Tesla says it will cut the cost of next-generation cars in half

DETROIT (AP) — Tesla says it will cut the cost of its next-generation vehicles in half, largely through the use of innovative manufacturing techniques and smaller factories.

CEO Elon Musk and other executives outlined the goals during a 3 1/2 hour investor day presentation at Tesla’s headquarters in Austin, Texas, Wednesday as they presented the company’s third master plan.

The changes could bring the cost of a new generation of vehicles to about $25,000. Many investors hoped to get a glimpse of the next-generation vehicles, but Musk said they wouldn’t be shown until there was a proper product reveal.

“We’d take a leap if we answered your question,” he told an analyst of the new vehicles.

Shares of Tesla fell nearly 6% in after-hours trading during the presentation that ended just after 8 p.m. Eastern time.

Musk announced that Tesla plans to build a new factory in Mexico near Monterrey. Company executives said it will not take production from other plants, where Tesla expects to expand production. They said the Mexican factory would build the next generation of vehicles, which will also be built in other factories.

It is likely that the next-generation vehicles will be smaller than the current ones to lower prices, but that was not clear from the presentation. Many automakers are building smaller vehicles in Mexico to cut labor costs and maintain profit margins.

CFRA analyst Garrett Nelson attributed the fall in Tesla’s shares to the lack of details about the new vehicles and to the company’s history of seeing its stock price rise prior to major events, only to fall when the actual news comes out. made.

He said the company’s long-term focus may have disappointed some investors, but he sees Tesla’s vision as justification for its high stock valuation relative to other automakers.

“What they outlined really made it clear that it deserves to trade at a high premium to the rest of the industry,” he said.

Franz Von Holzhausen, Tesla’s chief design officer, said the company needs to cut costs significantly again to meet its ambitious electric vehicle production target of 20 million vehicles per year by 2030. Tesla expects to produce 1.8 million this year.

The company, he said, will build the cars in smaller modular units and then put those units together. The system takes up less space. Executives said that as a result, the next electric powertrain plant will be half the size of the Tesla just built in Austin, and cost 65% less.

“That also means we can build more factories at the same time,” said Tom Zhu, who heads Tesla production.

Chief Financial Officer Zachary Kirkhorn said the company cut costs in half between the early models S and X and the second-generation, Models 3 and Y. It plans to do that again for the next generation, but will also upgrade the cars at the same time. improve. , he said.

The company also said it would design vehicles to have fewer wires and transistors and use less expensive rare earth metals in the batteries.

“As we improve affordability, the number of customers accessing our products will increase,” said Kirkhorn.

Musk said demand for Tesla vehicles is high, but many who want one now can’t afford them.

Executives said Tesla is unique from other automakers because all of the people involved in designing and manufacturing vehicles are in the same room. The company also designs and makes many of its parts and software, while others rely on multiple parts suppliers.

The company also said it opened 10 of its supercharge stations to owners of other electric vehicles as of Wednesday. And it plans to offer a package of unlimited home charging for $30 a month in Texas, using wind as the energy source.

Kirkhorn said the new master plan includes product developments, rapid volume growth and technological advancements.

Musk opened the session by saying that there is a clear path to sustainable energy on Earth, but that almost everything needs to be changed, from energy from fossil fuels to electricity generated from renewable sources. Earth can support more people than it does today without destroying natural habitats or massive cuts, he said.

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