Tesla is developing a new sedan that will be smaller than the existing Model S. The car was originally going to be called the Model E, but was changed after Ford issued a lawsuit citing similarity to the famous Model T.

The new model is due to be revealed in 2016, and available for purchase in 2017. It will likely be built on an all-new platform, employing advances in battery technology that will allow it to have a realistic range near that of the Model S at over 200 miles despite its smaller size. Like previous Tesla cars, the Model 3 will also come with free lifetime access to Tesla's network of Superchargers, which is being expanded throughout the U.S. and UK. The Model 3's name will by stylized as "Model III," according to CEO Elon Musk.

"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. So I said we had the model S and X, we might as well have the E," says Musk. "We were going to call it model E for a while and then Ford sued us saying it wanted to use the Model E -- I thought this is crazy, Ford's trying to kill sex! So we'll have to think of another name."

No images of the Model 3 are currently available, although the vehicle is rumored to be roughly 20 percent smaller than the wide-bodied Model S. Tesla is also trying to make the Model 3 significantly cheaper than previous vehicles.

Construction of a Gigafactory for mass-producing high-performance batteries is scheduled for 2015. The accompanying reduction in cost will be passed on to the Model 3, which is due to retail for around $35,000. The factory will produce batteries for all future Tesla vehicles, and will also sell batteries to other car manufacturers. No specific customers have been named so far, but interested companies are rumored to include Mercedes and Nissan.

With the Model X all-wheel-drive SUV set for release in 2015 and now the Model 3, Tesla is looking to expand its appeal beyond business executives and electric car enthusiasts. The Model 3 presents an inexpensive rival to compete with vehicles from large manufacturers, such as the Chevrolet Volt. Unlike rival vehicles, however, Tesla cars are not available from local dealerships. The Model 3 will only be available for purchase directly from the manufacturer.

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