What's up guys and welcome back to wall street millennial on this channel, we talk about everything related to stocks and investing today we're doing a video about the recently confirmed 25 000 tesla model 2, which will be released by 2023. This will be a real game, changer for the automobile industry and will likely be the final nail in the coffin for the internal combustion engine. It has long been tesla's corporate mission to accelerate the global transition to renewable green energy sources. The crux of this mission is elon musk's master plan to eventually make an affordable electric vehicle with a sticker price, even cheaper than gas-powered cars.

They started by creating the super luxury tesla roadster, with a price point above two hundred thousand dollars. They took the profits from these sales to reinvest in cheaper models culminating with the sub forty thousand dollar model. Three, when you consider the fuel cost savings, no need for oil changes and the slower depreciation the model 3's, total cost of ownership is already competitive. With budget gasoline vehicles now musk plans to take it to the next level with a 25 000 model, so even the sticker price will be highly competitive.

They haven't officially named the new vehicle but is unofficially called the model. 2.. The exact form factor has not yet been decided, but is suspected to have a compact, hatchback style, we're confident that long term we can design and manufacture a compelling 25 000 electric vehicle um. So you know this.

This has always been our dream from the beginning of the company. I even like wrote a blog piece about it: um because um you know our first car was was an expensive sports car and then then it was like slightly less expensive sedan and then finally sort of a. I don't know mass market premium. But you know like the model 3 and model y, but it really it was always our goal to try to make an affordable electric car and um.

I think probably uh, like i said about about three years from now, we're confident we can make a very calm. Very compelling 25 thousand dollar electric vehicle uh, that's also fully autonomous one of the most popular budget. Cars in the us and around the globe is a toyota camry, which is a starting price of twenty five thousand dollars. When the tesla starts offering an all-electric vehicle with autonomous driving capabilities, the value proposition will be a no-brainer.

The main argument by tesla short sellers is that the company has evaluation many times greater than the legacy automakers, despite the fact that they produce far fewer cars. In 2020, the largest automaker was volkswagen, which produced 9.33 million cars tesla, on the other hand, produced five hundred thousand cars, which is a little less than five percent of vw's production they're on track to produce close to a million cars this year. But this still only makes 10 percent of vw. Despite this, tesla's market cap is 680 billion dollars, which is more than four times out of vw, but once the 25 000 tesla starts deliveries in 2023, they could easily scale to 10 million deliveries within a few years, because the price point is so affordable to make The model 2 profitably tesla will have to increase their manufacturing efficiency even more than they already have.

The single most expensive part of an electric car is the battery, which typically represents upwards of 30 percent of the total price for the model 2. The battery as a percentage of the total cost, will be even greater to make this commercially viable. The cost of the battery needs to be taken down significantly. To this end, they developed the new 4680 battery cell, which will have five times the energy of older technologies.

This, along with other new technologies they are developing, will reduce the total battery cost per car by up to 50 percent. They will also transition from using a skateboard battery design to a structural battery. This means that the battery itself will provide structural support for the vehicle platform that will greatly reduce the number of parts needed in the assembly process, helping to speed up production and reduce manufacturing costs, they're already producing 4680 batteries in their fremont california facility and plan to Ramp up production over the next couple years, they'll initially use the structural batteries in the tesla semi truck in the model y, but they'll likely use the same method for the model 2.. The model 2 will be built in the shanghai gigafactory, which is a major benefit to production costs.

Labor costs in china are much lower than the us or germany, the two other locations of tesla's gigafactories. The model 2 will first be made for the domestic chinese market and once they ramp up production, they'll export them around the world. The chinese ev market is extremely competitive with the x-punk g3 starting at 21 000. The cheap cost of the g3 proves that it's possible to create a car in the 20 000 price range.

The competition in china has forced tesla to cut prices by 8 percent to 37 000 late last year, but the model 2 will solve these competition headwinds with tesla's superior brand image and leading-edge self-driving technology. The model 2 will likely receive more demand than the domestic ev brands in china at the same price, but the real upside potential for the model 2 is for tesla's upcoming robo-taxi fleet. As early as the end of this year, tesla is expected to launch their network of autonomous robo taxis once full self-driving is complete and approved. They will make a software update for existing teslas already on the road.

Tesla owners will be able to put their cars on the network and generate passive ride. Hailing revenue, while they're at work or otherwise would not be using their car anyway. Tesla will generate revenue by taking a 25 to 30 percent cut of the ride-hailing transactions. A tesla owner could potentially make back the cost of their car in two to three years and ride-hailing revenue.

Beyond that, it will be pure profit, so any customer will be able to add or remove their car to the tesla network. So we expect this to operate. Um is similar like a combination of maybe the uber and airbnb model. So if you own the car, you can add or subtract it to the tesla network and tesla would uh take 25 or 30 of the revenue, um and uh, and then in places where there aren't enough people sharing their cars, we would just have dedicated tesla vehicles.

So we'll we'll ship, when you use the car, we'll show you our ride, sharing app, so you're able to be able to summon the car from the parking lot get in and go for a drive like typically. The use of a car uh is about 10 to 12 hours a week, so most people will drive one and a half to two hours, a day, typically 10 to 12 hours a week of total driving. But if you have a car that can operate autonomously, then most likely you could probably most likely have that car operate for a third of the week or longer so they're 168 hours in a week. So probably you've got something on the order of 55 60 hours.

A week of operation, maybe a bit longer so the the fundamental utility of vehicle increases by a factor of five. So you look look at this from a macroeconomic standpoint and say just if, if this was like some, if we were operating some big simulation, if you could upgrade your simulation to increase the utility of cars by a factor of five, that would be a massive increase In the um economic efficiency of the simulation just gigantic, it will take a while for the robo-taxi network to get regulatory approval in all jurisdictions. But it's not a stretch to think that they can launch in some jurisdictions by the end of this year. For example, phoenix arizona is very friendly to autonomous vehicles in google's waymo cards have been operating there since 2018..

Tesla will start off in friendly jurisdictions and after they build up a record of safety, they can expand nationally, while waymo has to build a fleet from scratch. Tesla will just activate the robo-taxi network for the 1 million teslas on the road today. This gives them a massive head start and will likely allow them to be the dominant player in the autonomous ride-hailing industry. Musk said that the model 2 will have full autonomous capabilities.

If they can integrate these onto the robo-taxi network, it will be huge, even if the initial sales of cars is break, even tesla will be able to make thousands of dollars per year of recurring revenue from the ride. Hailing at software, like margins with the 25 000 price point, they'll be able to sell many millions of model 2s. This could add billions of dollars of recurring profit. Every year, kathy wood projects, tesla's robo taxi network - could be worth 1.5 trillion dollars by 2025, which would make up half of the 3 trillion market cap in her base case scenario.

In conclusion, if elon musk can deliver on the 25 000 tesla and robo taxi network, it will be a real game. Changer, once fully approved, the autonomous ride-hailing network could generate tens of billions of dollars in profit per year and easily justify a one trillion dollar market cap. Alright, guys that wraps it up for this video. What do you think about the 25 000 tesla? Let us know in the comments section below as always.

Thank you so much for watching and we'll see you in the next one wall, street millennial, signing out.