April 2, 2023


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Tesla pledges to cut electric vehicle production costs in half, and Musk is keeping his affordable car plan under wraps

SAN FRANCISCO (Reuters) – Engineers told investors on Wednesday that Tesla Inc (TSLA.O) will cut assembly costs by half in future generations of cars, but CEO Elon Musk did not reveal a date for its long-awaited debut. An affordable electric car.

Shares fell more than 5% in after-hours trading after an investor day for the Texas-based company.

More than a dozen Musk-led Tesla executives discussed everything from a white paper plan for the world to embrace sustainable energy to the company’s innovation in running its operations from manufacturing to service.

The presentation featured a group of senior engineers, including the new head of global production, Tom Chu, a nod to Tesla’s attempt to show the depth of its executive seat outside of Musk, the company’s face.

But there were no details about when the next-generation cars will be launched and which models will be offered.

Musk was expected to come up with a plan to build an affordable electric vehicle (EV) that would broaden his brand’s appeal and fend off competition.

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Executives have said that Tesla’s next-generation platform will include more than one vehicle built in standardized factories, but Musk brushed aside questions about which models to consider.

Tesla’s chief financial officer, Zach Kirkhorn, and others have emphasized their dedication to lowering production costs.

Kirkhorn estimated that Tesla must invest six times what it has so far to achieve its long-term goal of increasing production to 20 million cars per year by 2030, a 10-fold increase over current capacity. He said the bill could reach $175 billion.

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Musk said that the next investment step will be the construction of a new factory for Tesla in northern Mexico, announcing the first factory outside the United States, Germany and China.

Musk wouldn’t comment on plans for a revamped Model Y sedan next year, called Project Juniper that Reuters noted in a report on Wednesday, or a revamped version of the Model 3 sedan — a Project codenamed Highland that Reuters reported will go into production in September.

Design chief Franz von Holzhausen said the Cybertruck is coming this year.

wholesale market

Capturing the mass market is critical to achieving Tesla’s annual production target, which is more than the joint production of the two largest automakers by volume – Germany’s Volkswagen (VOWG_p.DE) and Japan’s Toyota (7203.T).

It would also represent a sales volume for Tesla alone of about a quarter of last year’s total global car sales.

The key to increasing Tesla’s sales volume is to lower prices for consumers, Musk said, adding that Tesla’s discounts offered this year have fueled demand.

“People’s desire to own a Tesla is very high,” Musk said. “The determining factor is their ability to pay for a Tesla.”

Tesla is the most valuable automaker, but its stock has swung wildly. Shares are down about half from their peak in November 2021, but have rebounded more than 60% this year.

Musk said Tesla may need as few as 10 models, which at target production would be 2 million sales per year per model line. By comparison, Toyota sells just over 1 million Corollas annually, globally.

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Tesla is already profitably outperforming its competitors in the electric vehicle industry. Chief engineer Lars Moravi said the company expects to build its next-generation vehicles at half the cost of the current Model 3 or Model Y.

Dubbed a “boxless” model, Muravi described the production process for future electric vehicles to combine sub-assemblies to reduce complexity and time in production.

Tesla CEO Peter Bannon gave an example of how the company uses data to cut costs. Customer data showed that Tesla owners were not using the sunroof, he said, “so we removed it.”

Leading Tesla investor Ross Gerber tweeted that the presentation was “extreme excitement” for the next-generation car. “It’s coming. They put it all in. 50% lower build cost. Do you get $25-$30K!”

Tesla has outpaced the industry in recent years, ramping up deliveries rapidly despite the pandemic and supply chain disruptions.

But Tesla has lowered prices in recent months to boost sales, which have been pressured by a weak economy and mounting threats from competitors in the United States and China.

Reuters Graphics Reuters

Tesla will also have to improve its battery technology, which Musk has called a “key determinant” of the transition to sustainable energy and affordable cars.

Tesla is struggling to scale up production of the advanced batteries, called 4680s. It’s likely to reach production volume this year, executives said Wednesday, but added that they’re still testing two different production processes.

The stock is down more than 60% last year

Additional reporting by Hyunjoo-jin in San Francisco, Joseph White in Detroit, Akash Sriram in Bengaluru, Abhrup Roy in San Francisco, and Kevin Krolicki in Singapore; Editing by Peter Henderson, Matthew Lewis, and Himani Sarkar

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