Reuters has reported that Tesla intends to commence the production of new electric vehicles by mid-2025.

Reuters has reported that Tesla intends to commence the production of new electric vehicles by mid-2025.

According to sources familiar with the matter, Tesla has informed its suppliers about its intention to commence production of a new mass-market electric vehicle, internally referred to as "Redwood," by mid-2025. Described by two insiders as a compact crossover, this model aligns with Tesla CEO Elon Musk's longstanding vision of introducing affordable electric vehicles and self-driving robotaxis built on next-generation, cost-effective electric car platforms.

Tesla's lineup, including a promised entry-level $25,000 car, aims to compete with more economical gasoline-powered vehicles and the increasing number of budget-friendly EVs like those from China's BYD. Notably, BYD surpassed Tesla as the world's leading EV maker in the final quarter of 2023.

Although Musk initially pledged to unveil a $25,000 car in 2020, a plan that was later put on hold and subsequently revived, Tesla's most affordable offering, the Model 3 sedan, currently starts at $38,990 in the United States. Last year, Musk expressed concerns about high-interest rates potentially impacting consumer demand for major purchases such as cars.

In pursuit of the "Redwood" project, Tesla sent out "requests for quotes" to suppliers last year, projecting a weekly production volume of 10,000 vehicles, according to two anonymous sources. The anticipated production start date is June 2025.

Despite not responding to requests for comment, Tesla's plans for next-generation compact vehicles were a key topic among investors ahead of the quarterly results report, where the company is expected to forecast a 21% increase in 2024 deliveries, falling short of Musk's long-term annual target of 50% set three years ago.

Musk previously announced that Tesla was actively working on two new products with a potential combined annual sales volume of 5 million vehicles. He emphasized their superior design and manufacturing techniques compared to industry standards during Tesla's annual shareholder meeting in May.

In line with information from Walter Isaacson's biography of Musk released in September, Tesla's future plans include the development of an inexpensive robotaxi and an entry-level $25,000 electric car based on the same vehicle architecture. Musk had stated in 2022 that a dedicated self-driving taxi with a futuristic design would be introduced in 2024. Despite Tesla's history of missing launch and pricing targets, the company aims to halve the cost of its next-generation vehicles, as outlined by Musk and other executives in March of the previous year.

According to one insider, Tesla's historical trend of being overly optimistic about new product launches suggests that substantial volume output for the affordable model is more realistically expected to commence in 2026. Elon Musk had stated in the previous year that the affordable model would have its initial production at Tesla's Texas factory.

However, turning a profit from these more budget-friendly electric vehicles presents a considerable challenge due to the high costs associated with batteries and the traditional difficulties in manufacturing quality yet inexpensive vehicles.

In a bid to glean insights on producing more cost-effective cars, Tesla has reportedly disassembled a Honda Civic, which has a starting price of $23,950 in the United States, according to two separate sources.

The upcoming Tesla architecture, internally referred to as "NV9X," is anticipated to encompass two or more models, as disclosed by two individuals and corroborated by one of the initial sources.

In addition to Texas, Tesla's plans extend to manufacturing more affordable cars at its factory near Berlin. There is also reported interest in establishing a factory in India with the specific aim of producing lower-cost electric vehicles, as mentioned in previous sources.

Tesla, a major player in the electric vehicle market, currently operates factories in Shanghai and Fremont, California.


-------The article excerpted from CNBC.

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