ELECTRIC car manufacturer Tesla has rolled out its cheapest vehicle to date which could fire the starting gun on a price war.

The new Model 3 retails at $35,000 (£26,650) and founder of the firm Elon Musk hopes it will be the first mass-market electric car.

He described it as the “best car for its cost, either electric or gasoline” at a glittering launch yesterday at a plant in Fremont, California.

Previous Tesla models, the S and X, had a starting price of $80,000 (£60,000), making them too expensive for the majority of drivers.

The company aims to produce 5,000 units of the Model 3 a week in 2017, and 10,000 a week by 2018. Buyers, including UK customers, ordering now are being told to expect delivery late next year. More than half a million have already placed deposits.

The new model in the US will be in competition with the Nissan Leaf, which starts at $30,680 (£23,000), or the hybrid Chevrolet Volt, which goes for $34,095 (£26,000).

Launching the lower-priced Tesla car, billionaire entrepreneur Elon Musk said: “The whole point of Tesla was to build a great, affordable electric car. That's what this day [the launch] means. I'm confident it'll be the best car in its class, gasoline or not, hands down.”

He also predicted, “for the future, the future being now, the cars will be increasingly autonomous,” adding that every Tesla model had the hardware needed to drive itself.

The Model 3's electric battery will run for 354km (220 miles) before recharge, Tesla claims. A longer-range version of the car is priced at $44,000 (£33,500) and will drive 310 miles on a single charge.

The more affordable Model 3 is a significant step for the firm, whose market value hit $49 billion in April.

The launch comes a week after the UK government announced an end to sales of new petrol and diesel cars by 2040, under plans to tackle air pollution.

But Tesla faces major hurdles in manufacturing the 500,000 vehicles projected for production next year — an increase of nearly six times Tesla's 2016 production.

Musk acknowledged it would be “quite a challenge” to build the car during the early days of mass production. “We're going to go through at least six months of manufacturing hell,” he said.

Nissan is also gearing up for the launch of its new Leaf model in early September. It is predicted to offer more than twice the range of its predecessor of up to 340 miles – and 120 miles more than the new Tesla model.