Tesla Motors plans to debut cheaper car in early 2015

Tesla Motors plans to unveil an electric car in early 2015 that could sell in the $40,000 range, a mainstream offering that could be key to the automaker’s future growth.

Tesla’s only current offering is the Model S, a premium sport sedan that starts at $71,070 before any state or federal tax incentives, and can cost far more with options. In late 2014, the Palo Alto automaker plans to release a long-awaited Model X sport-utility, likely to sell in the same price range.

The third, lower-priced model could make its official debut at the 2015 North American International Auto Show in Detroit, Tesla confirmed Friday. It would begin selling in 2016 or 2017.

The automaker has long promised a more affordable electric car. Delivering one will be crucial to its future.

“This is hugely important for Tesla,” said Thilo Koslowski, an auto industry analyst at Gartner. “This is ultimately the car that will make Tesla a household brand rather than just something in the premium segments. No car company can live off 20,000 to 30,000 sales a year and be profitable in the long term.”

Tesla is on pace to build about 21,000 copies of its only current vehicle, the Model S sedan. The automaker hopes to double that figure in 2014 with the introduction of the Model X.

Building a third, more affordable vehicle will require Tesla to find the sweet spot in combining battery size, capacity and cost.

The automaker will need to squeeze a 200-mile driving range out of a battery that’s smaller than currently available in the Model S, which has a maximum EPA-rated range of 265 miles.

“That’s pretty ambitious to get there,” Koslowski said. “One hundred to 120 miles of range isn’t enough for mainstream consumers to really feel comfortable.”

A $40,000 car with a 200-mile range would give Tesla a significant competitive advantage, as mainstream automakers probably will not hit those cost and range targets for at least another year or two, Koslowski said.

Also important for Tesla’s success will be its ability to ramp up production to a much higher level. The current Model S is built at Tesla’s Fremont, Calif., plant and uses only about a quarter of the facility’s 5 million square feet of space. This is where the Model X will also be built.

The X will use essentially the same drivetrain as the current rear-wheel-drive Model S, save for another electric motor driving the front wheels, making the X all-wheel-drive. The vehicle will sit higher than the Modal S and will use a pair of gullwing-style doors for easier access to the second and third row of seats, Tesla said.

Tesla is already taking refundable $5,000 deposits for the X, though it won’t say how many customers have plunked down their cash already.

The Model X and S are considered by the company as the second step in its evolution of electric cars. The first was the Tesla Roadster, the two-seat sports car of which Tesla sold about 2,300 copies worldwide, and which is no longer in production.

The newest model debuting in 2015 will be the third step, as its platform will differ significantly from anything else Tesla has built so far.

The plan for a mainstream model follows a strategy that Tesla Chief Executive Elon Musk laid out in a 2006 blog post.

“The strategy of Tesla is to enter at the high end of the market, where customers are prepared to pay a premium,” Musk wrote in a post titled “The Secret Tesla Motors Master Plan (just between you and me).” “Then drive down market as fast as possible to higher unit volume and lower prices with each successive model.”