Tesla plans to produce a car for 25,000. hole. already this year. Will demand skyrocket?

Luc Williams

The electric vehicle manufacturer intends to start producing new models later this year, i.e well ahead of the previously promised end-2025 deadline. This decision caused the shares to soar by 13% at the end of Tuesday's session, which was the largest increase this year among S&P 500 index companies.

News of the plan to accelerate the rollout of low-cost cars reassured investors and overshadowed the large decline in profits, sales and margins that Tesla saw in the first quarter of 2024.

Tesla's weaker results in Q1 2024

Tesla reported on Tuesday almost 9 percent revenue decline in the first quarter, the largest since 2012.

Revenue fell to $21.30 billion from $23.33 billion a year earlier and $25.17 billion in the fourth quarter of last year. Net profit fell 55 percent. to $1.13 billion, or 34 cents per share, from $2.51 billion, or 73 cents per share, a year ago.

Low demand suffocates producers

CEO Elon Musk expects that the introduction of cheap models will increase demand for electric vehicleswhich has declined globally recently and forced other carmakers to rethink their electrification plans.

In a call with analysts, Musk sharply criticized rivals such as General Motors and Ford Motor, which have cut production of electric vehicles and begun relaunching hybrid offerings.

“The adoption rate of electric vehicles is under pressure around the world, with many other car manufacturers abandoning electric vehicles and instead opting for plug-in hybrids,” he said. “This is not the right strategy.”

Tesla's unclear strategy increased investor concerns

Tesla's strategy was unclear for most of 2024. In 2023, the company lowered the prices of all models in its lineup in an attempt to increase sales. However, the price reduction strategy turned out to be ineffective as demand continued to decline.

Investors were concerned that Tesla had changed plans for the long-promised $25,000 car. dollars as Musk implemented his robotaxi vision. Now Tesla says it is accelerating its plan to produce low-cost cars that it can produce in existing factories.

It was not immediately clear whether Tesla's Tuesday pledge for “cheaper models” was a reference to the long-discussed low-cost car or whether it referred to efforts to lower the costs of the existing Model 3 and Y. Musk did not fully address those concerns. “I think we've said everything we want to say on this matter,” Musk said when asked for more details about the cheaper models.


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