Ahead of starting production of its next-generation electric vehicle at the Texas factory in the second half of 2025, Tesla CEO Elon Musk has warned of a sharp slowdown in sales growth this year. The company’s shares were down 6% in after-hours trading as the CEO noted that ramping up production of the new vehicle would be challenging. He said it would take “a tremendous amount of new revolutionary manufacturing technology” – a sign that any boost to Tesla’s declining pace of growth would take time.
However, the company has already told suppliers to prepare for a June 2025 startup of a smaller crossover vehicle, which is critical for the automaker as it is seeing competition from inexpensive EVs such as those made by China’s BYD. The brand, in fact, overtook Tesla has the world’s top EV maker in 2023. “I’m often optimistic regarding time. But our current schedule shows that we will start production towards the end of 2025, sometime in the second half,” Musk told analysts on a post-earnings call.
The new model will first be produced in Tesla’s factory in Texas, followed by Mexico and another factory outside North America to be decided later this year. The EV maker also warned of “notably lower” sales growth this year as it focuses on the new vehicle after it reported shrinking fourth-quarter gross margin. The new mass-market model will be based on the next-gen platform, which Tesla believes will drive another growth wave.
Tesla started a price war in late 2022, when it started slashing prices of its vehicles to compete with rivals. Tesla’s shares, which have enjoyed the valuations of a technology company, partly due to Musk’s promise of self-driving cars, have fallen 16% so far this year, after doubling in 2023. “I don’t think the price cuts are over, mainly for the reason that demand for its electric vehicles is still weak,” Jesse Cohen, senior analyst at Investing.com, told Reuters.
Tesla’s fourth-quarter revenue rose 3% to USD 25.17 billion, which marked its slowest pace of growth in more than three years. On an average, analysts expected USD 25.62 billion, according to LSEG data.