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- The world is waiting for cheap EVs, but Tesla isn't ready to deliver — yet.
- Elon Musk's EV company held an Investor Day in Texas that had everything but cheap EVs.
- The omission is a glaring one for a company grappling with rising competition and fluctuating demand.
Tesla fans have had a rollercoaster few months, so they can be forgiven for having wanted CEO Elon Musk to take a break from Twitter posting to update them on a long-anticipated, cheap EV model.
Instead, they got nothing much during an investor jamboree in Texas this week.
The presentation led by Musk and several other executives at Tesla's gigafactory Wednesday was widely expected to put front-and-center an affordable version of its pricey EVs — showing the company meant business when it came to delivering affordable electric vehicles.
The event, billed as the launch of part three in Tesla's Master Plan, instead turned into a four-hour slog that dragged on about vanity projects like the Cybertruck, heat pumps, autopilot crash numbers, and powertrain refinements.
Sure, these details offer varying degrees of intrigue, but they do little to disguise the fact that cheap EVs – the holy grail in Musk's quest to make Tesla the leader in a global transition to clean-energy transportation – remain elusive.
Indeed, promises of delivering an affordable vehicle now stretch back almost 17 years to when the billionaire first launched his Master Plan. He needs one now — and fast — as competitors are putting the pedal to the metal in their own quests for low-cost EVs.
A missing low-cost EV makes for a puzzling omission
Affordable EVs, which Tesla refers to as its "next-generation platform," can appease two key pressures Tesla faces: meeting consumer demand for a low-cost clean energy vehicle and expectations from Wall Street to ramp up production.
On the consumer front, Musk has repeatedly stated his desire to offer cheaper Teslas — making EVs available that everyone can afford and that will help accelerate the clean energy transition. On the investor front, low-cost EVs help make Tesla a truly global phenomenon.
"The desire for people to own a Tesla is extremely high. The limiting factor is their ability to pay for a Tesla," he said at the event. But the lack of any firm details on a cheap EV made for a puzzling omission from what was meant to be a showcase of Tesla's offerings.
That's particularly the case given an economic backdrop of high interest rates and inflation. Though EV sales grew 36% in 2022, according to figures from S&P, Tesla's high prices threaten to put a damper on consumer appetite. Tesla's cheapest car, the Model 3 sedan, remains a pricey $43,000.
Inevitably, a collective groan could be heard from investors after the event: Tesla's stock dropped 5% on Wednesday in after-hours trading. And it had fallen around 6% during regular trade in New York on Thursday.
Tesla may have cut prices on some of its top models by 20% across the US and Europe last month, but an altogether new model with an affordable entry price would help it see off competition from those traditional carmakers attempting to bring cheaper alternatives to market.
Cheap EVs will decide who wins the EV race
Tom Zhu, Musk's right-hand man at Tesla, announced Tesla has now made 4 million cars, picking up the pace of development along the way: Compared with the 12 years it took to build the first million, the last million Teslas took seven months. Continued scale will slash costs.
But hitting a production goal of 20 million vehicles a year by 2030 will almost certainly need a new, low-cost EV model in the mix.
Tesla CFO Zach Kirkhorn said Tesla will boost efficiency through cost cutting to generate the $150 billion to $175 billion of investment needed to meet this production target. Tesla's confirmation of a new gigafactory in Mexico on Wednesday all but certainly lines up the facility for just that.
That said, the clock is ticking for Tesla, with a continued absence of a low-price car only hurting it as competition grows. The EV maker, which once hit a market capitalization of over $1 trillion, is priced like a high-flying tech company because of weighty expectations to deliver industry-shaking accomplishments. (Its market cap has fallen to around $600 billion as its stock fell more than 35% over the past year.)
Establishing the ubiquity of iPhones is what it's after, and a cheap car is needed to do that.
Everything else should probably take a backseat for Tesla until then.