Introduction

Ultimately, automakers must speak through their products. Any shortcomings must be addressed.

On the 9th local time, a Deutsche Bank report revealed internal information from Tesla—the legendary affordable Model series is planned for launch in the first half of next year.

The source of this information is Travis Axelrod, Tesla's head of investor relations, who disclosed that the internal codename for the new model is 'Redwood.' It is approximately 15% smaller and 30% lighter than the Model 3, with half the manufacturing cost. The report also mentions two battery configurations: 53 kWh and 75 kWh, available with single-motor and dual-motor powertrains.

Initially, many doubted these reports, dismissing them as typical Tesla hype during a lull in significant announcements. However, on the 10th, Becky Peterson from The Wall Street Journal claimed on her personal social media that she had read a copy of the report.

She provided additional details: the new car will utilize existing production lines, and after subsidies from the Inflation Reduction Act, the US sales price will not exceed $30,000.

The Deutsche Bank report on Tesla offers more than just this revelation. For instance, it mentions that for the Robotaxi service, Tesla will initially operate its fleet and provide human remote safety officers for support. However, we won't delve into these details here; perhaps another time.

If indirect retellings lack credibility due to their prevalence, clues can also be found in recent Tesla documents. A month and a half ago, Tesla's Q3 2024 financial report stated:

Preparations for our offering of new vehicles, including more affordable models, remain underway. We will begin launching these in the first half of 2025.

'Completion' of the Master Plan

Step 1: Build a low-volume sports car at a premium price;

Step 2: Use the profits to develop a moderately priced, mid-volume car;

Step 3: Use those profits to create a high-volume, affordable electric vehicle;

Step 4: While achieving the above, also offer a zero-emission power generation option (solar power).

Yes, this is the original version of the 'Master Plan' posted by Musk on his Facebook page in August 2006.

Frankly, after 18 years of development, Musk's initial business strategy framework has undergone significant adjustments, much like the Qing Dynasty's 'Seven Grievances' declaration.

For example, after the production of the 1.5 Roadster electric sports car, the Model S and Model X, officially launched in 2012 and 2015 respectively, have long since exceeded the 'relatively affordable' category in both the US and global markets.

As for the third step, the 'mass-produced, affordable model,' the base prices of the Model 3/Y at $42,490 and $44,990, respectively, are hardly 'affordable' in the US unless you include the estimated $7,500 in tax credits and $6,000 in fuel savings over five years (default), which automatically factor in the Inflation Reduction Act tax credits and five years of fuel savings.

Otherwise, there's still a considerable gap from the standard affordable car price of $30,000 in the US.

In the automotive market, there's a saying that holds true in China, the US, Europe, Japan, and Korea: 'He who controls the A-segment controls the world.' The key lies in Tesla's long-standing 'urban legend'—the Model Q.

As early as 2021, US tech media reported that Tesla was designing a smaller electric vehicle with a range of 250 miles (slightly less than 400 kilometers). When this news spread to China, details emerged, such as the use of BYD's Blade batteries.

It's possible that BYD was approached as a battery supplier before the Lingang Gigafactory started production, or perhaps these were just rumors. As for the specific model name, some said it would be Model 2, but Model Q was more favored.

By piecing together various reports and analyzing the international business background at the time, we can see some clues.

Musk himself first mentioned an 'affordable Tesla' in early 2020, hinting at a starting price of $25,000, equipped with FSD like all Tesla vehicles, produced at the Tesla Austin factory, and going into mass production within three years.

At the time, media reported that, citing two internal sources, Tesla had 'disassembled a Honda Civic' to study how to make a cheaper car.

However, official news about a low-cost Tesla gradually disappeared after 2022. At that time, Musk began promoting the Robotaxi project, claiming it would go into production in 2024.

If our speculation is correct, the affordable Model series likely returned to the agenda sometime in late 2023.

By then, the decision-makers must have realized that 2023's performance was significantly below expectations and decided to re-enter the affordable car market to find new growth opportunities.

This unknown Model 2 or Model Q is presumably based on the same new-generation platform as the Tesla Robotaxi unveiled at the 'We, Robot' conference in October 2024.

Strengthening Tesla's Foundation

Last weekend, John Murphy, chief analyst at Bank of America, visited Tesla's Giga Texas factory in Austin at the invitation of Tesla.

After riding in a test vehicle upgraded to FSD v13.2, this seasoned stock analyst, with over 20 years of experience, gave Tesla stock a 'buy' rating and raised the price target to $400.

On December 9 local time, TSLA shares surged past the $400 mark, peaking at $404.8 per share. This is the highest point since the stock split in late August 2022.

Although Musk may not be in the mood to celebrate due to his recent legal setbacks (covered in another article), this is undoubtedly good news for Tesla investors and American car owners.

Combining this news with last month's revelation that the new US presidential team plans to make a 'federal framework for fully autonomous vehicles' a priority for the Department of Transportation, Tesla's strong stock performance is well-justified.

However, history has shown that relying on this sector for corporate growth is generally not sustainable. As early as this year's third-quarter financial report, Musk admitted that the biggest challenge in promoting FSD services is the diverse state laws regarding autonomous vehicles, making it 'very painful' to implement state by state.

Moreover, despite Musk's current official position, the 'Senate' is fraught with complex interests, and local forces in various states also have entangled relationships.

So, while the problems are clear, implementing uniform intelligent driving standards or new laws nationwide is far from easy.

At this stage, while Tesla's overall situation remains stable, it essentially relies on a 'news-driven' model of continuously releasing good news.

However, this growth model faces challenges as the North American auto market declines. The Cybertruck, once a star product, has struggled since its official delivery, failing to break through production bottlenecks or demonstrate market success as initially projected.

Of course, the initial popularity of the Cybertruck and the astronomical number of orders it received were largely due to the low $100 refundable deposit.

While cumulative orders reportedly reached 2 million, how many remain is something Musk is well aware of.

In brief, as introduced by Mr. Cui from the Commune in his article 'Tesla is Not a God, It's Normal for the Cybertruck to Not Sell Well' this week, the solution to the underlying issues lies in turning the conceptual into the tangible, converting parts that currently rely on hype and news into as many new car sales as possible.

We have reason to believe that with Model Q, Tesla will utilize its latest die-casting technology and unboxed process to further reduce production costs and improve efficiency.

Further cost reduction and efficiency enhancement are crucial for Tesla to maintain its current high gross margin.

This year, Tesla's global sales will experience the first decline since it began mass production. Correspondingly, Tesla's stock price, closely tied to Musk's wallet, will likely experience a downturn when financial reports are released.

Unless Tesla can timely play its long-overdue ace card of an affordable model.

When understanding and analyzing Tesla's basic strategy, we often fall into the trap of China-centric thinking due to our familiarity with domestic joint ventures, overlooking that Tesla is fundamentally a thoroughly American automaker.

Its market strategy is clearly rooted in the US market before considering global expansion. It's no wonder Musk aligned with former President Trump, given their 'America First' mindset.

Currently, Tesla's Model 3/Y have successfully secured a solid niche in the US B-segment market.

Don't criticize them for their sparse configurations; that's a perspective from China. All competing gasoline and electric vehicles in the same segment in the US, like the bZ4X starting at $46,700 or the Asian Dragon at $39,000, are similarly lacking.

What Chinese people mock as a 'barebones' interior is actually better than many similarly configured gasoline cars and 'no-name' electric vehicles. At least there's a 15-inch touchscreen, not to mention the futuristic FSD system, albeit still a promise.

Of course, this relatively high positioning means that its growth momentum is bound to hit a ceiling due to the current economic environment in the United States.

In fact, the emergence of the Cybertruck is part of Musk's plan for Tesla to attempt to capture new growth points from the unique American pickup truck market.

However, it has now been proven that this effort cannot be considered a success, at least not so quickly.

Therefore, it is time to make a painful decision to continue penetrating the lower-end market and engage in fierce competition with a host of Japanese A-segment gasoline vehicles.

Corporate stock prices and market values fluctuate, and they can surge through news and speculation. For example, in 2017, when Tesla's annual sales reached $10 billion, it was already the fifth-largest automaker in terms of market value ($58 billion) globally, even though Toyota, which ranked first with an annual sales of $257.6 billion, had a market value of only $183.9 billion.

Looking back at history, despite Tesla's impressive performance in the stock market in 2017, what would have been its fate if it hadn't been able to secure a wholly-owned project in China in 2018, and if the Model 3 couldn't have achieved true mass production across the ocean?

This is actually not a question, as the answer is obvious. As for now, the only way forward is to quickly introduce the Model Q.