Elon Musk: Tesla could produce a $25,000 car in around 3 years  

Key Points
  • Tesla's CEO estimates the company could produce a model at a $25,000 price point in perhaps three years.
  • Musk cited daunting economies of scale in an "insanely competitive" auto industry as barriers to making a cheaper car.
Elon Musk, co-founder and chief executive officer of Tesla
Yuriko Nakao | Bloomberg | Getty Images

Elon Musk suggested it could take Tesla "maybe" three years to come up with a low-cost version of a car, even as he admitted it was "really tough" to do given the auto sector's economics and competition.

Amid recent turmoil surrounding Musk's stated goal to take Tesla private, the CEO sat for an interview with YouTuber Marques Brownlee to discuss the future of electric cars. Musk explained that Tesla's comparatively smaller scale made it hard to compete against major producers like General Motors or Ford, given their massive scale in an "insanely competitive industry."

Musk told Brownlee that Tesla was "really focused on making cars more affordable, which is really tough. In order to make cars more affordable, you need high volume and economies of scale," he said. When asked if Tesla could eventually make a cheaper vehicle with higher quality, Musk responded in the affirmative.

"I think in order for us to get up to...a 25,000 car, that's something we can do," he said. "But if we work really hard I think maybe we can do that in about 3 years," Musk added, saying it depended on both time and scale. He compared car making to the early years of the cellphone, which were bulky and lacked functionality.

"With each successive design iteration, you can add more things, you can figure out better ways to produce it, so it gets better and cheaper," Musk said. With "natural progression of any new technology, it takes multiple versions and large volume to make it more affordable."

Currently one of the top trade-ins for a Tesla Model 3 is a Toyota Prius, according to statements Musk made during an August earnings call. The Prius, which starts at $23,475, is roughly half the cost of the $49,000 Model 3 starting price.

Musk boasted that Tesla shells out virtually nothing on advertising and endorsements, and relies heavily on word of mouth.

"Where I put all the money into and all the attention into is trying to make the product as compelling as possible," Musk says. The key to selling a product is having something people love and will talk about, he added.

"If you love it, you're going to talk and that generates word of mouth," he told Brownlee. That's Tesla's business model: rely mainly on word-of-mouth. The company isn't spending on advertising, according to Musk. And no discounts. Musk said even he pays full retail price on his Tesla cars.

Musk's sit-down was published on YouTube in the wake of an unusually personal New York Times interview, in which Musk displayed rare moments of emotion as he described the pressures of meeting a recent Model 3 production milestone. The bombshell report sent Tesla's stock reeling in Friday's trading, and laid bare concerns among Tesla board members about Musk.

The NYT article landed at a turbulent time for the electric carmaker. Musk upped the ante in his battle against investors betting against Tesla's stock, tweeting recently that he had "funding secured" to take Tesla private at $420 per share. That sent shares soaring, and ultimately prompted the SEC to open a probe, according to reports.

Correction: This version corrects the spelling of Tesla's name.

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