According to insider sources cited by Reuters, Tesla is gearing up for mass production of a new model, identified as a compact crossover, starting next year.
The move is seen as a response to the longstanding expectations of Tesla enthusiasts for a more affordable electric car, a concept that CEO Elon Musk has teased for years.
The base model of the anticipated vehicle, internally known as “Redwood,” could carry a price tag as low as $25,000, as per the Reuters report.
Initial production targets are set at 10,000 cars per week, with Tesla reportedly reaching out to auto suppliers through a quote request. Introducing a more budget-friendly model is a strategic move for Tesla to better compete with low-cost Chinese electric vehicle (EV) manufacturers.
Considering that Tesla is set to enter the Indian market and how popular SUVs and crossover SUVs/compact SUVs have been there, Tesla may be planning to expand its product line to entice Indian customers.
Moreover, Tesla must have realised that India continues to be a price-sensitive market and won’t respond well to most of its current offerings, as they are priced today.
While the news signals a positive development for Tesla, it may present a challenge for European automakers. The European car industry has long struggled to surpass Tesla’s dominance in the EV market.
Even as EV sales have grown, a recent downturn in European EV sales, particularly in Germany, with a 48 percent drop in December, has been attributed to the sudden end of government EV subsidies.
Additionally, supply chain concerns have been exacerbated by the crisis in the Red Sea, impacting Tesla’s German factory.
The company had to temporarily halt production due to delays in component deliveries caused by changes in shipping routes away from the Red Sea. Tesla imports crucial battery components from China, and the Red Sea and Suez Canal, once the shortest route, are now facing increased risks.
Elon Musk’s pledge to offer an affordable Tesla has been a long-standing commitment, with the new model expected to address these aspirations.
Although the Model 3 was initially intended to be the affordable option, its starting price of close to $39,000 fell short of the anticipated affordability. According to sources cited by Reuters, production of the new compact crossover model is projected to commence in mid-2025.
