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Tesla Compact Hatch Coming?

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I guess the big question is how the cycle life of Li-Fe batteries will hold up to enable short range EVs.

My understanding is the lithium iron phosphate batteries are quite robust, and suffer much less degradation over time. They're also cheaper. The only downsides are that they aren't as energy dense as other chemistries, and end up being heavier. For a short or medium range EV, they'd probably be the best choice.
 
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If the car is coming out next year wouldn't they already have test Mules out driving around and have the assembly line building prototypes?
Doesn’t that really depend on what needs to be tested?

Additionally, “next year” is a minimum of 11+ months away, that feels like a long time to me. Depending on whose rumors you go by, it’s 17-20+ months away to actual production, potentially 23+. Retuers claims mid-2025, which is 17 months away. Some claim 3rd quarter (17-20 months). Supposedly Elon said in the earnings call “2nd half” of 2025, which includes up to December. And that’s assuming there aren’t any significant delays.

If anything, I would expect mules around summer and then full prototypes closer to end of this year. Release candidates the following spring.

Finally, they could be “playing this close to their chest.” Meaning they might be trying to minimize public exposure to limit competitors from “borrowing” their ideas.

Then again, there were supposedly shots of “mules” that looked like a Tesla MY frontend with some Mazda SUV tail end.
 
Its possible it will use everything from the Highland but smaller battery packs?
Not sure how much of "everything" you mean.

The body and panels for the main (middle) and rear would have to be redesigned, at minimum. Its supposed to be a compact, so the body lines of the M3 won't work if you chop out roughly the space of the second row seating or half the cargo area, if you want to keep the seats. If anything, the MY might be a better choice in "borrowing" the body. The rear glass is higher in the MY, so you have a better chance of keeping that intact, while redesigning the middle to be a two seater.

The front and rear subassemblies for the motor and wheels might also need to be redesigned due to the shorter wheel base (if they've gone with the smaller cargo area, then its for sure in the rear). But we know it's using a new motor, so that could also be another reason for a redesign of the subassembly. If the subassembly does get redesigned, then the subframe (which would be gigacasts in MY and M3) might also need to be redesigned.

Not sure about the costs, but potentially, it could use 48v low voltage system and even steer by wire. Again, I don't know about costs break downs. It could be cheap enough already or could be expensive now but "planned" to cheap by enough the time production starts up, if implemented. Then again, we should all know Tesla's track history. They tend to launch higher price variants first to "subsidize" the base trim that comes later. So it could still be expensive, but an acceptable cost, even after production starts.

Oh, remember that the compact is also supposed to be but using the "unboxed" process, which isn't used in "Highland," whether you consider that the codename for the car or production process.
 
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If anything, the MY might be a better choice in "borrowing" the body.
In fact the Model 3 Highland body in white get quite updated, especially the front firewall and the rear speaker shelf
have been removed and are added later on, so the Highland could easily been converted into an hatchback. However
I don't thinlk that the Highland get any front or rear gigacasting like the Model Y.
 
In fact the Model 3 Highland body in white get quite updated, especially the front firewall and the rear speaker shelf
have been removed and are added later on, so the Highland could easily been converted into an hatchback. However
I don't thinlk that the Highland get any front or rear gigacasting like the Model Y.
I had thought they used gigacasting on the M3 too, but I guess not.

It doesn't really change the fact that, even if you do switch to "just" a hatchback version, it's still a redesign on the rear and still needs to modify the middle.

Its still a lot of changes, more than I would consider "easily converted."