India factory plans in limbo as Tesla shifts focus

The automaker will use its existing factories to build new and more affordable vehicles

• Pramod Thomas
• 26 April, 2024

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By: Pramod Thomas

US automaker Tesla said that it will use a current platform and production lines to produce what it called “more affordable” models by early next year.

The announcement from the Elon Musk-owned company suggested that investments in new factories in Mexico and India are unlikely in the near term.

Tesla said the change would allow the company to launch low-cost vehicles swiftly but would result in smaller cost reduction than had been expected and modest volume growth.

The leading electric vehicle manufacturer aims to increase production by 50 per cent from 2023 to its current capacity of close to three million vehicles, prior to considering investment in new manufacturing lines.

“This update may result in achieving less cost reduction than previously expected but enables us to prudently grow our vehicle volumes in a more capex efficient manner during uncertain times,” the company said.

Earlier this month, it was reported that Tesla had scrapped plans to launch its cheap vehicle, known as Model 2, which Tesla planned to build in Texas, Mexico and a third country.

The new model had been expected to cost $25,000 and drive Tesla’s growth into a mass-market automaker.

Meanwhile, Lars Moravy, Tesla’s engineering head, said that adopting new manufacturing processes and production lines carries “certain risks.”

He indicated that the company has made a “significant change” by prioritising the use of its facilities to rapidly and efficiently produce affordable vehicles for the time being.

Last week, Musk postponed a planned trip to India where he was to meet prime minister Narendra Modi, citing obligations at his automaker and saying he aimed to reschedule the visit for later this year.

Rohan Patel, a Tesla public policy executive who, according to sources, was one of those leading the company’s India entry plans, also resigned last week.

Tesla, however, did not provide a comment regarding its plans for Mexico and India.

Last year, Musk affirmed Tesla’s intention to construct a factory in Mexico. He added that the timing would depend on economic conditions and interest rates affecting vehicle affordability.

Analysts noted Tesla’s challenge in expanding capacity amidst projections of slowing sales following years of double-digit growth.

(with inputs from agencies)