Tesla promises to halve the production costs of electric cars, Musk keeps an affordable car plan hidden

SAN FRANCISCO, March 1 (Reuters) – Tesla Inc ( TSLA.O ) will cut assembly costs in half in future generations of cars, engineers told investors on Wednesday, but Chief Executive Elon Musk did not reveal when it will debut a long-awaited affordable electric car .

Shares fell more than 5% in after-hours trading after the company’s investor day from its Texas headquarters.

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

The presentation featured a number of senior engineers, including the new global manufacturing chief, Tom Zhu, a nod to Tesla’s efforts to show the depth of its executive bench beyond Musk, the company’s face.

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

Musk had been expected to lay out a plan to create a more affordable electric vehicle (EV) that would broaden the brand’s appeal and fend off competition.

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Executives said Tesla’s next-generation platform will include more than one vehicle built in standardized factories, but Musk dismissed questions about models in mind.

Tesla’s CFO, Zach Kirkhorn, and others emphasized their dedication to cutting production costs.

Kirkhorn estimates that Tesla will need to invest six times more than it has to date to reach its long-term goal of increasing production to 20 million cars annually by 2030, a 10-fold increase from current capacity. The bill could be $175 billion, he said.

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

Musk did not comment on plans to revamp the Model Y sedan next year, dubbed Project Juniper that Reuters flagged in a report on Wednesday, or a revamped version of its Model 3 sedan — a project codenamed Highland that Reuters has reported will go into production in September .

Design chief Franz von Holzhausen said the Cybertruck pickup will arrive this year.


Capturing the mass market is crucial to Tesla’s annual production targets, which are more than the combined output of the two biggest automakers – Germany’s Volkswagen ( VOWG_p.DE ) and Japan’s Toyota ( 7203.T ).

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

Musk said the key to driving Tesla’s sales volume would be getting prices down for consumers, adding that Tesla’s discounts offered this year had created the demand.

“The desire for people to own a Tesla is extremely high. The limiting factor is their ability to pay for a Tesla,” Musk said.

Tesla is the most valuable car manufacturer, but the stock has fluctuated wildly. Shares are down about half from their November 2021 peak, but have retreated more than 60% this year.

Musk said Tesla could need as few as 10 models, which at target production would amount to 2 million sales per year for each model line. In comparison, Toyota sells just over 1 million Corollas a year globally.

Tesla already has a head start on its rivals when it comes to producing electric cars at a profit. Chief engineer Lars Moravy said the company expects to build the next-generation vehicle for half the cost of today’s Model 3 or Model Y.

Moravy described a manufacturing process for future EVs he called an “unboxed” model for snapping together 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 Tesla owners weren’t using the sunroof, he said, “so we removed it.”

High-profile Tesla investor Ross Gerber tweeted that the presentation was a “huge tease” of the next-generation vehicle. “It’s coming. They laid it all out. 50% less cost to build. Would get you a $25-$30k EV!”

Tesla has outperformed the industry in recent years, increasing deliveries quickly despite the pandemic and supply chain disruptions.

But Tesla cut prices in recent months to boost sales, which have been pressured by a weak economy and growing threats from rivals in the United States and China.

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Tesla will also need to improve its battery technology, which Musk has called “the fundamental limiting factor” for the transition to sustainable energy and more affordable cars.

Tesla has struggled to scale up production of advanced batteries, called 4680s. Executives on Wednesday said it was likely they could achieve volume production this year, but added they were still testing two different production processes.

The stock fell more than 60 percent last year

Reporting by Hyunjoo Jin in San Francisco, Joseph White in Detroit, Akash Sriram in Bengaluru, Abhirup Roy in San Francisco and Kevin Krolicki in Singapore; Editing by Peter Henderson, Matthew Lewis and Himani Sarkar

Our standards: Thomson Reuters Trust Principles.

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