Musk hails ‘manufacturing revolution’ for low-cost Tesla

Elon Musk, CEO of US EV pure play Tesla, has confirmed that his firm is developing an affordable EV for mass-market production. And he describes the production line as ahead of any of his competitors globally.

“We are working on a low-cost electric vehicle that we will make in very high volume,” Musk confirmed in an interview on an engineering Youtube channel, weeks after he reportedly told workers in a visit to the company’s Berlin gigafactory in Germany that it would share in producing the new sub-$25,000 model.

“We are quite far advanced in that work. I review the production line plans for that every week,” the CEO says.

“The first production will be here in the gigafactory in Texas,” Musk says. And a proposed Tesla plant in Mexico “will be the second place,” with Musk explaining that “it will take too long to complete the factory in Mexico” for it to be the first production location for the new model.

Affordability has been a perennial obstacle to widespread EV adoption, and although the industry is approaching price parity with ICE vehicles, the market-leading quality of Tesla’s vehicles has never been matched to a sub-$30,000 price tag.

According to data from North Carolina-based consultancy Motor Intelligence, Tesla dominates the US EV market with a share of over 55pc of new electric registrations in October. This is despite its cheapest vehicle, the base Model 3, coming in at a shade over $40,000.

The base Model 3 uses a Chinese-made lithium iron phosphate (LFP) battery sourced from China’s Catl. That means its buyers will likely no longer qualify for any Inflation Reduction Act (IRA) subsidies once proposed clarity on foreign entity of concern considerations (FEOC) — which will hit products with Chinese influence in their supply chain — are signed into law.

So, if Tesla is planning to use LFP chemistry in its new, more affordable model, it will either have to find a relatively unproven non-FEOC supplier of these batteries — such as South Korea's SK On or US start-ups like ONE or Desten — or use a China-linked source and hit its lower price point without relying on IRA subsidies.

Production to ‘blow minds’

And that potential compromise on battery economics brings the remainder of the new vehicle's production process firmly into focus. Musk is bullish about what he views as a potentially industry-changing manufacturing process that Tesla is employing for the new vehicle.

“I think that the revolution in manufacturing that will be represented by that car will blow people’s minds. It is not like any car production line that anyone has ever seen,” he says.

While Musk is no stranger to bold promises which Tesla has either never fully met or has done so after painful delays, Tesla has been rumoured in recent months to have made a technological breakthrough with an ‘unboxed’ method of production, which company engineers told investors in March would cut costs in half.

When asked if the new EV would be produced through this unboxed manufacturing process, Musk was tight-lipped. “The thing that is most interesting about the system is that it is a level of automotive production that is far in advance of any automotive plant on earth,” he offers.

Tesla bulls will no doubt take Musk at his word. And indeed betting against him and his company in the EV space in recent years has been a fool’s errand.

But promises from the CEO about the unprecedented manufacturing process going into the new model could give rise to concerns that any delivery and then ramp of the new EV could encounter similar problems to those which the Cybertruck e-pickup suffered as a result of its own novel design and manufacture.