Tesla Offers "Half-Price Assembly" Instead of 'Half-Price Electric Cars'

A Sharp 5% Drop in After-Hours Trading

Tesla unveiled its long-term business plan blueprint for the first time in seven years, but it is being evaluated as falling short of market expectations. This is because the plans for future new cars, including the promised 'half-price electric vehicle' to be released this year, and financial targets were not specific. Concerns have been raised again that Tesla is significantly lagging behind latecomers such as General Motors (GM), Ford, and Volkswagen in responding to the low-cost electric vehicle market, causing Tesla's stock price to plunge sharply in after-hours trading.

Elon Musk, Tesla's Chief Executive Officer (CEO), revealed the long-term business plan blueprint called 'Master Plan 3' at the 'Investor Day' event held at Tesla's headquarters in Austin, Texas, on the 1st (local time). While introducing Tesla's future model lineup, he presented two additional future models shrouded in secrecy, along with the existing four models and the new 'Cybertruck.' Musk was the first to take the stage but did not mention the low-cost electric vehicle model, the so-called half-price electric vehicle, which the market was focusing on.

Cybertruck, delayed for 3 years, to be released this year

[Image source=Yonhap News]

First, Tesla announced plans to release the 'Cybertruck,' which has been attracting attention as a new car to lead a market turnaround, within this year. The Cybertruck, an electric pickup truck, is Tesla's first new vehicle in three years since the 'Model Y' in 2020. Tesla, which owns a total of four models, has not released a new vehicle since the Model Y in 2020, following the Model S in 2012, Model X in 2015, and Model 3 in 2017.

Initially unveiled in 2019, the Cybertruck was originally scheduled to enter mass production between late 2021 and early 2022, but the schedule was postponed to early this year. As competition in the electric pickup truck market intensified, Tesla experienced significant disruptions, including changes to key performance features of the new product, causing multiple delays in its release. Tesla also revealed plans to launch a modified version of its flagship and best-selling Model Y. Named 'Project Juniper,' this project involves a complete redesign of the Model Y's interior and exterior and is being conducted confidentially with a goal of mass production next year.

'Half-price electric vehicle' plan missing in 'half-hearted event'

[Image source=Reuters Yonhap News]

Specific details about the previously promised half-price electric vehicle were not disclosed at the event. Musk had pledged at the 'Battery Day' event in September 2020, a new technology unveiling event, that a $25,000 electric vehicle would be released by 2023. There were also expectations that the price of the Model 3 would be lowered to $35,000, but there was no mention of this. Ahead of the event, U.S. bank Wells Fargo noted, "If Tesla releases a $30,000 model, it could satisfy 95% of the total demand in the automobile market," highlighting the market's focus on plans for a low-cost new model. As the half-price electric vehicle plan fell short of expectations, Tesla's stock price, listed on the U.S. stock market, plunged by over 5% in after-hours trading (as of 8 p.m. local time).

Instead, Tesla announced a goal to reduce the assembly cost of next-generation vehicles to 'half' of the current level, but the market reaction was lukewarm. Lars Moravy, Tesla's Vice President of Vehicle Engineering, stated at the event, "We expect the next-generation model to have assembly costs at half the level of the current Model 3 or Model Y." This cost reduction would be achieved by simplifying assembly processes and reducing time. The New York Times (NYT) reported that the dominant view is that Tesla's response to the low-cost electric vehicle market, led by latecomer electric vehicle manufacturers, is significantly lagging behind.

GM plans to release three low-cost electric vehicle models, including the Chevrolet Equinox starting at $30,000 this year. With competitors such as Ford and Volkswagen announcing a series of low-cost new models, competition is intensifying. In the U.S. market, Tesla's stronghold, traditional automakers like Ford and GM are rapidly eroding Tesla's market share, and with foreign brands such as Hyundai and Nissan joining in, it is expected to become even more difficult for Tesla to maintain its market position. Tesla aims to increase vehicle deliveries to 20 million units by 2030, 15 times the current volume, targeting the mass market, but analysts say launching low-cost models is essential to achieve this.

Can Tesla regain investor trust?

[Image source=Reuters Yonhap News]

Tesla also announced measures to regain lost investor trust, including its fifth new factory under construction in Mexico. The Monterrey plant in Mexico is Tesla's first overseas factory outside the U.S., Germany, and China, and its fifth factory overall. The NYT reported that despite intensifying competition with emerging electric vehicle companies in China and elsewhere, Tesla is making every effort to maintain its position as the world's largest electric vehicle company.

Musk's long-term business vision, Master Plan 3, was unveiled seven years after the second plan in 2016 and the first plan in 2006. In Master Plan 1, Musk revealed plans to produce a high-end electric sports car, and Master Plan 2, which followed Tesla's acquisition of solar energy company SolarCity, included plans for energy production and storage as well as autonomous vehicle businesses.

This Master Plan unveiling came as Tesla's stock price surged nearly 70% this year, recovering most of last year's annual losses. Expectations that the economy would improve and interest rate hikes would ease led to a surge in bets on growth stocks, causing Tesla's stock price to double from its low point during intraday trading on the 6th of last month. The announcement of strong fourth-quarter earnings and expectations of increased sales due to electric vehicle price cuts on the 25th of last month also boosted the stock price. Notably, the stock price rose for eight consecutive trading days starting from the 31st of last month, marking the longest rally in six months.