Tesla finally confirmed rumors that a new, compact and all-electric third generation model dubbed as Tesla Model 3 is in the pipeline.

The confirmation was posted on Tesla’s official Twitter account on July 15.

"Our Gen III car, due out after Model X, will be named Model 3," wrote Tesla.

The company’s founder and chief operating officer Elon Musk likewise confirmed the speculations in an interview with Auto Express. He said the initial name of the new model was supposedly Model E, confirming earlier rumors.

"We had the model S for sedan and X for crossover SUV, then a friend asked what we were going to call the third car," Musk said. "So I said we had the model S and X, we might as well have the E."

Tesla was however forced to change the name because Ford sued them after wanting to use the name and trademark as well.

"I thought this is crazy, Ford’s trying to kill sex! So we’ll have to think of another name," added Musk.

He said the new model instead will be called Model 3 and will be represented by three bars, so the three generations of Tesla cars go as "S III X."

The third gen Tesla car will be of new British engineering under chief engineer Chris Porritt, who created an entirely new platform instead of using the cut-down type sustaining the Model X and Model S. It plans to have it 20 percent smaller as compared to Model S, and have the size of its rival BMW 3 Series.

Tesla Model 3 will include free use of the company’s Supercharger network that provides owners the capability to drive the breadth and length of UK at the end of next year and have a range of more than 200 miles plus a strong performance like its Model S.

"We want people to fall in love with their car and look forward to driving it," said Musk.

Price of Model S is likely around $35,000 in the US market or £30,000 in UK. The more affordable cost is attributed to its inexpensive battery technology to be produced by the forthcoming Gigafactory of Tesla.

Gigafactory is said to be developing batteries for all car models of Tesla, for non-Tesla customers and for wind and solar farms.

Tesla plans to launch its Model 3 in 2016 and to be up for sale in 2017, according to Musk.