Electric Tesla Model E to be half the price and 20 percent smaller than $70,000 Model S

Tesla Motors CEO Elon Musk is slowly painting a picture of potentially the most significant vehicle of its generation, or perhaps any generation.

During an interview at the California Public Utilities Commission last week, Musk said that the 2017 Tesla Model E (the car’s anticipated but unconfirmed nameplate) would be 20% smaller than the Model S.

If Musk is right the $35,000 Tesla Model E will be significantly smaller than the latest BMW 3 Series, the Volkswagen Jetta, and even the new Audi A3 sedan.

“For our vehicle after the Model X we’re aiming to produce a smaller car than the Model S – maybe 20 percent smaller – but it will probably halve the cost, which is around $35,000 with a 200-mile useable range,” Musk said.

Musk added that the Model E’s battery pack will also be 20 percent smaller, which would mean a 48kWh pack – roughly double that of a Nissan LEAF but some way off the top-spec Model S’ 85kWh pack. It would help drop the price of the Model significantly, but economies of scale, vertical integration and clever design solutions will also be crucial in offering the Model E for half the price of the Model S.

What isn’t yet known is whether Tesla’s figure of $35,000 includes federal tax credits for electric cars, which are worth worth $7,500.

Should the Model E arrive on time and on budget, it will realise Musk’s ambition of bringing a relatively affordable pure electric car to market that isn’t compromised by range. Tesla will have used an inverted business model to get there, starting at the very top of the market with the $100,000 Roadster in 2008 and slowly working its way down.

The company recently unveiled plans to build a battery ‘gigafactory’ that will help achieve those economies of scale. The $4.5 billion factory will be capable of shipping 500,000 packs a year to Tesla’s final assembly plant in Fremont, California. The factory is due to become operational in 2017, by which point it will be building power-packs for the Model S and Model X SUV due in 2015, as well as the Model E.