Tesla's Next Platform To Be Smaller, Half The Cost Of Model 3/Y

Tesla CEO Elon Musk has revealed new details about the company’s upcoming vehicle platform, which will be the third after the large one underpinning the Model S and X and the compact one used by the Model 3 and Y.

During Tesla's Q3 2022 earnings call Musk said that the next platform will be smaller in size than the Model 3/Y platform and roughly half the cost. Musk's comments came during the Q&A session (listen to the audio webcast in the video above), when Tesla executives were asked about any potential developments for the next generation of vehicles. 

The question from a retail investor mentioned the spectacular drop in cost from the Model S/X platform to the Model 3/Y platform, which allowed Tesla to enter the much larger segment of more affordable vehicles. 

In this context, the question was about when Tesla expects to release its third platform and what level of cost reduction the company thinks it can achieve. Elon Musk replied that while there are no exact dates for the launch yet, it is "the primary focus of the new vehicle development team."

He then went on to talk costs and production volumes, noting that the next-generation Tesla vehicle would be produced in volumes that outshine the Model 3 and Model Y—which made up 95 percent of the company's total deliveries in Q3 2022.

What's more, the executive added that the new model would surpass production of all other Tesla vehicles combined.

"The next-generation vehicle will be about half the cost of the 3/Y platform and it will be smaller. It will, I think, certainly exceed the production of all other vehicles combined."

The CEO explained that it will cost the same to build two units of the next-gen Tesla vehicle than it currently costs to build a single Model 3, and that "we do believe this can be done."

Musk's comments have obviously sparked discussions of the rumored $25,000 Tesla EV yet again. While production costs of the smaller model are expected to be half of Model 3/Y costs, that doesn't necessarily mean the vehicle will be priced 50 percent lower than the Model 3, which currently starts at $48,490 in the US. Still, given the cheaper platform, smaller dimensions and economies of scale, it should significantly undercut the Model 3.

The launch date is anyone's guess at the moment, but it's safe to assume the entry-level EV won't arrive until Tesla will have fully ramped up Cybertruck and Semi production. That may not happen before 2024—unless Tesla China, which is reportedly responsible for the project's development, gets the green light to bring the model to market sooner.