Musk unveils plans for low production cost while skirting affordable car option

Tesla chief executive was expected to lay out plan for a smaller, more affordable electric vehicle, but it did not materialize

Tesla will cut assembly costs by half in future generations of cars, engineers told investors on Wednesday, but Elon Musk did not unveil a much-awaited small, affordable electric vehicle.

Shares fell more than 5% in after hours trade following presentations at the company’s investor day from its Texas headquarters.

In the first nearly three hours of the webcast, Tesla executives led by Musk discussed everything from a white-paper plan for the globe to embrace sustainable energy to the company’s innovation in managing its operations from manufacturing to service.

The presentation featured an array of engineers, a nod to Tesla’s attempt to show the depth of its executive bench beyond Musk, the face of the company. Tom Zhu, the new global production chief, took the stage and said Tesla’s global capacity was 2m vehicles a year.

Musk was expected to lay out a plan to make a smaller, more affordable electric vehicle that would broaden his brand’s appeal and fend off competition, but by late in the presentation executives had not detailed new vehicle model plans or new financial targets for the year.

Tesla’s chief financial officer, Zach Kirkhorn, estimated the company would need to invest six times more than it has to date to hit its long-term target of increasing output to 20m vehicles annually, a 10-fold increase from current capacity. The bill could be $175bn, he said.

Capturing the mass market is critical to Tesla’s goal of increasing deliveries 15-fold – to 20m vehicles – by 2030.

The automaker has only four models, all priced toward the higher end of the market. The Cybertruck pickup is coming this year, executives said.

Musk said Tesla could need as few as 10 models to achieve annual sales of 20m vehicles a year. That would be an average of 2m sales each year for each model line. By comparison, Japan’s Toyota, the world’s largest automaker by volume, sells just over 1m Corollas a year globally.

Tesla has become the world’s most valuable car company by far, and the billionaire Musk has aspirations of cracking the mass market and turning the EV maker into a company that can create a more climate-friendly world.

Tesla outperformed the industry in recent years, increasing deliveries rapidly despite the pandemic and supply-chain disruptions.

But Tesla cut prices in recent months to boost sales, which were pressured by a weak economy and growing threats from rivals in the United States and China.

High-profile Tesla investor Ross Gerber tweeted that the presentation amounted to a “huge tease” on the next-generation vehicle. “It’s coming. They laid it all out. 50% less cost to build. Would get you a $25-$30k EV!”

On Tuesday, Mexican officials announced Tesla would build a factory in the northern state of Nuevo León. It would be the company’s first factory outside of the United States, Germany and China, and Musk is expected to provide more details on Wednesday.

The plans for a more affordable car could draw the broadest interest. In 2020, Musk unveiled a plan to develop batteries in-house, which he said would make self-driving electric cars priced at $25,000 feasible by 2023, but Tesla has been struggling to scale up the production of the so-called 4680 batteries.

Executives on Wednesday said Tesla plans to start production of battery materials factories this year, with a lithium refinery and a cathode facility in Texas. They did not give an update to its production volume of 4,680 cells.

Some investors, including those concerned Musk is spending too much time at his latest major acquisition, Twitter, are also hoping he will address calls to buy back shares, which are at about half of their November 2021 peaks even after a rebound of more than 60% this year.