On that 25K model, (not a new theory, and inflation aside) there's still a small part of me that says as the margins continue to improve on the Model 3, they can just lower the price to $25K and compete with leases and insurance products for that new broader market. A single vehicle improves margins more long-term from scaling up 1 vs 2 designs. However, I'm aware that China is creating a new vehicle. What if it's tiny?Currently 25K model does not make sense as battery capacity and cost are the limiting factors, but in a few years, the lower cost model will make sense.
So would everyone switch to tiny cars if that happened? Not to knock tiny cars as I used to love driving my MGB (when the Lucas wiring behaved), but not in the US, not yet. For example, Model Y SR RWD in China - HOT.... in the US, NOT. Maybe it should is besides the point, I don't see consumers taking on that flavor unless forced by the economy or laws. Remember, battery prices are STILL dropping. By the time Tesla catches up with existing demand, it will not require nearly today's margins to sustain a single vehicle approach - especially because of volume. McDonalds didn't really create a new burger, but the low price brought the traffic, and then they just made money on leasing the land. That's where the Tesla software goodies come in strong $$$ with value. (I expect some disagrees, please present your thoughts as well).