Tesla promises 'more affordable' cars but India, Mexico plants on hold
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Tesla promises ‘more affordable’ cars but India, Mexico plants on hold

Tesla promises ‘more affordable’ cars but India, Mexico plants on hold

The automaker said its plan for new models would let it better control capital expenditures during “uncertain times”


Tesla said on Tuesday it would introduce “new models” by early 2025 using its current platforms and production lines as it retreated from more ambitious plans to produce an all-new model that had been expected to cost $25,000.

Elon Musk declined to provide details of the new vehicles but said they would include more-affordable models that would start production by early 2025. That’s just before the target Musk previously set for launching the all-new low-cost model widely known as the Model 2.

Reuters exclusively reported on April 5 that Tesla had scrapped plans for the Model 2, which investors had expected to drive Tesla‘s growth into a mass-market automaker. Musk initially reacted to that story with a post on his social platform X saying “Reuters is lying,” without pointing out any inaccuracies.

Tesla’s focus on affordable vehicles

On Tuesday, neither Tesla nor Musk directly addressed the Reuters report.

Instead, they discussed unidentified new models that appeared to be different products, without saying how many, what type or providing their target prices.

Musk declined to answer an analyst’s question about whether the new vehicles would be all-new models, or tweaks to existing vehicles.

“I think we’ve said all we will on that front,” Musk said.

One observer took Tesla‘s comments on new models as a confirmation that it had halted plans for the Model 2.

“It seems clear that the new vehicle platform has indeed been shelved for now,” said Sam Abuelsamid, an analyst at Guidehouse Insights.

“The next gen vehicle was supposed to use fundamentally different production processes from current models. With no desire to spend billions on new production facilities or retool existing factories, it seems like we will see Tesla continue to build the current products.”

Currently, Tesla‘s Model 3 and Model Y, with starting prices of around $40,000, are its only volume sellers.

Tesla's New Model 3. Image credit: Tesla/X
Tesla’s New Model 3. Image credit: Tesla/X

India, Mexico manufacturing plants on hold

Tesla said on Tuesday that it will use its existing factories to build new and more affordable vehicles as early as late this year, leaving investments in new factories in Mexico and India unlikely in the near term.

The world’s top EV maker said it plans to raise production by 50 per cent from 2023 to its current capacity of close to 3 million vehicles before investing in new manufacturing lines.

“This update may result in achieving less cost reduction than previously expected but enables us to prudently grow our vehicle volumes in a more capex efficient manner during uncertain times,” the company said.

Investors cheered the decision not to take the risks of building new models in new factories, with Tesla shares jumping 12 per cent in after-hour trading despite the company’s quarterly results missing financial targets.

“I think it’s a positive that he’s not just barreling ahead with an expansion plan, ignoring the challenges in the market and the fact that he’s doing a cheaper vehicle from the existing product line,” said Elliot Johnson, chief investment officer at Evolve ETFs, which manages nearly $6bn in assets, including investments in Tesla and other EV makers.

In January, Musk said Tesla aimed to deliver the cheaper new model in the second half of 2025, adding that the model will have “revolutionary manufacturing technology” and generate the next wave of growth for Tesla.

The new models would be built on Tesla‘s current manufacturing lines and use “aspects” of its current platform and a next-generation platform, Tesla said. It cautioned that this plan may “result in achieving less cost reduction than previously expected,” suggesting that the vehicles may cost consumers more than the Model 2’s anticipated $25,000 price.

The automaker said its plan for new models would let it better control capital expenditures during “uncertain times.”

Tesla engineering chief Lars Moravy said the company would avoid the risk of investing in a “revolutionary” manufacturing process. Musk has said previously the all-new affordable car would be a test bed for manufacturing innovation.

Moravy said Tesla‘s work on the next-generation affordable car is “transferable” to the vehicles the automaker now aims to release early next year.

“That engineering work, we’re not trying to just throw it away,” Moravy said. “We’re going to take it and utilise it.”

Musk postpones meet with Modi

Musk had been expected to meet with Indian Prime Minister Narendra Modi on Monday and announce major investments in an auto factory to produce a small, affordable model. Musk canceled at the last minute, citing “very heavy Tesla obligations” and said he aimed to reschedule the visit for later this year.

Musk said last year that Tesla will “definitely” build its factory in Mexico, but that the timing of the factory would depend on the economy and interest rates that reduce the affordability of vehicles. He also said that Tesla would start the initial phases of construction last year.

Tesla did not respond to a request for comment on Tuesday on its plans in India and Mexico.

Analysts said it would be hard for Tesla to expand capacity while it braces for slowing sales after years of double-digit growth rates. Tesla on Tuesday reiterated that this year, its vehicle volume growth rate may be notably lower than in 2023.

Musk added during a conference call that sales would still grow from last year.

Smaller peer Rivian, known for its R1S SUVs and R1T pickup trucks, said last month it would start producing its smaller, less expensive electric R2 SUVs at its existing US factory to hasten deliveries in the first half of 2026. It had previously planned to build the R2 at a new $5bn plant.

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