Tesla’s grand plans to reduce assembly costs disappoint investors

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On the company’s investor day on Wednesday (March 1), engineers from Tesla disclosed their plans to reduce assembly costs in future car generations by 50 per cent.

In addition to Elon Musk, the company’s public face, the presentation included more than a dozen other Tesla officials, including Tom Zhu, the new global production leader.

The executives covered a wide range of topics throughout the presentation, including the company’s creativity in managing its operations from manufacture to service, as well as a white paper strategy for the world to adopt sustainable energy.

Zach Kirkhorn, the company’s chief financial officer, emphasized their commitment to reducing production costs and announced that tesla’s next-generation platform would comprise many vehicles produced in standardized factories.

Tesla’s shares dropped more than five per cent in after-hours trading as a result of Musk disappointing investors by failing to reveal the release date of a highly anticipated inexpensive small electric vehicle.

Musk was anticipated to present a strategy for creating a more accessible electric vehicle (EV) that would increase consumer interest in his brand and fend off rivals.

Tesla vs Market

Capturing the mass market is critical to Tesla’s annual production goal, which is more than the combined production of two of the world’s largest volume vehicle makers – Germany’s Volkswagen and Japan’s Toyota.

It would also represent a sales volume for Tesla alone of about a quarter of last year’s total global car sales. Musk said the key to driving Tesla’s sales volume would be bringing prices down for consumers, adding that tesla’s discounts offered this year had stoked demand.

The most valuable automaker is Tesla, but its price has fluctuated significantly. Shares have recovered more than 60 per cent this year but are still down almost 50 per cent from their peak in November 2021.

Tesla could only need 10 models, according to Musk, which would result in 2 million annual sales for each model line at the desired manufacturing rate.

In terms of making profitable EVs, Tesla already has an advantage over its competitors.

Peter Bannon, a Tesla executive, illustrated how the company uses data to save expenses. He claimed that customer data revealed Tesla owners did not utilize the sunroof, so “we removed it.”

Tesla will need to advance its battery technology despite its recent achievements, which Musk has referred to as the “basic limiting factor” for the switch to sustainable energy and more inexpensive vehicles. Tesla has had difficulty increasing the output of cutting-edge batteries known as 4680s.

But, they said that they were still testing two different production procedures. Executives stated on Wednesday that it was likely they may reach volume production this year.

Tesla’s investor day presentation showcased the company’s commitment to cutting production costs and capturing the mass market.

While the lack of details about when a more affordable EV will debut was disappointing to investors, Tesla’s lead in manufacturing EVs at a profit and dedication to reducing costs gives hope for future success.

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