Breaking new ground in its pursuit of widespread electric vehicle adoption, Tesla is gearing up to produce a budget-friendly 25,000-euro ($26,838) car at its Berlin factory, a revelation from a confidential source on Monday suggests.
Maintaining an air of mystery, the undisclosed source refrained from divulging the production commencement date, leaving enthusiasts in anticipation. Tesla, exercising discretion, chose not to offer any comments, yet the news triggered a 3% surge in pre-market trading shares in the United States at 0910 GMT.
Tesla Overcoming Price Barriers in Electric Vehicle Adoption
The formidable barrier to electric vehicle adoption, notably in Europe and the United States, has been the steep price tag exacerbated by high interest rates. Consumer surveys reveal that the average retail price of electric vehicles in Europe during the first half of 2023 soared beyond 65,000 euros, dwarfing the figure of just over 31,000 euros in China.
While Tesla’s CEO Elon Musk had initially envisioned an affordable electric car, he conceded in 2022 that the technological mastery required was still a work in progress, prompting a temporary shelving of the plan. However, insiders spilled the beans in September, suggesting that Tesla was on the brink of a breakthrough: the ability to die-cast nearly the entire underbody of an electric vehicle in one seamless piece. This innovation promises to not only accelerate production but also slash costs significantly.
Pivotal Step Towards Mass Market
For Tesla, reaching the mass market is a pivotal step towards achieving its ambitious target of 20 million vehicle deliveries by 2030, setting it apart from competitors like Volkswagen. Unlike others who shy away from setting delivery targets, Tesla’s strategy focuses on securing profit margins during the transition to electric vehicles.
Production Plans and Capacity Expansion
Elon Musk personally shared the production plans during his visit to the Gruenheide plant in Germany, currently responsible for manufacturing the Model Y—the best-selling electric vehicle in Europe. The German plant’s capacity is poised to double to an impressive 1 million vehicles annually, underscoring Tesla’s commitment to expansion.
Employee Pay Increase Amid Expansion
In tandem with this announcement, Tesla informed its workforce about a 4% pay increase for all employees, effective from November onwards. Production workers are in for an additional 2,500 euros annually starting February 2024, translating to an 18% pay raise within a year and a half. This salary adjustment comes on the heels of German union IG Metall’s observation in 2022 that Tesla wages lagged approximately 20% behind those offered under collective bargaining agreements at other carmakers.
As Tesla navigates its expansion plans in Germany, local authorities await additional details on how the company will align its growth with nature conservation laws. The approval decision will follow, though a specific timeframe remains undisclosed.
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