Tesla: A carmaker for the masses?

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It’s time for Tesla to give the people what they want, said Hasan Chowdhury in Business Insider: a new, cheaper electric vehicle. The company’s much-hyped investor jamboree last week “was widely expected to put front and center an affordable version of its pricey EVs — showing the company meant business when it came to delivering affordable vehicles.” Chief executive Elon Musk even promoted the event as “the launch of part 3 of Tesla’s Master Plan.” Tesla’s stock has soared this year, spurred on by a big price cut in January that helped stoke demand; for a short while in February, Musk was (once again) the world’s richest person. But investors wiped $50 billion off the company’s market cap after the ballyhooed “Master Plan” became “a four-hour slog” of technical details and “vanity projects like the CyberTruck.”

“Musk did say something very important,” even if it wasn’t what investors were looking for, said Al Root in Barron’s. Musk has set a goal for Tesla to make 20 million vehicles a year within a decade. That’s double what global leader Toyota produces, and Musk said Tesla will need only 10 models to do it. “That’s the bombshell. It’s an incredibly low number.” Musk compares the evolution of cars to that of smartphones, which once came in any number of form factors. Now “no one really cares about the shape of their phone,” and the vast majority come with the same basic, easy-to-manufacture shape. If Tesla succeeds in bringing this kind of simplification to cars, it will mean a “radical departure from the way things are done” for the whole auto industry.

We’ve already witnessed what lower prices mean for Tesla demand, said Richard Waters in the Financial Times. “A round of price cuts in January” across all models “had an immediate impact” on sales. This week, Tesla again lowered the starting price of the Model S by 5 percent to $89,990, “while the cost of the lowest-priced Model X has come down 9 percent to $99,990.” It was more than $120,000 for a Model X last year. Musk once said getting the affordable Model 3 off the ground was “production hell,” said Jonathan Guilford in Reuters. Is he ready for a second trip through the inferno? Making a cheaper car will “require radical cost cuts,” considering a large percentage of gross margins are currently chewed up by R&D. “Still, Musk pulled off the seemingly impossible before.”

The launch of Tesla’s latest Master Plan may have fizzled, but Tesla is still doing far better than its would-be EV rivals, said Chris Bryant in Bloomberg. Electric truck maker Rivian reported a $6.8 billion loss last year, with production costs almost three times bigger than its revenue. Meanwhile, luxury EV maker Lucid lost $2.6 billion, making just 7,000 vehicles. Those companies’ negative margins “far exceed anything Tesla experienced in its early days.” Their cars simply “cost too much to produce, and they can’t raise prices sufficiently to compensate.” Yet both are currently building new factories, and it’s “too late to backtrack on their capital binge.” They’ll just continue incinerating money, hoping they can eventually scale up enough to justify it.

This article was first published in the latest issue of The Week magazine. If you want to read more like it, you can try six risk-free issues of the magazine here.

The smartest insight and analysis, from all perspectives, rounded up from around the web: It’s time for Tesla to give the people what they want, said Hasan Chowdhury in Business Insider: a new, cheaper electric vehicle. The company’s much-hyped investor jamboree last week “was widely expected to put front and center an affordable version of…

The smartest insight and analysis, from all perspectives, rounded up from around the web: It’s time for Tesla to give the people what they want, said Hasan Chowdhury in Business Insider: a new, cheaper electric vehicle. The company’s much-hyped investor jamboree last week “was widely expected to put front and center an affordable version of…