Chapter 1: Unveiling the Model 2

The anticipated $25,000 Tesla Model 2 has faced skepticism from many, including myself. Upon reviewing its leaked specifications, I found it lacking when compared to other electric vehicles (EVs) currently available or soon to be released. Initially, there seemed to be nothing distinctive about the Model 2 that would justify the sales volumes Elon Musk predicted. However, recent updates from Tesla's battery collaborator, CATL, suggest that my initial impressions—and those of others—might be misguided. The Model 2 could potentially outshine its competitors in the affordable EV segment. Let’s delve deeper.

Initial speculations indicated that the Model 2 would feature a 53 kWh battery from BYD, known as the impressive Blade Battery. This configuration would allow for 250 miles of range and a charging time from 10% to 80% in approximately 25 minutes. However, competitors such as the BYD Dolphin, VW ID2, MG MG4, and several others boast similar specifications at comparable prices, particularly when factoring in government incentives that are likely included in the Model 2's pricing.

Yet, it appears Tesla may opt against using the BYD Blade Battery. CATL's CEO has hinted at a collaboration with Tesla for the Model 2, indicating that it may utilize the upcoming Shenxing battery instead.

This battery represents the fastest-charging lithium iron phosphate (LFP) cells available globally. With a 4C charge capability, it can reach 80% from just 10% in a mere 10 minutes, and achieve a full charge from flat in just 15 minutes! The advantages of this technology are significant, particularly for budget-conscious buyers who may hesitate due to battery replacement fears. Unlike many fast-charging options that remain theoretical, the production of the Shenxing battery has already commenced, with deliveries anticipated within this year. However, the pricing for these cells is still uncertain. As an LFP battery, the Shenxing should be more economical than traditional lithium-ion cells, though its rapid charging feature could elevate costs, estimated around $100 per kWh.

If Tesla is indeed collaborating with CATL for the Model 2’s battery—whether by purchasing directly or licensing the technology for in-house production—it stands to reason that they would choose the Shenxing. The 53 kWh battery pack would cost around $5,300, significantly less than what is used in the Model Y. Furthermore, a 250 kW charger would be sufficient to facilitate those impressive 10-minute charge times. Thus, with Tesla’s V3 Superchargers, these quick charge capabilities could become a reality in everyday scenarios.

Why is this development crucial? For several reasons. Unlike BYD, CATL has a history of allowing Western companies to use its technology and produce batteries independently. This is vital for meeting the requirements necessary to qualify for U.S. EV tax credits, potentially making the Model 2 more affordable or profitable. Additionally, it positions the Model 2 ahead of its budget EV competitors. While those rivals may only achieve around 140 miles on a highway before needing a charge and typically require at least 30 minutes to recharge, the Model 2 can do it in just 10 minutes. Consequently, for a journey of about 280 miles, the Model 2 could arrive roughly 20 minutes ahead of the competition!

This substantial reduction in charge time makes the Model 2 far more practical than any other EV priced under $30,000. With this edge, Tesla might genuinely be able to meet its ambitious sales target of one million units annually.

However, this battery collaboration poses a risk for Tesla. CATL also supplies batteries for numerous manufacturers, including BMW, Volvo, and Toyota, among others. Thus, these companies could also adopt the Shenxing battery technology for their own affordable EVs, potentially undermining the Model 2’s competitive advantage. While this development is promising for consumers, it does not guarantee Tesla's dominance in the EV market.

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(Originally published on PlanetEarthAndBeyond.co)

Sources: Notebook Check, Reuters, GCC, Notebook Check, Will Lockett, Forbes

Chapter 2: Competitive Landscape

In this video, we explore whether Elon Musk is teasing us or if the $25,000 Tesla Model 2 is indeed on the horizon.