Tesla Motors Inc (NASDAQ:TSLA) announced that it would launch its new Model III at a price point of $35,000, which is substantially lower than the current Model S price of $70,000. Although there is more than one issue that could hinder the company from producing an electric car at such a low-price point, Tesla hopes to keep the price down by economy of scale.

Tesla Model 3

Gigafactory a must for success

John Voelcker, senior editor for High Gear Media (which publishes Green Car Reports), in an interview with CNET, said that lithium-ion batteries cost shouldcome down in price over time by innovation in technology and higher volumes. He said that the company made 2,500 two-seater Roadsters and for Model S it has manufactured more than 50,000 units. Voelcker feels when Tesla Motors Inc (NASDAQ:TSLA) enters into volume manufacturing of the Model 3, it will not just make tens of thousands of cars per year, but hundreds of thousands of cars per year. Tesla is still lacking on battery production front, but that issue will be resolved after the Gigafactory setup.

When asked about the impact that the low-priced Tesla will have on the United States consumers, Voelcker said that the electronic vehicle manufacturer knows how to market without shelling out a fortune on advertising and will attract thousands of fans.

“It has grabbed the imagination of the technology-following public and the car-buying public in a way that I don’t think [has] very many other parallels.” The expert added that if the Palo Alto-based company could offer a stylish design with a range of 200 miles or greater and facilitates charging through a sprawling supercharger network at a price of $35,000, there would be many consumers lining up to buy a Model III.

Rivals may follow Tesla soon

Voelcker said that Tesla Motors Inc (NASDAQ:TSLA) will not be only one to offer a car with such specifications and at this price point. Other auto manufacturers like Nissan and General Motors are also planning their own machines with similar specifications.

Industry analysts such as Dave Sullivan of AutoPacific Inc note that the existing models at a mid-range price point have range issues along with problems like long charging cycles, mediocre performance, and hefty premiums for their battery powertrains. However, Tesla has begun to overcome these drawbacks with the Model S, and the Model X will be yet another step ahead in resolving these issues.