Concerns about using current factories cast doubt on Tesla’s India investment: Report

According to news agency Reuters, US-based electric car company Tesla indicated that it would concentrate on using its current facilities to develop new, more inexpensive vehicles by late this year, which may postpone its intentions to invest in building a plant in India.

The top producer of electric cars (EVs) plans to add approximately 3 million vehicles by 2023, a 50% increase in output, without immediately establishing new production lines.

According to Tesla, this approach enables the firm to increase its car numbers in a more cost-effective way during uncertain times, even if it may result in less cost reduction than originally planned.

“This update may result in achieving less cost reduction than previously expected but enables us to prudently grow our vehicle volumes in a more capex efficient manner during uncertain times,” Tesla said in the report.

Tesla shares rose 12% in after-hours trading as a consequence of investors applauding the move, even if the company’s quarterly earnings fell short of projections.

Tesla lowered the price of its vehicles everywhere in an effort to boost demand. According to media sources on Tuesday, the EV maker saw a fall in its quarterly profitability for the first time since 2020.

Elliot Johnson, chief investment officer of Evolve ETFs, expressed optimism about the decision. Evolve ETFs manage assets valued at around $6 billion, including investments in Tesla and other EV manufacturers.

He emphasized the need to proceed cautiously with plans for growth in light of market problems and the launch of a less expensive car within the current product range.

“I think it’s a positive that he’s not just barrelling ahead with an expansion plan, ignoring the challenges in the market and the fact that he’s doing a cheaper vehicle from the existing product line,” Johnson said.

According to earlier Reuters reporting, Tesla may have given up on launching its low-cost Model 2, which was supposed to retail for $25,000 and serve as the catalyst for the company’s entry into the mainstream market.

Although Musk had earlier said that the less expensive model will be released in the second half of 2025, Tesla’s engineering chief Lars Moravy highlighted concerns about the risks involved in implementing new production lines and manufacturing techniques. Consequently, Tesla made the decision to make a significant strategy change and use its current facilities to produce low-cost automobiles.

Musk abruptly called off his planned meeting with Prime Minister Narendra Modi to discuss significant investments in an auto facility, citing his “very heavy Tesla obligations.”

Plans for a facility in Mexico are also up in the air; Musk said last year that the timing of the investment would depend on interest rates and the state of the economy.