Elon Musk predicts $25,000 entry-level Tesla could launch as soon as late 2025, heralding return to high growth for slumping EV maker

elon musk predicts $25,000 entry-level tesla could launch as soon as late 2025, heralding return to high growth for slumping ev maker

Tesla CEO Elon Musk issued disappointing 2024 guidance, but he had at least one reassuring announcement to make.

Tesla boss Elon Musk put on a brave face before delivering a raft of bad news to investors on Wednesday. Vehicle sales growth this year would be “notably lower” than the 38% from 2023—a figure itself only made possible by multiple rounds of massive price discounting.

Yet Tesla’s totemic CEO held out hope to shareholders bitter at losing the industry’s top spot to the new number one, BYD of China. A $25,000 entry-level model, whose launch should herald the return of Tesla’s 50% compound annual growth rates, is just around the corner.

“Our current schedule says that we will start production towards the end of 2025, sometime in the second half,” said the buoyant CEO, whose dour and irritable attitude on the last quarterly earnings call had investors howling.

Musk explained he replaced Mexico as the lead plant for the vehicle in part because he needs his team of manufacturing engineers to be living and, yes, sleeping on the assembly line to solve any production problems arising from the new next-gen vehicle platform. This means ramping output could be a slog, at least initially.

“It’s hard to say what the unit volume would be next year,” he said. “We’re not going to make any predictions on that front, but it does seem quite likely that we will start production next year.”

Investors currently need every reassurance they can get from Musk. The stock has already been hammered since the start of this year, shedding 16% of its value. Wednesday’s lack of concrete guidance for 2024 is adding further pressure as Tesla is expected to open nearly 9% lower at the start of trading, crashing through the psychological floor of $200 a share.

In a research note to clients, investment bank Piper Sandler argued Tesla should remain a core multi-year holding, but acknowledged there is no rush for anyone to own the stock right now given all the uncertainty.

“A growth ‘air pocket’ in 2024 could drive sideways trading (at best) for the next several months,” the bank warned.

Talks to license Tesla’s FSD to carmakers founder

That’s one way of putting it. Another is that Tesla is a $660 billion growth stock minus the growth.

For example, revenue gains from the sale and lease of cars, which excludes regulatory CO2 credits, barely breached 1% in the fourth quarter compared to the same period a full year ago, even though vehicle deliveries jumped by a full fifth.

This mismatch between volumes and turnover is proof the ruinous price war Musk unleashed at the start of 2023 left deep scars on Tesla’s income statement—and little can be done to bolster profitability at this point.

Finance chief Vaibhav Taneja warned his team has effectively reached the end of the line when it comes to driving down the cost of goods sold of each vehicle. That means any further price cuts to stimulate moribund demand will feed right through to margins going forward.

The rest of the call only poured further cold water onto the Tesla bull thesis.

Asked about early discussions with carmakers to license his Full-Self Driving technology—a carrot Musk first dangled back in July—the tycoon admitted talks have gone nowhere.

“We’ve had some tentative conversations, but I think they don’t believe it’s real,” he conceded, despite his belief that this was the year Tesla would prove FSD worked.

What prototype?

The bad news didn’t stop there. Musk then admitted his custom-built AI supercomputer Dojo, which Morgan Stanley predicted is worth half a trillion, was in fact a “long shot” with a “low probability of success.”

Finally Tesla made no explicit reference in its outlook to the long-term target of 50% annual average vehicle sales growth for the first time in 12 straight quarters.

A question mark even needs to be put next to Tesla’s one big hope, the $25,000 entry car. Jim Chanos, the speculator famous for shorting Enron right before it collapsed, pointed out it would be difficult to start series production of the vehicle next year “without a prototype”.

To this date, Tesla has never revealed what the vehicle will actually look like, highly unusual with so little time left. Typically carmakers like Volkwagen give an early glimpse of the design, sometimes years in advance.

There is one persistent rumor that may give Musk cause not to reveal his cards to the competition yet: to lower costs, allegedly the car could come without a steering wheel or pedals.

If true, that means there is no getting around solving full autonomy, what Musk has described as Tesla’s very own “ChatGPT moment”.

This story was originally featured on Fortune.com

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