Musk Posits $20,000 Tesla Model Y, Says Future Affordable Car ‘Game Changer’

Elon Musk isn’t wavering in his quest to bring out an inexpensive vehicle.

The Tesla CEO mused about the possibilities of a more affordable Tesla at the 2024 Annual Stockholder Meeting on Thursday, stating a hypothetical — “You could imagine if there was…say, a Model Y that cost less than $20,000, it would sell like five million units,” he said. “That’s not feasible today but figuring out ways to make more affordable vehicles is really like the game changer.”

“We have to make it affordable”: Musk seems to be holding fast to a future where a Tesla is more affordable than it is today. “For most people it’s not a question of whether they want a Tesla. They simply do not have enough money to afford one. So we have to make it affordable, that’s essential,” Musk said.

Not a new idea: “Every car manufacturer has done this. They’ve tried to make an affordable car. This isn’t new,” a major American transportation company executive, who wished to remain anonymous, told me. “I don’t think they’ll make a new car that’s cheap out of whole cloth but they’ll find a way to make current cars cheaper,” he said. In fact, Musk referenced this thinking during the first quarter earnings conference call when he said that Tesla “will use aspects of the next-generation platform as well as aspects of our current platforms” to build more affordable cars. Those cars will be produced on the same manufacturing lines as Tesla’s current vehicle lineup, Musk said. And commentary in the June AutoForecast Monthly from AutoForecast Solutions stated that the low-cost vehicle is “now thought to be a slimmed-down vehicle based on the Model Y.”

Could Tesla pull it off? “There are many consumers that want to own a Tesla,” said Sam Fiorani, an analyst at AutoForecast Solutions. “[But] the company currently makes less money per vehicle than a number of mainstream automakers providing no room for Tesla to cut prices substantially more than they already have.” Fiorani added that a $20,000 Tesla would come with “substantial compromises.” But he’s optimistic about the future of EVs. “These vehicles will get much better very quickly, making today’s EVs look ancient in just a few years,” Fiorani said, adding that mainstream car buyers, who make up the bulk of the market, “are waiting for a better EV, not just a cheaper one.”

Teslas are already getting cheaper: One way Tesla is bringing down the cost of its cars today is through leases. A Model 3, for instance, can be leased for $299 a month with $2,999 down (before taxes and fees). That’s within the range of affordability for more buyers compared to a year ago and comparable with gas cars from companies like Honda.