Tesla promises low-cost car 'as quickly as possible'

The manufacturer Tesla, which announced on Tuesday April 23 a 55% drop in its net profit in the first quarter, intends to produce a low-cost electric vehicle “as quickly as possible”, an announcement which delighted the markets. During an audio conference with analysts, management indicated that the low-cost vehicle project would be accelerated, so that it would be available “as quickly as possible”. In the wake of these remarks, Tesla shares soared by more than 11% in electronic trading after the New York Stock Exchange closed. For analysts, Tesla could find a second wind with this vehicle nicknamed Model 2, which would be sold for around $25,000.

According to Factset, the average price of all Tesla models combined was $42,110 in the first quarter, compared to $46,000 a year earlier. A figure lower than the drops announced over the weekend in Europe, the United States and China. Price “is one of the biggest obstacles. The industry needs more products under $30,000,” said Stephanie Valdez Streaty, director of Industry Insight at Cox Automotive.

Analysts were expecting clarification from boss Elon Musk and the management team on the group's strategy after a fairly eventful month of April, punctuated by sporadic official announcements and speculation. So many uncertainties which have caused its market capitalization to plunge by almost 40% since the start of the year. Tesla lifted a corner of the veil on Tuesday, saying it had invested $2.8 billion in the first quarter in its artificial intelligence infrastructure, its production capacities, its network of Superchargers and its new production infrastructure.

“We have updated our vehicle programming to accelerate the launch of new models that we had previously planned to begin production in the second half of 2025,” Elon Musk explained to analysts. “We now think that it will be at the beginning of 2025, if not at the end of this year,” he added, specifying that existing production lines would be used and that this should make it possible to reach a capacity annual production of three million vehicles.

The group also discussed future advances in autonomy and the release, among the new models, of the long-awaited low-cost car and Semi, its semi-trailer truck. Without forgetting its robotaxi, a 100% autonomous vehicle, which must be presented on August 8. Concerning the latter, the objective is to start production at the end of 2025 for first deliveries the following year.

Pending the completion of all these projects and developments, volume growth in 2024 should be “significantly lower” than in 2023, warned Tesla, noting that the electric vehicle market was still “under pressure”. In addition to a less dynamic electric vehicle market than expected in the United States, Tesla is also facing difficulties in China with strong competition from local manufacturers, including internationally. BYD thus snatched the title of world's largest seller of electric vehicles in the fourth quarter.

The honor is safe: the Tesla Model Y was the best-selling car in the world in 2023, a first for an electric vehicle. But, between January and March, it delivered fewer vehicles than a year earlier and, above all, much fewer than expected by analysts. Production also disappointed, with a decline of 8.5% over one year. Over the first three months of the year, it achieved a turnover of $21.30 billion (-9% year-on-year) and a net profit of $1.30 billion (-55%). Reported per share and excluding exceptional items - the markets' preferred data - the net profit came to 45 cents. These results are lower than market expectations.

“Tesla is in a correction period and will have to proceed with caution if it wants to avoid a deeper decline in sales,” commented Gadjo Sevilla, technology analyst at EMarketer. Furthermore, regarding the layoffs announced on April 15, which should affect a total of around 14,000 people out of the group's 140,000 employees - which has not confirmed these figures - Tesla was legally forced to provide details. It informed the Texan authorities on Monday of the dismissal, from June 14, of 2,688 employees at its mega-factory in Austin (Texas), according to a notification sent to AFP on Tuesday.