Tesla aims to cut manufacturing costs in half

The Tesla Investor Day event brought along a few announcements including plans to build a new Gigafactory Mexico.

The Tesla Investor Day event brought along a few announcements including plans to build a new Gigafactory in Mexico. This plant is part of Tesla's plans to increase its production numbers and reduce manufacturing costs over the next decade.

Elon Musk, Tesla's CEO, stated that the company expects to reduce manufacturing costs by half. This was partly due to an updated set of manufacturing processes and its next-generation vehicle platform, which will be produced at Giga Mexico. Tesla plans to increase its annual production capacity by 20 million units per year over the next ten years, which is far more than the 1.3 million units sold in 2022.

Tesla expects to be able to produce vehicles at a scale that is comparable to traditional gas cars like the Toyota Corolla, with a sticker price of less than $30,000.This is expected to increase mainstream adoption of electric vehicles as more people can afford the updated pricing models.

Many have called the affordable Tesla Model 2 the "Model 2," and analysts predict it will cost between $25,000 to $30,000.Analysts at investment firm Bernstein pointed out the competition Tesla faces and weren't convinced that the automaker would be able to meet its sales targets in the future.

Bernstein stated that Tesla will not be able to produce new models quickly enough to meet its 2024 volume expectations. This is especially because the next-generation platform is still in the design phase."Moreover, we believe that price reductions underline the highly competitive nature of the auto market, which has high margins and is characterized by high volumes.

At Investor Day, several Tesla executives discussed the plan to shift towards a higher-volume automaker. A number of Tesla executives also discussed the company's "Master Plans" from the past. These plans included selling one vehicle, then using the profits for a more affordable vehicle, and then doing the same with the profits of that vehicle to make an even more affordable vehicle.

Lars Moravy, Tesla's vice president of vehicle engineering, pointed out that higher volumes of auto production mean lower manufacturing costs. Moravy stressed the importance of manufacturing and a new-generation EV platform for the company's ability to achieve its long-term production goals.