Tesla Must Sell Cheaper Cars To Stay Dominant: Analysts


  • Tesla is the world leader in electric vehicles but needs to diversify its offering.
  • If Elon Musk wants to become a top player like GM, Volkswagen or Toyota, he has to build cheaper cars.
  • Musk has plans for a $25,000 car, but it’s unclear where that project stands.

Elon Musk has big ambitions for Tesla – like selling a staggering 20 million cars by 2030 (equivalent to producing Toyota and Volkswagen combined) and makes the company worth trillions.

However, to remain a long-term leader in the auto industry, Tesla needs to expand its tight supply and start selling cheaper models, experts say.

The electric car maker has made great strides with its current four-vehicle high-end lineup. With 1.3 million units shipped last year (a 40% increase from 2021), it is the world’s best-selling battery-powered car. The Model 3, Model Y, Model S, and Model X, which range in price from $44,000 to $120,000, were eliminated nearly 70% of EVs sold in the US in 2022.

Tesla Lineup

Tesla’s cars range in price from $40,000 to $150,000

Tesla



But its skyrocketing growth has an expiration date if it can’t offer people more affordable, mass-market options, industry watchers say. And that makes perfect sense considering how the biggest auto companies do business; They sell a wide range of products to appeal to a wide range of buyers.

Toyota has them $22,000 crown and the $100,000 Lexus LC, plus a whole lot in between. Volkswagen also sells affordable hatchbacks Porsche, Audis and Bentleys. General Motors makes Chevy’s and Cadillacs.

The gap at the bottom of Tesla’s lineup exposes it to increasing competition. China’s BYD, the world’s No. 2 seller of electric vehicles, is quickly move up to the top of Tesla. That’s not the least bit surprising, Michael Dunne, founder of EV consultancy ZoZoGo, told Insider, especially given that BYD has a sizable portfolio while Tesla is a solid luxury player.

“It’s like asking, ‘Will Toyota outperform Mercedes in overall sales?’ Yes, because Toyota has a full spectrum of vehicles ranging from $20,000 to $80,000,” Dunne said. “And obviously the lower the price point, the bigger the market.”

A Tesla Model 3.

The Model 3 sedan is Tesla’s cheapest vehicle after a recent price drop at $44,000.

David Zalubowski/AP



Mercedes-Benz sells around 2 million cars a year. Toyota sells 10 million.

As competition for electric vehicles intensifies and buyer interest grows, Tesla will need to release new offerings like trucks and cheaper cars to complement its aging offering, Sam Fiorani, vice president of global vehicle forecasting at AutoForecast Solutions, told Insider. The Model 3 and Model Y, by far Tesla’s best sellers, went on sale in 2017 and 2020, respectively.

“It’s going to be a few more years before EV buyers expand to the point where they need a range of products, and Tesla has to be there when the market is ready,” he said, adding that Tesla isn’t a top can be a player or achieve his high goals with just a few models.

Elon Musk at Tesla Battery Day in 2020.

Elon Musk announced plans for a $25,000 car at a Tesla event in 2020, but the car never materialized.

Tesla



Bernstein analysts recently said developing lower-cost models should be a priority for Tesla, especially given this recently price cuts that signals slowing demand for its cars.

“Given our concerns about end-state volumes for the Model 3 and Y being dictated by either price or luxury buyers’ desire for differentiation, we believe it is becoming increasingly important for TSLA to offer additional (lower-priced) models,” they said in a note to investors in early January.

Tesla has discussed plans for a $25,000 car, but it’s unclear where that project stands today. The vehicle should come by 2023but in early 2022, Musk said Tesla had too much on his plate to work on. Then, in November, Musk mentioned Progress on a cheaper vehicle platform without specifying what the end product would be.

Musk’s automaker has struggled to diversify its offering as it has poured resources into accelerating production of the Model 3 and Model Y. The Semi, a class 8 truck, Launched late 2022, three years behind schedule. years after their announcement, the Roadster sports car and cybertruck pickup both are nowhere to be found.



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