Tesla touts plans to halve vehicle production costs

By Hyunjoo Jin, Joseph White and Akash Sriram

SAN FRANCISCO (Reuters) – Tesla (NASDAQ:) Inc will cut vehicle assembly costs by half in future generations of cars, engineers told investors on Wednesday, outlining design and factory efficiency gains as fans waited for Chief Executive Elon Musk to unveil a new model.

In the first two hours of the presentation, 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.

Musk had been expected to lay out a plan to make a small, affordable electric vehicle that would broaden his brand’s appeal and fend off competition, and he presented a slide showing two disguised future models.

But by late in the presentation executives had not detailed new vehicle plans or financial targets, and Tesla shares were down about 3% in after-hours trading.

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

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

Tesla already has a significant lead over its rivals in manufacturing EVs at a profit. Chief Engineer Lars Moravy said the company expects to build its next-generation vehicles for half the cost of the current Model 3 or Model Y.

Moravy described a production process for future EVs he called an “unboxed” model that would deliver lower costs by snapping together sub-assemblies and reducing complexity and time in assembly.

Tesla executive Peter Bannon gave an example of how the company uses data to cut costs. Customer data showed Tesla owners did not use the sun roof, he said, “so we removed it.”

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!”

Musk showed a chart of Tesla’s projection of the future electric fleet. The slide depicted the EV maker’s existing models, including the Semi truck, as part of a market projected at 440 million vehicles. It showed the Cybertruck and a shrouded future model as part of a 300 million-vehicle market. An additional, smaller shrouded model was shown as part of the largest market in its projection: 700 million vehicles.

Tesla also is opening up its charging stations to other brands of electric vehicles, with the first 10 U.S. Supercharger sites opening to non-Teslas on Tuesday. Executives said the company also was focused on developing charging infrastructure in commercial parking, beyond the Supercharger network.

Tesla also will have to improve its battery technology, which Musk has called the “fundamental limiting factor” for the transition to sustainable energy, making it a potential topic for Wednesday’s address.

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.

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

Graphic: How EV prices stack up against Tesla’s cars https://www.reuters.com/graphics/TESLA-ELECTRIC/STARTUPS/zdpxdrgrzpx/chart.png

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 said Tesla plans to start production of battery materials factories this year, with a lithium refinery and a cathode facility in Texas. But it did not give an update to its production volume of 4680 cells.

Some investors, including those concerned Musk is spending too much time at his latest major acquisition, Twitter, are also hoping the CEO 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.

Graphic: Tesla shares bounce back in 2023 https://www.reuters.com/graphics/TESLA-STOCKS/klvygnmdwvg/Pasted%20image%201677700941872.png