A cheaper Tesla is back on the menu

Tesla says it will build more affordable electric vehicles — perhaps as soon as 2025 — refuting recent reports that Tesla CEO Elon Musk had canceled plans for a cheaper “Model 2” vehicle in favor of getting a robotaxi out the door. But Musk didn’t clarify whether the lower-cost EV would be a brand new model for Tesla or simplified versions of its current vehicles.

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

The vehicles will blend “aspects” of a next-generation platform with the current platform that undergirds the company’s top-selling Model 3 and Model Y. “This is not contingent on a new factory or massive new production lines, it’ll be made on our current production lines much more efficiently,” Musk said, predicting it could accelerate the company’s production to over 3 million vehicles a year.

Tesla has reported $21 billion in revenue for the first quarter of 2024, a 9 percent drop year over year. Net income dropped 55 percent 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 started the call by addressing concerns that the market is emphasizing the development of hybrid vehicles over fully electric ones, which he believes is “not the right strategy.”

“We’ll talk about this more on August 8th,” Musk said, as he reemphasized that 7 million cars by the end of this year will be part of a robotaxi fleet. August 8th is the date Tesla plans to unveil a new robotaxi vehicle.

Although Tesla is again promising to release cheaper EVs, it hasn’t confirmed whether entirely new cheap models will come. It’s possible cheaper models could just be stripped down Model 3 and Model Y vehicles, which alone drive the majority of the company’s revenues.

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

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

“If you have a great product at a great price, sales will be excellent,” Musk said at one point, responding to a question about value. He said Tesla will keep improving affordability to make the “value for money” better.