Elon Musk-led Tesla announced on Tuesday that it will utilize its current factories to produce new and more affordable vehicles, potentially starting as early as the end of this year. This decision makes investments in new factories in Mexico and India unlikely in the near future, states a Reuters report.
The company, which is the world’s leading EV manufacturer, aims to increase production by 50% from 2023 to its current capacity of nearly 3 million vehicles before investing in new manufacturing lines.
Tesla stated, “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.”
Investors reacted positively to the decision, with Tesla shares surging 12% in after-hour trading, despite the company’s quarterly results falling short of financial targets.
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Elliot Johnson, chief investment officer at Evolve ETFs, which manages nearly $6 billion in assets, including investments in Tesla and other EV makers, commented, “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.”
On Tuesday, Tesla discussed unidentified new models that seemed to be different from the previously reported Model 2, which was expected to cost $25,000 and drive Tesla’s growth into a mass-market automaker.
In January, Musk announced Tesla’s target to launch the more affordable new model by the latter half of 2025. He emphasized that this model would incorporate “revolutionary manufacturing technology” and serve as the catalyst for Tesla’s next phase of growth.
Lars Moravy, head of Tesla’s engineering, noted that new manufacturing processes and production lines involve “some risks,” and the automaker made a “major shift” to utilize its facilities to build low-cost vehicles in a fast and efficient manner for now.
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Musk was anticipated to meet with Indian Prime Minister
Narendra Modi
on Monday to announce significant investments in an auto factory aimed at producing a small, affordable model. However, Musk canceled the meeting at the last moment, citing “very heavy Tesla obligations,” with intentions to reschedule the visit for later in the year.
Last year, Musk stated that Tesla would “definitely” construct a factory in Mexico, contingent upon economic conditions and interest rates affecting vehicle affordability. He also mentioned plans to initiate the initial construction phases last year.
On Tuesday, Tesla did not respond to inquiries regarding its plans in Mexico and India.
Analysts pointed out that it would be challenging for Tesla to expand capacity while preparing for slowing sales after years of double-digit growth rates. Tesla reiterated on Tuesday that its vehicle volume growth rate may be significantly lower than in 2023, although Musk added during a conference call that sales would still increase from last year.