who could up sell used cars or make it back on repairs. Tesla’s showroom model breaks the benefits of that approach which makes competing at the very bottom of the market less appealing especially as their currently constrained by manufacturing capacity.

It’s different in China where a 250 mile 25k car would still be aspirational for many people. Though the US market might look at a 200 mile range 25k EV with a 300 mile range option at ~30k as a slightly different story with significant upsell possibilities for Tesla.

The low cost car of the 1970's was a different prospect to the low cost car of 1914.

https://corporate.ford.com/articles/history/the-model-t.html

This is really false, or was true until Toyota and Honda came in with high profit, low cost cars in the 70s/80s.

You can get a Mirage starting at $13,995, yet Toyota’s cheapest car comes in at $19,925 a 40% price bump. Companies really do avoid the segment.

They don’t sell the absolute cheapest, but they sell a lot of low cost cars. They don’t avoid the low cost segment. $20k is low cost these days, even though the absolute cheapest US car is $14k.

Toyota just discontinued its Yaris that was $17k and Honda still sells its Fit for $16k.

There’s a ton of cars to be sold at the $25k level, profitably. The upsell of new versions down the road is just gravy.

I agree IC cars can be sold for 20k profitably especially when people add options. But that’s starting at a 43% price jump from the ultra low end. However, with current battery prices a 25k EV with decent range is going to need to be cut down with near Mirage levels of options, or be closer to 30k than 25k for Tesla to profitably sell them.

Granted, Tesla could put a 150 mile battery in it but that’s also a major compromise.

The Yaris was available for roughly $14k up until a year or two ago (I only know the Canadian price, which was I think $15,900 cad). It was discontinued because it didn't sell well enough.

Similarly, Nissan had the Micra available in Canada up until a year or two ago.

US Yaris was disconnected in 2020. Even the Mirage jumps 9% this year from 14k to 15,290 in 2021 with a hefty 995$ destination charge.

Companies really have been abandoning this sediment because as I said it’s unprofitable.

You say it was discontinued because it was unprofitable. I say it was discontinued because it was unpopular. Neither of us has shown any actual proof one way or the other

Those subcompacts are still sold on outside NA so latter is plausible.

There are so many affordable EV's in Europe and China, but Tesla is just a bit more exciting with range and acceleration - not everyone needs that. It's an iPhone SE equivalent.

Would it have to dilute their brand further than the Mercedes A-Class or BMW 1 Series have diluted their respective brands?

Look for the BMW 1 or 2 series here: https://www.bmwusa.com/

They don’t sell it in the US, so my guess is they think it does. Which is why the cheapest US model I could find starts at $41,250.

Alternatively, the market for premium subcompacts is sufficiently small that it doesn't justify the cost of making them comply with market regulations?

Possibly, though they seemingly pulled the model 1 in the US due to low sales figures. It’s hard to advertise cost effectively to both the top and bottom of a market. Dealerships also have huge incentives to sell used 3 series over new 1 series. It’s a little different in Europe as the utility of tiny cars is much higher there.

I don’t see a reason why they couldn’t get a model 3 down to $25K by 2025 it might be a bit hard but if they actually start to manufacture cars like a proper car manufacturer and they won’t require so much manual labor and complex welds and improve the economy of scales on their batteries it might be quite possible to hit that target especially if you consider that the price of the self driving hardware could considerably drop too especially if they move towards custom silicon.

yank the machine learning and cameras out, single lower power motor, new cheaper lighter battery cells, leads to smaller cheaper tires wheels brakes suspension. maybe!

Would Tesla roll a new MCU for a $25K car or possibly reuse the one from the 3/Y? The CPU in the current MCU is custom, if they wanted to limit software development cost on it, using the same MCU might make sense as well as economies of scale and what not.

The cameras on a Tesla are used for Front Collision Alert, Lane Departure Warning and Lane Keep Assist as well as Sentry Mode. The backup camera is required by law in many places now. Removing those would limit the number of advanced safety features they could offer.

I wonder how much cost savings would be realized by removing the nonessential cameras? I know automotive grade parts tend to cost more but are we talking about hundreds or thousands of dollars in savings?

Removing the cameras may be a good idea, but note that their extensive fleet of camera-equipped vehicles is an important part of their potentially VERY lucrative self driving software development.

EDIT: I highly recommend watching head of AI at Tesla Andrej Karpathy's talk on their self driving architecture. "The Fleet" as a source of data is a vital functional part of their self driving software development. They may be able to calculate that including cameras and a computer on a car that will ship in high volumes would increase sales of their self driving option across all Tesla vehicles (including that low cost model) enough to justify the inclusion of those parts.

https://www.youtube.com/watch?v=hx7BXih7zx8

Cameras are pretty cheap, the custom board is probably decently expensive, but if FSD is a 10-15k upgrade then it doesn't take much to sell that portion of the hardware at a loss to make it back in software options.

The cameras and machine learning thing is a money maker for Tesla. It will allow them to gather a lot of data, I mean, which Silicon Valley company will consider having thousands of eyes on the road at all times a bad thing?

Plus, expect these cameras to be the basis of expensive options and subscriptions.

Tesla has over 2 billion miles of autopilot driving data. I am skeptical of the suggestion that more driving data will accelerate or open the door to significant progress. I could easily see more data reducing efficiency and increasing overall costs.

"which Silicon Valley company will consider having thousands of eyes on the road at all times a bad thing?"

Any company that doesn't want it or need it? I'm not sure I see the obviousness. Just because something is cool doesn't mean I want my company spending money on it. What am I missing?

You're missing a wide array of applications, from dystopic surveillance to checking the state of a place (damage, garbage).

Sounds potentially profitable to me.

Of course owners should be able to opt out of that or even be paid for opting in.

Insurance..