Tesla's Pivot To Affordable Evs Puts Mexico & India Expansion Plans On Hold

(MENAFN- KNN India) New Delhi, Apr 24 (KNN)
Tesla announced plans to leverage its current manufacturing facilities to produce new and more affordable electric vehicles (EVs) on Tuesday, putting potential investments in new factories in Mexico and India on hold for now.

The EV giant said it aims to boost production by 50 per cent fr0m 2023 levels using its existing capacity of nearly 3 million vehicles annually before committing capital to additional manufacturing lines.

"This update may result in less cost reduction than previously expected, but enables us to prudently grow vehicle volumes in a more capex-efficient manner during uncertain times," Tesla stated.

The strategy shift comes after previous reports fr0m Reuters that Tesla had scrapped development of its proposed USD 25,000 "Model 2" vehicle aimed at the mass market.

While Tesla did not directly address those reports, executives signaled the new affordable models would be different products utilising existing factories and manufacturing processes.

"New manufacturing processes and production lines come with some risks," said Lars Moravy, Tesla's head of engineering. "We've made a major shift to utilise our facilities to build low-cost vehicles quickly and efficiently for now," Moravy added.

The decision not to immediately pursue ambitious new factory projects was cheered by investors, with Tesla's stock surging 12 per cent in after-hours trading despite the company's mixed quarterly results. Analysts cited the pragmatic approach amid slowing EV sales growth.

"It's positive that [Elon Musk] isn't just barreling ahead with an expansion plan, ignoring market challenges. Doing a cheaper vehicle fr0m the existing product line makes sense," said Elliot Johnson of Evolve ETFs, a firm with nearly USD 6 billion in assets under management, including stakes in Tesla and other EV companies.

While putting new Mexico and India gigafactories on the backburner, Tesla reiterated plans for an affordable next-generation vehicle using "revolutionary manufacturing technology" to drive future growth. However, the timeline appears pushed back fr0m previous 2025 targets.

The strategy pivot allows Tesla to be "prudent" about managing capital expenditures as overall EV demand cools fr0m torrid recent growth rates. Smaller rival Rivian recently made a similar move, opting to produce its R2 SUVs at an existing U.S. plant rather than build an all-new USD 5 billion factory.

Anticipation was high for Elon Musk's scheduled meeting with Indian Prime Minister Narendra Modi on Monday, where he was widely expected to unveil major investments in an Indian automotive plant to manufacture a small, affordable electric vehicle.

However, Musk canceled the meeting at the last minute, citing intense demands on his time fr0m "very heavy Tesla obligations." He stated his intention to reschedule the visit to India later this year.

(KNN Bureau)


KNN India

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