Tesla Appears To Be Giving Up On The Middle Class

Tesla Motors seems farther than ever from hitting the mass market after announcing Sunday it will cancel production of the cheapest version of its Model S sedan.

According to a press release, the demand for the Model S powered by a 40 kilowatt-hours battery is not sufficient to justify production.

Only four percent of customers wanted that version, with an estimated range of 160 miles, at 55 mph.

For $62,400, the Model S with a 60 kWh battery has a range of 230 miles. The 85 kWh battery model starts at $72,400, and can go about 300 miles on a full charge.

The weak demand for the small battery model is not surprising, as the biggest downside to electric cars is their limited range. Even the most powerful Model S has come under fire for running out of power: For the review that sparked a fight with Tesla CEO Elon Musk, John Broder at the New York Times drove the version equipped with the largest available battery pack (85 kWh), which starts at $79,900.

While reasonable, the decision to cancel the 40 kWh Model S undermines Tesla's insistence that it is not making expensive toys for wealthy drivers.

According to a simple master business plan Musk outlined in August 2006, the Model S was supposed to cost half as much as the $89,000 Roadster sports car Tesla built before it.

The 40 kWh version of the sedan started at $52,400: a bit over that mark, but not by too much. Now the cheapest Model S is the one with a 60 kWh battery that starts at $62,400. That's 70 percent of the Roadster's price tag.

The bigger news in Sunday's announcement is that Tesla is exceeding its previous guidance on auto sales and turning profitable for the quarter. Canceling the 40 kWh Model S should help it continue to grow.

But in terms of Tesla's longterm goal, to offer "a full range of increasingly affordable electric cars," it represents a step backward.