The company, a leading electric vehicle manufacturer, aims to increase production by 50% by 2023, reaching close to 3 million vehicles before considering new manufacturing lines.
"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," the company said.
Following the announcement, Tesla's shares surged by 12% in after-hour trading, despite the company missing its financial targets for the quarter.
Elliot Johnson, the chief investment officer at Evolve ETFs, which manages significant investments in Tesla and other EV makers, hailed the move, saying, "I think it's a positive that he's not just barreling 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."
Earlier reports had indicated that Tesla had abandoned plans to introduce its affordable Model 2 vehicle, which was expected to be priced at USD 25,000 and cater to the mass market. Tesla CEO Elon Musk had dismissed these reports and instead hinted at the development of new, unidentified models that differ from the original plan.
While Musk had previously mentioned plans to meet with Indian Prime Minister Narendra Modi and announce investments in an auto factory in India, the meeting was canceled last minute due to "very heavy Tesla obligations." Similarly, the construction of a factory in Mexico, which Musk had confirmed last year, is on hold pending economic conditions and interest rates.
In contrast, Rivian, a smaller competitor known for its electric SUVs and pickup trucks, has decided to accelerate the production of its R2 SUVs at its existing U.S. factory to expedite deliveries by the first half of 2026. This move deviates from the initial plan of building a new USD 5 billion plant for the R2 model.
The decision by Tesla to focus on utilizing its current facilities for producing affordable vehicles reflects a strategic shift to mitigate risks associated with new manufacturing processes. While Musk's plans for new models and expansion in Mexico and India remain uncertain, the company's emphasis on efficient growth and cost-effectiveness signals a pragmatic approach amidst evolving market conditions.
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