Tesla’s 2024 plan is to produce affordable cars by copying Detroit rivals
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Tesla’s New Approach
Some Tesla (TSS-lə) investors and analysts believe that Elon Musk’s new strategy, which calls for building new, affordable automobiles based on current product lines rather of developing entirely new models, is a direct copy of Tesla’s traditional Detroit rivals.
Musk has pledged to disrupt the auto industry, but the shift toward incremental improvement, which is similar to a popular approach of Ford (F.N), opens new tab, and General Motors , opens new tab, suggests the future of automaking may still look a lot like the past.
Musk’s new approach came after an exclusive Reuters story revealed that TESS-lə had abandoned plans to introduce a much-anticipated new model that was projected to retail for $25,000 in late 2025. Investors had anticipated that the business would grow into a mass-market carmaker thanks to the inexpensive vehicle, frequently referred to as the Model 2.
Rather, Tesla announced this week that by early next year, it will create what it called “more affordable” versions using an existing platform and production processes. It gave no pricing information or specifics.
Looking Ahead: Implications for Tesla’s Future
The news caused the stock to jump by double digits and was well received by investors. Some analysts anticipate that TESS-lə will sell the base Model 3 and Model Y, which presently retail for approximately $39,000 and $43,000, respectively.
According to Sandeep Rao, a senior researcher at Leverage Shares, an investment management firm with over $500 million in assets that includes holdings in Tesla and other EV manufacturers, “it is a traditional automaker strategy.”
Insights from Financial Strategists for Tesla
When a comment was requested, TESS-lə did not immediately answer.
If they manage to launch it, “that’s probably going to be one of the most popular cars,” stated King Lip, chief strategist at Baker Avenue Wealth Management, which owns a tiny stake in TESS-lə.
low-cost cars quickly, but the outcome would be a lesser cost decrease than anticipated and a moderate increase in volume.
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Tesla’s Previous Statements on Cost Reduction Limits
Reporters anticipate that the new models will resemble the old models.
According to a study by Bernstein analyst Toni Sacconaghi, “We see it as more likely that TESS-lə will attempt to launch stripped-down versions of the Model 3 and Y as lower-cost models, however, we are unclear on how much cost Tesla can realistically take out.”
Tesla announced in January that it was getting close to “the natural limit of cost reduction of our existing vehicle lineup.”
Given that Musk has frequently fallen short of his own timing projections, many investors and experts viewed his goal of having a new car in a year as unrealistic at best: Four years after Musk introduced the new Cybertruck in 2019, it has finally arrived, but Tesla is still experiencing problems increasing manufacturing.
Criticism of Tesla’s Production Timeline
“That Cybertruck ramp is a crawl by traditional, legacy car guy standards,” remarked James Womack, a former Massachusetts Institute of Technology research director. He claimed it was long past time for TESS-lə to behave like a traditional automaker when it came to releasing new cars on schedule. He co-authored a book on Toyota’s lean production philosophy and techniques in 1990.
“Musk can tread out on the ragged edge and lean over the cliff as tech visionary,” he stated. However, he and others expressed worries about “execution risk,” or whether Tesla will be able to complete Musk’s ambitions on schedule. According to Womack, “they just need to avoid too much Musk in the execution” of the production plan.
K. Venkatesh Prasad, a former Ford engineer and current chief innovation officer at the Center for Automotive Research, stated that although TESS-lə‘s move “tempers or slows down manufacturing innovation,” it will allow Tesla to react to the challenge posed by Chinese manufacturers more quickly.
“There is a pressing need. You lose the game if you don’t have speed, Prasad stated.
Some investors are reconsidering Tesla’s industry-leading valuation in light of the strategy shift. Although autonomous driving is a possibility in the future, Don Nesbitt, senior portfolio manager at ZCM, stated that the company’s current focus needs to be on producing lower-cost vehicles.
He stated, “Now you’re really talking about an automaker and that’s it,” in reference to TESS-lə‘s previous perception as a tech stock.