Tesla is well on its way to engineering its $25,000 electric car, Elon Musk claimed, raising hopes that the EV manufacturer would soon return to the extraordinary growth rates of the past.
Musk said the entry-level Tesla, predicted to sell by the millions annually, would “blow people’s minds” thanks to a revolutionary manufacturing method he believes is far in advance of anything else found in the industry.
“We’re quite far advanced in that work. I review the production line plans for that every week,” Musk said in an interview posted to YouTube on Tuesday, adding Tesla's plant in Texas will be the first to build the vehicle, followed by Mexico.
While customers don’t care what method a company uses to produce their car as long as it is well-built, it is a key concern for investors tired of seeing Tesla’s margins retreat for the past four quarters in a row.
Musk's company is at the low point of its cycle with its first three vehicles all long in the tooth and the Model Y coming up on four years in January. All have needed significant discounting to support demand, partly reflecting high borrowing costs in many parts of the world.
In Germany, an EV market roughly half the size of the U.S., new sales of Teslas grew just 14% through November barely outpacing the 11% gain in overall car demand.
Even the new Cybertruck that just launched won’t provide any help since it's too complicated to manufacture. Annualized production run rates are not slated to hit a quarter million until midway through 2025, according to Musk.
That leaves the entry-level Tesla as his best hope at meeting investor demands for 50% annual compound growth as he strives to take the company from selling 1.8 million cars this year to 20 million by 2030.
Musk said the small EV sold for $25,000 could hit annual volumes of over 5 million taken together with a new dedicated robotaxi model.
It’s important to point out however that Musk’s track record for reliably predicting is spotty: he’s best when it comes to future technological trends that prove themselves many years later.
The excitement around ChatGPT and generative AI arguably might not even exist had it not been for Musk funding OpenAI back in late 2015—a time when his fortune was tied up in an EV maker only worth $30 billion with a future still very much in doubt.
But his ambitious, some might say unrealistic, timeframes mean he routinely misses the mark when it comes to product launches. Repeated predictions of achieving unsupervised Full Self-Driving are only the most obvious case.
Revolutionary manufacturing
The Tesla Semi unveiled in 2017 is still only in testing with one customer, the Roadster is nowhere to be seen and the tri-motor Cybertruck is hitting the road at a far higher price and much lower range than promised four years ago.
Musk moreover has a major incentive to convince investors the entry Tesla is far along even though not so much as a design rendering of the final concept has been presented, let alone a full-size prototype.
X, formerly Twitter, finds itself in the middle of a financial crisis after major advertisers like Walmart pulled out.
To stave off potential bankruptcy, he may once again need to sell Tesla stock either to buy back the $13 billion in pricey loans he took out, inject fresh equity into the company or some combination of both.
That is a whole lot easier if there are plenty of high-conviction Tesla investors ready to provide him exit liquidity at a generous price.
In the YouTube interview with Tesla fan regular Sandy Munro, Musk said he couldn't share market-relevant information with the trained car engineer but promised the entry model would be well worth the wait.
"The revolution in manufacturing that will be represented by that car will blow people's minds, it is not like any car production line that anyone has ever seen," Musk said. “I just can’t tell you unit volumes and dates.”
