Tesla’s plans to invest in building a factory in India may face delays, as the US-based electric vehicle (EV) manufacturer announced its focus on utilizing existing factories to produce new, more affordable vehicles by late this year, according to reports from news agency Reuters.
The leading EV manufacturer aims to ramp up production by 50% from 2023 to nearly 3 million vehicles without immediately investing in new manufacturing lines. Tesla stated that while this shift may lead to achieving less cost reduction than previously expected, it enables the company to grow vehicle volumes in a more capital-efficient manner during uncertain times.
Investors responded positively to this decision, driving Tesla shares up by 12% in after-hours trading, despite the company’s quarterly results falling short of financial targets.
Tesla also reduced prices on its cars globally to boost demand. However, the EV manufacturer saw a decline in quarterly profits for the first time since 2020, according to media reports on Tuesday.
Elliot Johnson, chief investment officer at Evolve ETFs, which manages assets worth nearly $6 billion, including investments in Tesla and other EV makers, expressed optimism about the decision. He highlighted the prudence in avoiding hasty expansion plans amid market challenges and the introduction of a cheaper vehicle within the existing product line.
Earlier reports from Reuters indicated that Tesla had scrapped plans to launch its affordable Model 2 vehicle, expected to cost $25,000, which would have expanded Tesla’s reach into the mass-market segment.
While CEO Elon Musk had previously aimed to introduce the cheaper model in the second half of 2025, Lars Moravy, head of Tesla’s engineering, cited risks associated with new manufacturing processes and production lines. Consequently, Tesla opted for a major strategic shift to utilize existing facilities for the production of low-cost vehicles.
Musk’s scheduled meeting with Indian Prime Minister Narendra Modi to announce major investments in an auto factory was canceled last minute, citing “very heavy Tesla obligations.” Additionally, plans for a factory in Mexico remain uncertain, with Musk stating last year that the timing of the investment would depend on economic conditions and interest rates.
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