Depending on who you talk to, Tesla is heading one of two ways. Either it’s revolutionising the car industry by streamlining production on the way to its goal of selling 20 million cars a year by 2030 or it’s plummeting headlong into making the classic car-industry error of creating the capacity to build too many cars with too few customers.
Tesla’s presentation earlier this month held at its headquarters in Austin, Texas, disappointed many for not revealing the ‘next-generation’ model that’s going to juice the company’s next big sales push.
What CEO Elon Musk did instead was parade his executives to talk at a deeper level than ever before about how Tesla was going to drive down the cost of future vehicles, including replacing Henry Ford’s linear production process with an ‘Unboxed’ concept whereby finished sections all come together in a final frenzy of highly efficient assembly.
While this was engrossing, it left many analysts wondering exactly how Tesla was going hit all its annual sales targets on the way to 20m, given that it’s currently relying on almost entirely on Model Y and Model 3 with nothing visible in the pipeline until 2025 at the earliest.
Those two cars helped push Tesla deliveries last year to 1.3m – a mighty achievement for a company that only cracked 100,000 sales in 2017. That figure should rise to 1.9m in 2023, according to estimates from the analysis arm of the bank Bernstein. But then comes the crunch.
Number of Teslas delivered annually
How do you maintain sales of two cars when they’re already part of the road furniture in many markets and new rivals are launching all the time?
“EV models have generally struggled to increase volume beyond the third or fourth year of introduction,” Daniel Roeska, Bernstein’s lead autos analyst, wrote in a report following the investor day. “We struggle to see how Tesla can meet consensus expectations of 2.4-2.5m [sales in 2024] without a new model.”
Tesla has already chosen the nuclear option to stimulate sales: cutting prices, by as much as £8,000 on the Model Y and Model 3. Tesla reckons it can do this without harming its now consistently impressive profits, because these cars are cheaper to build. At the investor day, chief financial officer Zach Kirkhorn bragged that the company had taken 30% of the cost out of building the Model 3 since 2018. “Cost reduction is deeply ingrained in our culture,” he said.
Tesla is now building cars from four global assembly plants, and it will add a fifth in Mexico, the company announced at the investor day. More will have to be built to fulfil Musk’s goal. But with more production capability comes more pressure to sell, and that’s something car makers have long had to grapple with.
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Tesla would do well to spin some variants off the existing platforms. S or 3 estate? What about an S convertible?
Lots of opportunities beyond the US-centric Sedan/SUV production model.
Where's the Model 2? Roadster?
I suspect that they might expand faster by becoming a technology seller to other OEMs rather than trying to compete at scale as a full product manufacturer.