Tesla Plans To Manufacture 4 Million Less Expensive Electric Cars Each Year
Last weekend, CleanTechnica published a deliciously subversive article that claimed Tesla was preparing to bring a less expensive city car to market and build it at its new Supercalifragilistic Megafactory in Nuevo León, Mexico. That article was an April Fools spoof, which should have been abundantly obvious to anyone who noticed it was published on April 1, but still some readers were taken in by it and lambasted us for publishing such obviously false drivel.
So, we were very much surprised to read in CNEvPost today that its sources are saying the company is gearing up to build a new smaller, less expensive electric car that will sell for around $25,000. And get this, those sources claim Tesla is planning to manufacture 4 million of them a year by 2030 — 2 million at the new factory in Mexico, 1 million in China, and another million elsewhere. We are more than a little surprised to learn our silly prognostications were so close to the mark!
The CNEvPost article is based on a report by Chinese automotive news site 36kr, whose sources say the new model will be a scaled down version of the Model Y. At Tesla Investor Day, there were two shadowy vehicles under wraps in the background, neither one of which looked anything like a downsized Model Y to me. Were those red herrings, designed to distract the masses? No one knows. Nothing was said about them at that event and there have been no rumors about them since. The clearest hint of what the new lower priced model might look like was on display behind Elon Musk at Battery Day.
Musk has been ambivalent about new models. During the Q4 earnings call in 2022, he said, “We are not currently working on a $25,000 car. At some point we will, but we have enough on our plate right now — too much on our plate, frankly.” But Musk has also been touting new manufacturing efficiencies such as using enormous casting machines that can turn out finished body parts in minutes, rather than the traditional process that requires dozens if not hundreds of stampings which then have to be welded, glued, or riveted together — a process that can take hours.
Time is not the only factor. Musk claims that, using castings instead of stampings, factories can be much smaller and use far fewer robots to assemble vehicles. Time is money, and if Tesla can build cars faster and use factory space more efficiently, it will realize significant cost savings.
Our readers will remember former Volkswagen Group CEO Herbert Diess telling people that Tesla needs only 10 hours to manufacture a Model Y in Grünheide while Volkswagen needs 30 hours to build an ID.3 in Zwickau. Diess got shunted aside for daring to say such things (or for other matters), but that doesn’t mean he was wrong. Diess and Musk has quite the mutual admiration society going on there for a while and it rubbed a lot of people in Wolfsburg the wrong way.
At Tesla Battery Day in 2020, Musk said that self-driving electric vehicles priced at $25,000 will be possible by 2023. Since then, the company’s progress on perfecting its Full Self Driving systems has suffered a number of setbacks, one of which caused the NHTSA to demand a recall of more than 300,000 cars equipped with the FSD suite of hardware and software.
For an EV with a range of no less than 400 kilometers and a mainstream smart driving suite, material costs are extremely difficult to get below $25,000, the 36kr report said, citing an engineer from a local car company. If Tesla can bring the price of its entry-level car down to slightly more than $20,000, not only will it gain significant market share for itself, but it will also be a huge push for the maturation of the industry chain, an industry source said. That same source added that this is when the smart EV industry will see drastic changes.
Depending on the factory’s construction schedule, mass production of Tesla’s $25,000 model may be at least a year away, 36kr said, citing another source who claimed Tesla is sending a signal to its suppliers to begin gearing up for production of the new, lower priced model. The new car could be known as the Model C, in theory, or something nobody has even imagined yet. A Model R would make the company’s lineup S3XYR. Stranger things have happened in the world of Tesla.
Tesla has ambitious sales plans, and Musk said last year that the EV maker could open 10 to 12 new factories to increase production and eventually reach its goal of selling 20 million EVs a year by 2030. A less expensive model would make the benefits of owning a Tesla available to a much broader segment of the market and help to tamp down criticisms that label electric cars as expensive baubles for the well heeled.
Tesla Mexico
Not much is known about the new Tesla factory near Monterrey, Mexico, except that it has the potential to be the largest factory yet — even larger than Tesla Shanghai. The governor of Nuevo León told the press last year, “This six year term is coming an alignment of planets for Nuevo León. Due to different global circumstances, they make me sign confidentiality contracts, so I can’t talk about more, but I can tell you halfway that historic investments are coming for Nuevo León, some of them, to give you an idea, they will be the largest investments in the history of the country.”
If Tesla starts producing a more affordable car — one that uses LFP batteries and has some self-driving capability — there are untapped markets throughout Central and South America and possibly Africa as well that it could enter.
The Takeaway
All of this is highly speculative, of course, because Tesla is like a black hole where information goes to die. Requests for information addressed to Twitter now routinely are answered with an emoticon of a smiling pile of excrement, which provides no enlightenment but does offer insight into the mind of Musk, scary as that may be. Requests to Tesla seemingly just disappear. Perhaps Elon has learned to under-promise and over-deliver after nearly a decade of trouble with the opposite.
IF there is a new, less expensive model coming from Tesla, that is wonderful news. Among other things, it will put pressure on other manufacturers to also bring lower-priced EVs (like the forthcoming Volkswagen ID.2all) to market. Traditionally, lower-priced cars have lower profit margins, so this may not be good news for Wall Street. Although, sometimes it is possible to make up for lower gross margins with higher sales volumes.
Executives at other car companies must be pulling their hair out when faced with more competition from Tesla. For the rest of us, the prospect of an entry-level Tesla is music to our ears.
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