Tesla has reportedly informed its suppliers that it intends to commence production of its highly anticipated next-generation electric vehicle, codenamed "Redwood," in mid-2025. This exciting development aims to usher in a new era of mass-market electric vehicles for the renowned automaker.
Elon Musk, the CEO of Tesla, confirmed this groundbreaking news during a post-earnings call on Wednesday. He revealed that the company plans to initiate production of the next-generation electric vehicle at its state-of-the-art factory in Texas during the second half of 2025. Subsequently, Tesla intends to expand production to Mexico and explore other factory locations outside of North America later this year. Musk acknowledged the challenges associated with scaling up production for this novel vehicle, emphasising the complexity of the task at hand.
Tesla has long been tantalizing its devoted fan base and investors with promises of affordable electric vehicles and self-driving robotaxis built on next-generation, cost-effective electric car platforms. This ambitious endeavor includes the creation of an entry-level $25,000 car, positioning Tesla to compete with more economical gasoline-powered vehicles and an increasing number of affordable electric vehicles, such as those manufactured by China's BYD.
Notably, BYD surpassed Tesla as the world's leading electric vehicle manufacturer in the final quarter of 2023, prompting Tesla to intensify its efforts to regain its position at the forefront of the EV market.
Tesla foresees its next-generation vehicle as a catalyst for substantial growth. The company's recent quarterly results report acknowledged that the vehicle volume growth rate in 2024 may be comparatively lower than the remarkable growth rate achieved in 2023. This is attributed to Tesla's dedicated teams focusing on the launch of the next-generation vehicle at Gigafactory Texas.
While the introduction of a $25,000 car was initially promised by Musk in 2020, the plan was subsequently shelved and then revived. At present, Tesla's most affordable offering, the Model 3 sedan, starts at $38,990 in the United States. Musk expressed concerns last year regarding the potential impact of high interest rates on consumer demand for significant purchases, such as automobiles.
Sources familiar with the matter revealed that Tesla had sent "requests for quotes" to suppliers for the "Redwood" model last year, with an estimated weekly production volume target of 10,000 vehicles. According to insiders, production is slated to commence in June 2025. All sources spoke on condition of anonymity due to the confidential nature of the matter.
The timing of the release of next-generation compact vehicles was among the most frequently asked questions posed by investors to Tesla before the release of its quarterly results report. It is anticipated that the report will forecast a 21% rise in deliveries for 2024, falling short of Musk's long-term annual target of 50%, which he set approximately three years ago.
In May, Musk shared that Tesla was actively developing two new products, potentially resulting in combined annual sales of 5 million vehicles. He expressed confidence in both the design of the products and the revolutionary manufacturing techniques that would set them apart from anything else in the industry.
According to Walter Isaacson's biography of Musk, released in September, Tesla plans to create an affordable robotaxi and an entry-level electric car priced at $25,000, both based on the same vehicle architecture. Furthermore, Tesla aims to manufacture more cost-effective vehicles at its Berlin factory and is exploring the possibility of establishing a manufacturing facility in India, signaling its commitment to producing affordable electric cars globally.
Tesla's track record of missing launch targets and pricing projections suggests that achieving volume production will require time and careful planning. The Cybertruck, for instance, has experienced delays and a slow acceleration in production, with its starting price of $60,990 in the United States being 50% higher than initially advertised in 2019.
Musk, known for his optimism, acknowledged that the company's current schedule indicates the launch of production towards the end of 2025. He expressed unwavering dedication, stating that the company would be tirelessly working towards this goal.
While the profitability of these more affordable electric vehicles may pose challenges due to the costs associated with batteries and the production of quality inexpensive vehicles, Tesla has demonstrated its commitment to innovation by extensively studying a Honda Civic, priced at $23,950 in the United States, to glean insights on manufacturing cost-effective cars.
The next-generation Tesla architecture, internally referred to as "NV9X," is expected to encompass multiple models, according to sources familiar with the matter.
