Tesla CEO Elon Musk hints at small compact EV that will cost half of Model 3

Tesla CEO Elon Musk has hinted that the automaker is mulling the plan of introducing a smaller and more compact electric car. It would be based on the automaker's third electric vehicle platform. The automaker currently has two vehicle platforms, one for the Model 3 and Model Y, while the other for the Model S and Model X. Musk said during Tesla's Q3 2022 earning call that the next platform will be smaller in size than the current compact one and it would cost roughly the half than Model 3 architecture.

The automaker's large vehicle architecture is meant for full-size cars like Model S and Model X. The Model 3 and Model Y compact cars are underpinned by a shorter and more compact architecture.

Musk also said that the primary focus of the electric vehicle manufacturer is on new vehicle development. However, he didn't reveal any specific timeframe for the launch. Musk also talked about the costs and production volumes. The Tesla CEO claims that the upcoming smaller electric car would outshine the Model 3 and Model Y production, which made up 95 per cent of the automaker's total vehicle deliveries in the third quarter of 2022.

The new model based on Tesla's third vehicle platform is claimed to surpass the production of all other Tesla cars combined. "The next-generation vehicle will be about half the cost of the 3/Y platform and it will be smaller. It will, I think, certainly exceed the production of all other vehicles combined," Musk said.

Elaborating on the cost dynamics, the Tesla CEO claimed that the automaker would be able to make two units of the new smaller EV at the same cost as a single Model 3. “We do believe this can be done," claimed Musk.

This is not the first time Tesla sparked a discussion about a smaller and more affordable electric car. It has long been rumoured that Tesla would bring a $25,000 electric car, which would come in the form of a hatchback. However, it doesn't guarantee that the new Tesla electric car will be priced 50 per cent lower than the Model 3, which currently comes at a starting price of $48,490 in the US. But, it can be said that the new Tesla car would significantly undercut the pricing of the Model 3, thanks to a cheaper architecture, smaller dimensions and economies of scale.