VW is currently in the midst of launching its ID.3 hatchback in Europe, and it’s a car that has a strong chance of getting all up in Tesla’s non-existent grille. The ID.3 should be very popular: after all, it's effectively the electric equivalent of the Golf, which is Europe’s best-selling car every year by a wide margin. It will also be far more affordable than a Tesla; the eventual base price for the ID.3 in Britain, around $36,000, is around $20,000 less than the current cheapest Model 3.
According to UK website Autocar, Tesla may have a response in the works. Tesla is opening a factory in Germany, set to go online in July 2021, and the report says that it could be the place for Tesla to build a smaller, cheaper hatchback rival for the ID.3 that would be based on the Model 3. (To be fair, Tesla has hinted at creating such a model before, at least in China.)
To make it work, Tesla would have to bring the cost down to rival the ID.3. One way would be to dial back the performance and reduce the battery size of the Model 3. (Europeans may not have quite the same expectations regarding acceleration and range as power-hungry, road-tripping Americans do.) Another way would be to reduce production costs. To that end, Tesla is patenting an aluminum casting machine that can reduce the parts of a unibody frame from 70 to just two, dramatically simplifying the production process.
Beyond how such a model would fit into Tesla’s “S3XY” terminology, a big question worth considering is whether such a car would be sold in North America. We’ve seen the Model 3, in particular, rack up tremendous sales success in its luxury segment. A genuinely affordable Tesla that isn’t just a stripped-down spec Model 3 to technically meet the $35,000 base price promise could be a game-changer.