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Affordable Tesla to arrive in late 2016

Same price as Leaf, but with quick charge and 200-mile range

Tesla Motors will launch its smaller electric sedan in late 2016, with a range of at least 200 miles and a price point “half” of the flagship Model S, Tesla CEO Elon Musk said.

Musk’s timeline, range and price announcement is the most definitive data so far regarding the so-called “Gen III” vehicle. The current Model S starts at $62,400 after a $7,500 federal tax credit, meaning the Gen III car will start at about the same price as the Nissan Leaf SV and have triple the real-world range.

Speaking at the annual meeting of shareholders on Tuesday in Mountain View, Calif., Musk said the Gen III will have a “family resemblance” in design to the current lineup. He hinted that the car might have “some autopilot or self-driving elements,” but cautioned that those features might not be ready when the car first goes on sale.

“A significant improvement in technology is needed to have a compelling affordable electric car. To be compelling, it must have a useful range of 200 miles,” Musk said.

Tesla is working with Panasonic on new battery-cell electrochemistry that is optimized for automotive use, Musk said. He added that he is “pretty optimistic” that advances in energy storage and energy density technology can be made “without any miracles happening.”

Regarding current vehicle sales, Musk said that U.S. demand for the Model S is holding steady at 15,000 units per year through the second quarter. Tesla will begin shipping cars to Europe in late June, and to Asia in the fourth quarter. Including those markets, demand is about 40,000 annualized vehicles. A slide shown to investors said demand was about 30,000 units, but Musk said the correct number is 40,000 during his speech.

As for vehicle deliveries this calendar year, Tesla will physically deliver about 21,000 units, said Musk, sporting a casual maroon t-shirt with the Tesla logo vertically splashed up the torso.

Most of Musk’s audience at the meeting has made a lot of money on Tesla stock. A year ago, the shares were trading for $27.91. They closed Tuesday at $94.84. At one point last week, the shares topped $110.

After the meeting’s close, Musk, whose current worth is about $7 billion, tweeted: “Forgot to say one thing at Tesla annual shareholders meeting: just as my money was the first in, it will be the last out.”

Strong cash position

During the meeting, Musk said Tesla’s cash position, even after paying off the Department of Energy loan, is about $760 million.

“That is sufficient cash to survive a natural disaster, like an earthquake in California or a supplier going bankrupt, so as not to be flying at treetop level,” Musk said. “Not that we want to be less cautious about our cash management, but the [extra cash] means, even if we suck at cash management, we’ll be okay.”

Musk believes that Tesla’s gross margins can be about 25 percent for the Model S sedan and Model X crossover. The less expensive Gen III cars will obviously carry tighter margins, but with a higher volume over which to divide fixed costs.

“I would rather sell the car for less than get the highest gross margin,” Musk said.

Supercharging network

Tesla recently announced that its Supercharger network has improved its recharging speed from 45 minutes down to 20 minutes to regain most of the battery’s range. Musk suggested that a live demonstration on June 20 will show that advance is not the limit of recharging technology. He hinted that the Superchargers could recharge a car faster than a gasoline counterpart.

Musk said he is open to licensing Tesla battery and charging technology to other automakers.

“We would have to ask for some compensation, because cost of the Supercharging network is built into the price of the car,” Musk said. “Others can join us, or copy us, or think of something better.”

Retail update

On the retail front, despite recent setbacks in Texas, North Carolina and Virginia, Tesla will continue to battle national and state auto dealer associations regarding the automaker’s factory-store model, Musk said.

“Auto dealers very influential among state legislatures. People think it’s the Mom and Pop dealers who are doing this, but it’s not. It’s the giant auto dealers, the big national auto dealers that have the big money to spend,” Musk said.

Citing poll data showing between 86 percent and 99 percent of those surveyed approving of Tesla’s retail model, a suddenly emotional Musk said, “If democracy is working and legislators are implementing the will of the people, there wouldn’t be legislation trying to restrict direct sales.

“Auto dealers are crowing how they were able to defeat us in Texas and how they are making progress in North Carolina. Crowing about the perversion of democracy is just wrong.”