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Tesla departs all-new Model 2 in favour of "more affordable" vehicles

by IT Desk

April 24, 2024

Visitors check a Tesla Model 3 car next to a Model Y displayed at a showroom of the U.S. electric vehicle (EV) maker in Beijing, China February 4, 2023. REUTERS/Florence Lo/File Photo

key takeaways

Tesla (TSLA.O), opens new tab announced on Tuesday that it will use its current platforms and production lines to introduce "new models" by early 2025, retreating from more ambitious plans to manufacture an all-new model that was anticipated to cost $25,000.

After months of decline, during which Tesla has faced with tough competition and dwindling sales, the promise of new goods on a speedier timeframe drove Tesla shares surging in after-hours trading. This was a much-needed lift. Despite Tesla's first-quarter results falling short of Wall Street's projections, the company nevertheless saw improvements.

Chief Executive Elon Musk declined to provide details of the new vehicles but said they would include more-affordable models that would start production by early 2025. That's just before the target Musk previously set for launching the all-new low-cost model widely known as the Model 2.

Reuters exclusively reported on April 5 that Tesla had scrapped plans for the Model 2, which investors had expected to drive Tesla's growth into a mass-market automaker. Musk initially reacted to that story with a post on his social platform X saying "Reuters is lying," without pointing out any inaccuracies.

On Tuesday, neither Tesla nor Musk directly addressed the Reuters report.

Instead, they discussed unidentified new models that appeared to be different products, without saying how many, what type or providing their target prices.

The new models would be built on Tesla's current manufacturing lines and use "aspects" of its current platform and a next-generation platform, Tesla said. It cautioned that this plan may "result in achieving less cost reduction than previously expected," suggesting that the vehicles may cost consumers more than the Model 2's anticipated $25,000 price.

The automaker said its plan for new models would let it better control capital expenditures during "uncertain times." Tesla engineering chief Lars Moravy said the company would avoid the risk of investing in a "revolutionary" manufacturing process. Musk has said previously the all-new affordable car would be a test bed for manufacturing innovation.

Moravy said Tesla's work on the next-generation affordable car is "transferable" to the vehicles the automaker now aims to release early next year.