Tesla (Nasdaq: TSLA) is gearing up to commence production of a new model codenamed “Redwood” in mid-2025 in a strategic move to enter the mass-market electric vehicle (EV) segment, according to sources close to the matter. Two insiders have described the upcoming model as a compact crossover, signaling Tesla’s foray into more affordable electric offerings.
Tesla CEO Elon Musk, known for his ambitious plans, has consistently expressed a desire to produce affordable EVs and self-driving robotaxis, leveraging next-generation, cost-effective electric car platforms. The proposed models, including an entry-level $25,000 car, are aimed at competing with lower-priced gasoline vehicles and the growing market of affordable EVs, exemplified by China’s BYD.
BYD surpassed Tesla as the world’s leading EV maker in the final quarter of 2023, underlining the intensifying competition in the electric vehicle industry.
Musk had initially promised a $25,000 car in 2020, a commitment that was temporarily set aside before being revived. Currently, Tesla’s most budget-friendly option, the Model 3 sedan, starts at $38,990 in the United States.
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Expressing concern about the impact of high-interest rates on consumer demand, Musk had hinted at the challenges associated with selling high-ticket items such as cars. In pursuit of its Redwood model, Tesla reportedly sent “requests for quotes” to suppliers last year, projecting a weekly production volume of 10,000 vehicles.
If all goes according to plan, production of the Redwood model is set to commence in June 2025, as revealed by three anonymous sources close to the matter. Investors are keenly awaiting Tesla’s quarterly results report, where the timing of the next-generation compact vehicles is expected to be a focal point. Tesla is projected to forecast a 21% rise in 2024 deliveries, falling short of Musk’s ambitious long-term annual target of 50%, set around three years ago.
During a shareholder meeting in May, Musk disclosed that Tesla was actively working on two new products, potentially accounting for a combined annual sales volume of 5 million vehicles. He emphasized that both the design and manufacturing techniques of these products would surpass industry standards.
Tesla’s plans, as outlined in Walter Isaacson’s biography of Musk released in September, include the development of an inexpensive robotaxi and an entry-level $25,000 electric car sharing the same vehicle architecture. Musk’s previous announcement in 2022 about the creation of a dedicated self-driving taxi with a futuristic appearance is expected to materialize in 2024.
Despite Tesla’s optimistic projections, historical data indicates a propensity for missing launch and pricing targets. The production of the Cybertruck, for instance, has faced delays and sluggish production growth, with its current starting price of $60,990 in the U.S. being 50% higher than initially proposed in 2019.
A source cautioned, “They have been overly optimistic on most of their new product launches. Volume output is more likely to begin in 2026.”
Musk has indicated that the affordable Redwood model will initially roll off the production line at Tesla’s Texas factory. However, turning a profit on these cheaper EVs may prove challenging, given the inherent costs of batteries and the traditional difficulties associated with producing quality, inexpensive vehicles.
In its pursuit of affordability, Tesla has reportedly studied competitors, including tearing down a Honda Civic priced at $23,950 in the U.S. for insights on producing more cost-effective cars. The next-generation Tesla architecture, internally referred to as “NV9X,” is expected to include two or more models.
Information for this briefing was found via Reuters and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
