Tesla announced on Tuesday its decision to utilize its existing manufacturing capabilities to produce more cost-effective vehicles. However, their plans to invest in new factories in Mexico and India for the time being have been put on hold. The electric vehicle company mostly manufactures high-end luxury vehicles. Now, the company aims to increase production by 50% starting in 2023, with a goal of reaching nearly 3 million vehicles without expanding into new manufacturing facilities at this time.
The company's revised strategy may result in slightly less cost reduction than originally planned. But it also allows for incremental growth in vehicle volumes while navigating uncertain market conditions in a capital-efficient manner. Tesla stated that this shift in approach will help them prudently scale up production during unpredictable times.
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Investors responded positively to Tesla's cautious strategy. This led to a 12% growth in the company's shares during after-hours trading, despite the quarterly results coming in below financial expectations. While CEO Elon Musk had targeted the release of the more affordable Model 2 by the second half of 2025, Tesla's Head of Engineering, Lars Moravy, highlighted the challenges associated with new manufacturing processes and production lines. This prompted a strategic pivot towards using existing facilities to produce lower-cost vehicles, with Moravy describing it as a "major strategy shift."
Elon Musk's plans to engage with India's Prime Minister Narendra Modi and establish a significant presence in the country's auto industry were put on hold as he cited "very heavy Tesla obligations" for canceling the meeting. The company's focus on leveraging current manufacturing capabilities reflects a pragmatic approach to growth and production efficiency in the ever-evolving EV market.
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