Tesla Model III design concept render

Tesla’s Elon Musk has revealed his company’s plans to take on compact executive cars, such as the BMW 3-series and i3, with the Tesla Model 3. The all-electric Model 3 (which was originally going to be called the Model E) will be around 20% smaller than the Model S, and will have a shorter range of around 200 miles — but it will have “strong performance” like the Model S and start at just $35,000 (the Model S starts at around $70,000).

[The image at the top of the story is an unofficial render of what the Model 3 might look like. Tesla hasn't released any official imagery yet.]

While no one doubts the success of the Model S, there is one question that keeps popping up: When will Tesla make a cheaper version? At $70,000 for the cheapest Model S, and upwards of $90,000 for a tricked out version with 265-mile range, there simply aren’t many people who can afford one. It’s all well and good to have a fancy EV that millionaire early adopters are proud to show off to their friends —  but if you want to really change the world, and to challenge the dominion of gas-powered cars, you need an EV for the mass market — and that means cheap.

BMW i3

The BMW i3, which Tesla will be targeting with the new Model 3

At $35,000, the Model 3 wouldn’t be that cheap, but it would be cheap enough to grow Tesla’s addressable market by at least a factor of 10. The BMW 3-series, which Tesla is explicitly and implicitly targeting with the Model 3, sold 500,000 units worldwide in 2013, versus around 30,000 total lifetime sales for the Model S. And then there’s the Audi A4, Mercedes C Class, BMW 1-Series, Ford Focus… and so on.

Of course, with a lower price point comes lower specs. For a start, the Model 3 will have a range of 200 miles, down from 300 miles for the 85 kWh Model S. The car itself will be 20% smaller (and it won’t be based on the Model S wheelbase), and I suspect it’ll be a fair bit lighter too. According to Tesla’s engineering chief, a lot of the price reduction will come from the use of more cost-effective batteries (possibly via Tesla’s upcoming battery Gigafactory). Tesla’s designer, Franz von Holzhausen, has said previously that the Model 3 will have a more distinctive design than the Model S (i.e. it will probably look like a funky EV, as opposed to a fairly standard sedan). Musk says the Model 3 will have “strong performance,” but we wouldn’t be surprised if it isn’t quite the same as the Model S’s 0-60 mph in 4.2 seconds.

Tesla Model X

The Model X crossover utility vehicle will be the next car in Tesla’s stable, due sometime in 2015

If everything goes to plan, the design of the Model 3 will be unveiled in 2016, and will go on sale in 2017. The Model X — a crossover utility vehicle based on the Model S, but with a higher roof and falcon-wing doors — is the next Tesla to go on sale, with a target delivery date of Q2 2015. If all goes to plan, the Model X and Model 3 should push Tesla from a boutique tens-of-thousands car seller into the hundreds-of-thousands mainstream.

Finally, as an amusing aside, you might be wondering why the Model E is now called the Model 3. Speaking to Auto Express, Musk explains:

“We had the model S for sedan and X for crossover SUV, then a friend asked what we were going to call the third car. So I said we had the Model S and X, we might as well have the E. We were going to call it model E for a while and then Ford sued us saying it wanted to use the Model E — I thought this is crazy, Ford’s trying to kill sex! So we’ll have to think of another name. The new model is going to be called Model 3, we’ll have three bars to represent it and it’ll be S III X!”

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