Tesla has recently made some significant changes to its product roadmap, and the reason behind it is now clear. The company is facing pressure on electric vehicle (EV) sales, which has led to an accelerated plan that includes the launch of more affordable models as early as next year or possibly by the end of 2024, according to Tesla CEO Elon Musk. This unexpected announcement caused Tesla’s stock to soar over 11% in after-hours trading.
The decision to revamp the product roadmap comes after a report from Reuters in early April claimed that Tesla had abandoned its work on a low-cost, next-generation car. This car was supposed to be built on the same EV platform that Tesla is developing for its robotaxi vehicle. While Musk denied Reuters’ claims, subsequent reports from Electrek and Bloomberg News have suggested that the development of this particular EV has been delayed or de-emphasized within the company.
Tesla revealed its updated product roadmap in its first-quarter earnings report, which showed a 55% year-over-year decline in profits. The company stated that it had updated its future vehicle lineup to accelerate the launch of new models ahead of the previously communicated start of production in the second half of 2025. These new models will be more affordable and built on existing production lines, utilizing aspects of both the next-generation platform and current platforms.
Bloomberg News reported that Tesla is working on new versions of the Model Y and Model 3 that incorporate technology and processes from the next-gen EV, with a focus on the Model Y. However, Tesla investors will have to wait until August 8th, when the company plans to reveal its robotaxi, to learn more about the new product roadmap.
During the investor call, Musk avoided providing specific details about the new roadmap, stating that they would discuss it on August 8th. When asked again later in the call, Musk indicated that they had already shared all the information they would on that front.
Tesla VP Lars Moravy acknowledged that there is some risk associated with the new platform but emphasized that the company aims to leverage all the subsystems being developed for it, including powertrains, drive units, manufacturing improvements, automation, thermal systems, seating, and more. The goal is to incorporate this engineering work into new products as quickly as possible rather than discarding it.
While the new product roadmap may result in a reduction in cost savings compared to the original plan, Tesla anticipates substantial growth. The company believes it can double its production in 2023 (around 1.8 million vehicles) by 2025. By integrating the next-gen technology and processes with existing platforms and manufacturing lines, Tesla can avoid the need to build new production facilities. This has led to a slowdown in the construction of a new factory in Mexico, where the next-gen EV and robotaxi were initially planned to be produced.
Despite Tesla’s optimistic growth projections, it is worth noting that the company has consistently missed its target of achieving 50% annual growth over the past few years. Tesla has also undergone significant workforce reductions, but Musk claims that the company is not giving up anything significant in terms of capabilities.
In conclusion, Tesla’s decision to revise its product roadmap is a response to the pressure on EV sales. The company aims to launch more affordable models sooner than originally planned by incorporating aspects of its next-generation platform into existing production lines. While there are challenges and potential trade-offs involved, Tesla believes this approach will enable significant growth without the need for additional production facilities. However, given Tesla’s history of missing growth targets, investors will be eagerly awaiting further details about the new product lineup on August 8th.