I hope it's not too late.

Is XPeng in danger as Tesla's cheapest electric car becomes a reality?

With the Model Y and Model 3 as its main selling models, Tesla remains the dominant global electric vehicle giant. In the first two quarters of 2024, Tesla delivered a total of 830,766 vehicles, which, although down from the same period last year, is still a benchmark.

From a product perspective, Tesla has indeed shown some signs of fatigue recently. The updates brought by the refreshed Model 3 and Model Y were limited, resulting in weak sales growth momentum. In the domestic market, Tesla is also under pressure from numerous domestic new energy vehicles. The sales and rollout of the Cybertruck in China have encountered some unknown obstacles, and FSD capabilities have not yet entered the country. In fact, Tesla urgently needs a breakthrough point for upward growth.

Musk announced the latest all-electric platform and related models at Tesla's Investor Day long ago, stating that the new platform after the technology upgrade will reduce manufacturing costs by 50%, shorten manufacturing time by 40%, and enable a new car to roll off the production line every 45 seconds. In other words, the price of the new cars from this platform is expected to be lower than that of the Model 3. The outside world believes that Tesla's next-generation new platform model will be an entry-level Robotaxi with autonomous driving capabilities.

Soon, Tesla officially teased the Investor Day event to be held in Los Angeles on October 10 on the X platform, inviting individual shareholders to attend. It is expected that Musk will reveal more information about Tesla's new platform and models at the Investor Day, and a low-cost electric vehicle equipped with FSD autonomous driving capabilities may soon be launched.

A wider range of low-cost new cars may be Tesla's next "manufacturing miracle" and "sales secret" after the Model 3 and Model Y.

Bringing high-level autonomous driving to entry-level cars

There have been many rumors about Tesla's new models. The new platform can significantly reduce manufacturing costs, meaning the new car will be priced very competitively, potentially retailing at around USD 25,000 (approximately RMB 178,000). However, there is currently no definitive information on the final naming of the new car.

Musk revealed at an investor conference in 2022 that the new model would be smaller than the current Model 3 and that the cost of producing two new platform vehicles would be equivalent to producing one Model 3, with production volumes expected to exceed the combined totals of Tesla's other models. This suggests that Musk sees a huge demand for low-cost vehicles and has high confidence and expectations for the new car's layout.

There are currently no spy shots to support the rumors, but it is believed that the new model may be a modified version of the Model Y or Model 3, such as a "hatchback Model 3," and named "Model 2." With extreme cost-cutting measures, the final configuration of the Model 2 becomes more "stripped-down," reflecting Tesla's push to new heights in manufacturing efficiency and cost control.

Long range, refined interiors, and solid chassis materials are not yet within reach, but affordability is paramount. After all, the Model 3 and Model Y, which sell for over RMB 200,000, are often criticized for their "barebones" interiors, and the lower-priced Model 2 is unlikely to offer any "upgrades." We may need to adjust our expectations regarding the sophistication of the new car.

Tesla also appears to be preparing for the corresponding production capacity. Specifically, the Fremont Superfactory has the capacity to produce over 550,000 Model 3/Model Y vehicles annually, as well as 100,000 Model X/Model S; the Shanghai Superfactory can produce 950,000 Model 3/Model Y vehicles annually; the Berlin Superfactory is expected to produce 375,000 Model Y vehicles annually; and the Texas Superfactory currently produces 375,000 Model Y vehicles annually and is expected to produce an additional 125,000 Cybertruck vehicles.

There are reports that Tesla is still expanding its production capacity and plans to build a new factory in Mexico. The annual production capacity required for the entry-level Model 2 may exceed 1.5 million units, and perhaps when the factory is ready, the new car will be just around the corner.

Musk believes that only by reducing the price of electric vehicles and eliminating the competitive advantage of fuel vehicles can the "emission reduction blueprint" be effectively promoted. Affordable products are popular in any market, and traditional automakers rely heavily on low-priced entry-level models for their sales.

In addition to affordability, Musk plans to use the new car as a platform for the popularization of autonomous driving, with FSD autonomous driving likely to be one of the core selling points of the Model 2. After multiple iterations and tests, the current FSD V12 Beta is performing very maturely. After test-driving Tesla's FSD in the US, XPeng CEO He Xiaopeng gave it high praise, stating that it handles various road conditions smoothly, performs exceptionally well on Silicon Valley roads and highways, and has made significant progress in recent months.

From a technological perspective, Tesla's pure vision end-to-end intelligent driving is highly representative. From the input to the output end, the emergence of end-to-end technology greatly simplifies the development process of intelligent driving, possesses learning capabilities, and becomes increasingly intelligent with use. As a giant in electric vehicles with a large user base, Tesla has an advantage in training data, allowing its software algorithms to evolve more quickly, laying the foundation for the future rollout of Robotaxi.

Overall, Tesla's new model focuses on affordability and intelligent driving, with relatively few core selling points. The key is to bring high-level pure vision advanced intelligent driving and autonomous driving to an entry-level price point. Considering Tesla's brand influence and consumers' pursuit of intelligence, the Model 2 is bound to make waves in the market.

FSD's entry into China is 'stuck in review,' with domestic manufacturers closing in

On September 5, Tesla AI posted on the X platform that Tesla's FSD will be rolled out to the Chinese and European markets in the first quarter of 2025, but is still awaiting approval from relevant authorities. Musk also acknowledged this news in the comments section below and hoped for a launch at the end of the first quarter or the beginning of the second quarter.

This means that rumors of Tesla's FSD entering the domestic market were not false, and European netizens have also expressed high recognition of FSD's entry. However, as an autonomous driving technology, FSD must undergo a series of rigorous evaluations and audits, requiring automakers to make targeted adjustments and calibrations for local markets, which is necessary and time-consuming.

The 'stuck in review' situation is not entirely good news for Tesla's FSD. On the one hand, it gives FSD more time to adapt to domestic road conditions. On the other hand, domestic high-level intelligent driving solutions are gradually maturing, with software algorithms becoming more sophisticated and adapting to most complex scenarios in China, making them 'nationwide usable' and gradually shifting to end-to-end solutions. Leading high-level intelligent driving brands such as Huawei, XPeng, Lixiang, NIO, and the only pure vision high-level intelligent driving solution in China, Jiyue, are all making adequate preparations.

Moreover, low-cost vehicles are not exclusive to Tesla, as domestic manufacturers have long been competing in the low-cost intelligent driving segment. A high-level intelligent driving solution with LiDAR can even be found in new energy vehicles priced below RMB 200,000. Even cheaper options exist, such as XPeng's MONA M03, which combines low price with outstanding design and intelligence. Tesla's Model 2 is already under pressure before its launch, as its estimated price and configuration suggest it may not have much say in the domestic market.

In terms of Robotaxi, domestic suppliers such as Baidu Apollo (Luobo Kuaipao), Pony.ai, and Auto X are also active, with some already in trial operations and expanding their operating scale. There are also fully autonomous driving routes, making the autonomous driving race quite crowded, with Tesla not being the only player.

While Tesla is still preparing for industrial upgrades and autonomous driving, domestic brands have already embarked on a "downward exploration" strategy, lowering the threshold for intelligence and achieving "intelligent equality." While Tesla's technological approach is forward-looking, many competitors have already taken the first step and launched products to capture the market.

Musk often praises Chinese new energy vehicles in public, and domestic technology has the endorsement of top influencers, making domestic automakers influential. However, Tesla's role in the new energy vehicle arena cannot be overlooked, and both low-cost vehicles and autonomous driving technologies require tangible actions to demonstrate Tesla's benchmark status in the industry in the short term.

Tesla needs new growth points

You may have noticed that domestic manufacturers rarely compare themselves directly with Tesla models lately, indicating that Tesla's "benchmark effect" is weakening to some extent.

Due to declining profits and slowing growth, Tesla's share price has fallen to some extent, resulting in losses for shareholders, including Musk, in the short term. In the European market, Tesla's electric vehicle sales are no longer far ahead, and it has even been surpassed by traditional brands like BMW at times. In the Chinese market, the Model Y remains the top-selling new energy SUV, with a commanding lead over the second-place model, and is arguably Tesla's only sales pillar in China. However, there are many domestic competitors behind it, including veterans like the Song PLUS and newcomers like the Lixiang L6.

Behind this is clearly driven by zero-down-payment policies and various benefit subsidies. During the golden sales periods, more automakers will introduce significant limited-time benefits. However, relying solely on price promotions is unsustainable in the long run. Facing increasing consumer demand, Tesla may need to address this issue through product improvements.

Previous rumors of 6-seat/7-seat versions were officially dismissed as "false news." Perhaps based on Tesla's understanding of Chinese consumers, forcibly increasing the number of seats to create selling points would not work. In Xiaotong's view, a new product layout is more likely to create a phenomenal effect, such as the highly anticipated Model 2, which is likely to be Tesla's sales growth point in the coming years.

Chinese automakers are gradually improving their layouts for low-cost products, occupying the high ground of the entry-level market, and steadily advancing in overseas layouts. However, for Tesla, which covers the global market, the Chinese market is not the only one; major automotive consumer countries like the United States and Europe are also key battlegrounds for this automaker.

Tesla enjoys a high reputation globally and has a significant influence in overseas markets. Once the Model 2 goes into mass production, it is highly likely to achieve impressive sales figures and replace some fuel vehicle sales. Speeding up the layout of the new platform and new cars will allow Tesla to reap the benefits of low-cost vehicles sooner.

Of course, we are more concerned about Tesla's low-cost models. With one more player in the market, competition will ultimately benefit consumers with cheaper electric vehicles. Regardless of which automaker offers them, there will surely be supporters.

Source: Leitech