Tesla’s Pledge of Affordable Cars Sends Stock Soaring by Over 12%

Tesla announced Tuesday that it will use its existing factories to build new, more affordable vehicles later this year. As reported by Reuters, the decision postpones investments in new factories in Mexico and India in the near term. The world’s leading electric vehicle (EV) maker aims to increase production by 50 percent from 2023, before investing in new production lines, taking its current capacity to around 3 million vehicles. “This update may lead to lower cost reductions than previously anticipated but allows us to prudently increase our vehicle volumes in a more cost-effective manner in the uncertain times,” the company said.

Tesla stock
Despite posting first-quarter results that fell short of Wall Street expectations, investors reacted positively to the decision not to build new models at new factories. Tesla shares rose 12 percent in after-hours trading despite missing financial targets. Tesla CEO Elon Musk hinted at introducing a more affordable model that is slated to go into production as early as 2025. This aligns with Musk’s earlier plans to launch a much-anticipated low-cost model, tentatively named the Model 2.

Earlier this month, Tesla scrapped plans to launch the low-cost Model 2, which would have been built in Texas, Mexico and elsewhere. The Model 2 was expected to cost around $25,000 and help Tesla become a mass-market automaker. Musk responded to reports of Tesla canceling the Model 2 with a message on X (formerly Twitter) that “Reuters lies.” He did not provide further details, and on Tuesday, he did not directly address the report. Tesla instead discussed new models that seemed different from previously announced projects. In January, Musk said Tesla aimed to launch an affordable new model in the second half of 2025, describing it as a “revolutionary manufacturing technology” that would drive Tesla’s next wave of growth.

Tesla’s head of engineering, Lars Morawi, acknowledged Tuesday that the new manufacturing processes and production lines carry “some risks.” As a result, the automaker changed its approach to using existing facilities to produce vehicles at a lower cost quickly and efficiently.

Musk’s visit to India
Musk was expected to meet Prime Minister Narendra Modi on Monday and announce major investments in auto factories to build an affordable model. However, the meeting was postponed with plans to reschedule later this year due to Musk’s “very heavy Tesla obligations.”