January 25, 2024 – Tesla (TSLA.O) CEO Elon Musk has revealed plans to commence production of the next-generation electric vehicle (EV) at the Texas factory in the second half of 2025. This announcement follows Musk’s cautionary remarks about a significant slowdown in sales growth for the company this year, leading to a 6% drop in Tesla shares during after-hours trading.
Musk emphasized the challenges associated with ramping up production for the new vehicle, citing the need for “a tremendous amount of new revolutionary manufacturing technology.” This indication suggests that efforts to revitalize Tesla’s growth pace may require considerable time and innovation.
The disclosure aligns with an earlier Reuters report stating that Tesla had informed suppliers to prepare for the startup of a smaller crossover vehicle by June 2025, seen as critical for Tesla as it faces competition from more affordable EVs, particularly those produced by China’s BYD.
While Musk expressed optimism about the production schedule, noting that they would start production towards the end of 2025, he acknowledged the difficulties by stating, “We’ll be sleeping on the line practically.” The Texas factory will be the initial production site, followed by Mexico and another factory outside North America, the location of which will be decided later this year.
Tesla, anticipating a notable deceleration in sales growth this year, indicated a shift between two growth waves. The first was driven by the release of Models 3 and Y in 2017 and 2020, respectively, while the second wave is expected to commence with the introduction of the next-generation vehicle platform.
Market analysts anticipate Tesla to sell approximately 2.2 million vehicles in 2024, representing a 21% increase from 2023. However, this falls short of the long-term target set by Musk about three years ago, which aimed for a 50% growth. Tesla did not reiterate this target in its recent statements.
The EV industry leader is currently navigating a period of slowing growth and margins as demand for EVs softens and competition intensifies. Tesla has responded by introducing price cuts, sparking a price war that has impacted U.S. rivals. The company’s fourth-quarter results showed a decline in gross margin, and its shares have fallen 16% since the beginning of the year.
Tesla’s future margins are expected to be influenced by interest rates, according to Musk. Despite reporting a more than doubled net income in the fourth quarter of 2023, Tesla faces challenges in sustaining its previous growth momentum and brand leadership.($1 = 1,201.6000 won)
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