Tesla On Track With Shanghai R&D Center to Design $25,000 EV

Attempting to duplicate the speed with which the company built its Gigafactory in Shanghai in 2019, Tesla Inc. (NASDAQ: TSLA) head of operations in China, Tom Zhu, said in an interview with Xinhua that the company expects to complete a new research and development center in Shanghai and “have it up and running in the middle of this year.”

According to Zhu, Tesla’s China-based manufacturing facilities “want to design, develop, and produce an original model in China. It is manufactured here and sold to the whole world.” The R&D center represents the starting blocks to reach that goal.

If Tesla is able to meet that aggressive schedule, it will bring the company one big step closer to delivering an all-electric, fully autonomous vehicle for $25,000 late next year or early in 2023. That schedule would also fulfill CEO Elon Musk’s prediction at last September’s Battery Day. The $25,000 price point has been a long-time goal for Musk and Tesla.

Tesla expects to build the low-priced vehicle by cutting battery costs in half, primarily through a new battery cell design and improved battery manufacturing processes. It also expects to cut the cost of a battery by 56% by 2022, lowering the cost per kilowatt-hour (kWh) from just over $100 currently to around $50 per kWh.

A 60-kWh battery currently costs about $9,000, and Tesla’s Model 3 Sedan costs around $35,000. Halving the battery cost gets the company about halfway to its goal of a $25,000 car. The company is counting on manufacturing improvements to get it all the way to its price point. The car, likely a hatchback design, is expected to have a range of around 200 miles.

Tesla began staffing up the R&D center last year and soon began accepting design submissions for the new vehicle on the company’s official WeChat social media site.

If (and it’s a big if) Tesla can pull off designing and building this car for the $25,000 sticker price by 2022, the move could cement the company’s place at the head of a long list of automakers now building electric vehicles. With a few exceptions, all-electric vehicles capable of carrying four passengers for 200 miles are priced at around $35,000 to $40,000.

GM’s 2021 Chevy Bolt has a starting manufacturer’s suggested retail price of $36,500. Ford’s 2021 Mustang Mach-E SUV starts at $42,895, and Kia’s 2020 Niro begins at $39,090. Volkswagen’s ID.4 has a starting price of $49,995, and BMW’s i3 starts at $44,450. Only a couple of Chinese EVs built for the Chinese market sell for $25,000 or less.

Tesla stock traded down about 2% in the early afternoon Tuesday, at $846.07 in a 52-week range of $70.10 to $900.40. The stock’s consensus 12-month price target is $580.38.

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