Tesla Inc. (NASDAQ: NASDAQ:TSLA) has announced a strategic shift to focus on ramping up production of new, more affordable vehicles using existing factory capacity. The move puts previous plans to build new manufacturing facilities in Mexico and India on hold for the foreseeable future. The leading electric vehicle (EV) maker aims to increase production to 50% from 2023 levels, or nearly 3 million vehicles, before committing to new production lines.
The company’s decision to delay investment in new factories was made in response to the current economic environment, with the goal of growing vehicle volumes efficiently during uncertain times. Tesla shares rose 12% in after-hours trading following the announcement, despite missing its quarterly financial targets.
Elliot Johnson, chief investment officer at Evolve ETFs, praised the decision, noting the cautious approach to expansion given market challenges and the focus on building a cheaper car from an existing product line.
The update comes after an April 5 report that Tesla had abandoned plans for the Model 2, a $25,000 car originally planned to be produced in Texas, Mexico and an unspecified third country. The Model 2 was expected to be a key driver in Tesla’s transition to a mass-market automaker.
Despite Tesla CEO Elon Musk’s earlier announcement of a new, cheaper model that would be delivered in the second half of 2025, featuring “revolutionary manufacturing technology,” Tesla’s head of engineering, Lars Moravy, has revealed a major strategy shift. The automaker now intends to leverage its existing facilities to produce low-cost vehicles quickly and efficiently, acknowledging that new manufacturing processes and production lines carry certain risks.
Musk, who was scheduled to meet Indian Prime Minister Narendra Modi to discuss significant investments in a car factory, canceled the meeting at the last minute due to “very heavy obligations” for Tesla. He had previously said that Tesla would “absolutely” set up a factory in Mexico, depending on economic conditions and interest rates.
Source: Investing
