Tesla touts cost efficiencies as it gears up for more affordable model

Tesla executives said a wide range of efficiency and cost improvements has put the company on track to launch a far cheaper electric vehicle, potentially allowing it to tap a big new market as it faces greater competition from rival carmakers.

The headway being made towards what it called a “next-generation platform” for a cheaper vehicle dominated discussion at Tesla’s first investor day held at its factory in Texas on Wednesday.

The company’s shares slipped 5 per cent in after-market trading after executives stopped short of spelling out when a new model would be launched or what it would cost.

Lars Moravy, head of vehicle engineering, said: “We’re going to move that quickly over the next couple of years.” He added that the new, “large-volume” vehicle would be produced at a number of the company’s plants, including a new facility in Mexico that was disclosed by the country’s president earlier this week and confirmed by Tesla on Wednesday.

Chief executive Elon Musk said “affordability” was the biggest barrier to Tesla reaching a far bigger market. Before recent price cuts for its electric vehicles, he said, “we weren’t sure about what the price elasticity of demand was for Tesla”.

“We found that even small changes in price have a big impact on demand — very big,” he added.

In the first apparent confirmation that the round of price cuts has helped to revive demand after a weak start to the year, Tom Zhu, head of Tesla’s China’s operations, said lower prices there had an immediate impact, with the company increasing its market share in the country.

“After [the price cuts] we generated huge demand, more than we can produce really,” said Zhu, who was also put in charge of Tesla’s productions facilities around the world at the start of this year.

Musk took an uncharacteristically low-key role at the investor event, leaving it to executives in charge of many of Tesla’s operations to lay out in detail how they had improved efficiency and brought down costs with a goal of making production of the company’s next model cheaper.

Zhu said the company had followed a process in each of its car plants of “question, delete, simplify, accelerate, automate” — querying each step in its manufacturing process and cutting out anything that was not essential, before working out how to do speed up the process and automate it.

A lower-priced car is seen by many Wall Street analysts as essential to Tesla’s goal of selling 20mn vehicles a year by the end of the decade, up from the 1.3mn it sold in 2022. Zach Kirkhorn, chief financial officer, said the company expected to need investment of $150bn to $175bn to hit its 2030 production target, though he added that the carmaker expected to meet this out of its operating cash flow.

Commenting on the new factory planned for Mexico, Musk said: “We will continue to expand production at all of our existing factories. This is not moving output to anywhere from anywhere, it is about expanding total global output.”


Business Asia
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