Tesla vows to cut EV production costs in half, Musk keeps affordable car plan a secret

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

Shares fell more than 5% in after-hours trading following 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 world to embrace renewable energy to the company’s innovation in managing its operations from manufacturing to service.

The presentation included a range of senior engineers, including new global chief of production, Tom Zhu, in a nod to Tesla’s attempt to show the depth of its executive bench beyond Musk, the face of the company.

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

Musk was expected to lay out a plan to create a more affordable electric car (EV) that would increase the appeal of his brand and fend off competition.

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Executives said Tesla’s next-generation platform would feature more than one vehicle built in standardized factories, but Musk brushed off questions about models.

Tesla’s chief financial officer, Zach Kirkhorn, and others underlined their commitment to lowering production costs.

Kirkhorn estimated that Tesla would need to invest six times more than it has done to date to meet its long-term goal of increasing production to 20 million vehicles per year by 2030, a tenfold increase over current capacity. The bill could reach $175 billion, he said.

The next investment step will be a new Tesla factory in northern Mexico, Musk said when announcing the first factory 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 Wednesday, or a refreshed version of its Model 3 sedan — a project codenamed Highland that Reuters reported on. that it will go into production September.

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


Capturing the mass market is critical to Tesla’s annual production goal, which exceeds the combined production of the two largest automakers – Germany’s Volkswagen (VOWG_p.DE) and Japan’s Toyota (7203.T).

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

Musk said the key to boosting Tesla’s sales volume would be to lower prices for consumers, adding that Tesla’s discounts offered this year had fueled demand.

“People’s desire 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 automaker, but its share fluctuated wildly. Shares are down about half from their peak in November 2021, but are up more than 60% this year.

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

Tesla already has an edge over its rivals in producing electric cars at a profit. Chief engineer Lars Moravy said the company expects to build its next-generation vehicles for half the cost of the current Model 3 or Model Y.

Moravy described a manufacturing process for future EVs that he called an “unboxed” model of snapping subassemblies together 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 were not using the sunroof, he said, “so we removed it.”

High-profile Tesla investor Ross Gerber tweeted that the presentation amounted to a “huge tease” about the next-generation vehicle. “It’s coming. They’ve got it all mapped out. 50% less construction cost. Would get you a $25-$30,000 EV!”

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

But Tesla cut prices in recent months to boost sales, which have been squeezed 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 renewable energy and more affordable cars.

Tesla is struggling to scale up production of advanced batteries called 4680s. Executives said on Wednesday they were likely to reach volume production this year, but added they were still testing two different production processes.

The stock fell more than 60% 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; Edited by Peter Henderson, Matthew Lewis and Himani Sarkar

Our Standards: The Thomson Reuters Principles of Trust.


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