A cheaper Tesla is back on the menu

Tesla says it will build more affordable electric vehicles – perhaps as early as 2025 – refuting recent reports that Tesla CEO Elon Musk canceled plans for a cheaper “Model 2” vehicle in favor of launching a robotaxi. But Musk didn’t clarify whether the low-cost EV would be an entirely new model for Tesla or stripped-down versions of its current vehicles.

“There’s been a lot of talk in terms of a new product roadmap,” Musk said during the company’s first-quarter earnings call, addressing concerns investors expressed last month about delayed plans for a low-cost EV. “We have updated our future vehicle lineup to accelerate the launch of new models.” Musk said we could see the vehicles in early 2025, if not this year.

The vehicles will combine “aspects” of a next-generation platform with the current platform that underpins the company’s best-selling models, the Model 3 and Model Y. “This is not dependent on a new factory or massive new production lines, it will be manufactured on our current production lines much more efficiently,” Musk said, predicting this could accelerate the company’s production to more than 3 million vehicles per year.

Tesla reported revenues of $21 billion in the first quarter of 2024, down 9% year over year. Net profit fell 55% to $1.1 billion. The company sold fewer models this quarter as demand for electric vehicles cooled. Analysts say a more affordable model is crucial to Tesla’s future growth.

Musk began the conference call by addressing concerns that the market is emphasizing the development of hybrid vehicles over fully electric vehicles, which he believes is “not the right strategy.”

“We will talk more about this on August 8th,” said Musk, once again emphasizing that 7 million cars by the end of this year will be part of a fleet of robotaxis. August 8 is the date Tesla plans to launch a new robotaxi vehicle.

While Tesla is again promising to launch cheaper EVs, it hasn’t confirmed whether entirely new cheap models will come. It’s possible that cheaper models could simply be reduced to the Model 3 and Model Y vehicles, which alone generate the majority of the company’s revenue.

Right now, you can buy a Model 3 for $38,990, which is about the cheapest the vehicle has ever been — but still not at the elusive $35,000 price tag that was promised nearly a decade ago. The company promised that a simplified “unboxed” manufacturing process will further reduce costs.

When asked directly by an investor about cheaper EVs like the Model 2 and where Musk’s “heart” is, Musk largely dropped the subject. In contrast, he was happy to talk at length about autonomy, autonomous driving, and even aliens.

“If you have a great product at a great price, sales will be great,” Musk said at one point, responding to a question about value. He said Tesla will continue to improve accessibility to improve “value for money.”