Tesla needs to sell cheaper cars to stay dominant: analysts

Tesla needs to sell cheaper cars to stay dominant: analysts

  • Tesla is the world leader in electric vehicles, but it needs to diversify its lineup.
  • If Elon Musk wants to be a major player like GM, Volkswagen or Toyota, he needs to make cheaper cars.
  • Musk has plans for a $25,000 car, but it’s unclear where that project stands.

Elon Musk has big aspirations for Tesla, such as selling a staggering 20 million cars by 2030 (the equivalent output of Toyota and Volkswagen combined) and making the company worth trillions.

However, to remain a leader in the auto industry for the long term, Tesla will need to expand its small lineup and start selling cheaper models, experts say.

The electric carmaker has made great strides with its current lineup of four high-end vehicles. It is the largest seller of battery-powered cars globally with 1.3 million units shipped last year (a 40% increase over 2021). The Model 3, Model Y, Model S and Model X, which cost between $44,000 and $120,000, accounted for approximately 65% ​​of electric vehicles sold in the US in 2022.

Tesla lineup

Tesla cars range in price from around $40,000 to $150,000


But its breakneck growth has an expiration date if it can’t give people more affordable mass-market options, industry watchers say. And that makes a lot of sense when you consider how the major auto players do business; they sell a wide range of products to satisfy a spectrum of buyers.

Toyota has the $22,000 Corolla and the $100,000 Lexus LC, plus many others. Volkswagen sells inexpensive hatchbacks, but also Porsches, Audis, and Bentleys. General Motors makes Chevys and Cadillacs.

The gap at the bottom end of Tesla’s lineup leaves it open to increasingly stiff competition. China’s BYD, the world’s second-largest seller of electric vehicles, is quickly gaining the top spot from Tesla. That’s not in the least surprising, Michael Dunne, founder of electric vehicle consultancy ZoZoGo, told Insider, especially when you consider that BYD has a sprawling portfolio while Tesla is solidly a luxury player.

“It’s like asking, ‘Will Toyota overtake Mercedes in overall sales?’ Yes, because Toyota has a full range of vehicles ranging from $20,000 to $80,000,” Dunne said. “And the lower the price, the bigger the market, of course.”

A Tesla Model 3.

The Model 3 sedan is Tesla’s cheapest vehicle at $44,000 after a recent price drop.

David Zalubowski/AP

Mercedes-Benz sells about 2 million cars a year. Toyota sells 10 million.

As EV competition increases and buyer interest grows, Tesla will need to roll out new offerings, such as cheaper trucks and cars, to complement its aging lineup, Sam Fiorani, vice president of global vehicle forecasting at AutoForecast Solutions. The Model 3 and Model Y, by far Tesla’s best sellers, went on sale in 2017 and 2020, respectively.

“It will be a few more years before EV buyers expand enough to need a product range, and Tesla needs to be there when the market is ready,” he said, adding that Tesla cannot be a major player or Achieve your lofty goals with just a few models.

Elon Musk at Tesla Battery Day in 2020.

Elon Musk announced plans for a $25,000 car at a Tesla event in 2020, but the car hasn’t materialized.


Bernstein analysts recently said that developing lower-cost models should be a priority for Tesla, especially given recent price cuts that signal slowing demand for its cars.

“Given our concerns about end-state volume levels for the 3 and Y models dictated by price or luxury buyers’ desire for differentiation, we believe it is increasingly imperative that TSLA offer additional (lower-priced) models ),” they said in a note to investors in early January.

Tesla has discussed plans for a $25,000 car, but it’s unclear where that project stands today. The vehicle was supposed to arrive in 2023, but in early 2022 Musk said Tesla had too much on his plate to work on it. Then, in November, Musk mentioned progress on a cheaper vehicle platform without specifying what the final product would be.

Musk’s automaker has struggled to diversify its lineup as it poured resources into speeding up production of the Model 3 and Y. The Semi, a Class 8 truck, launched in late 2022, three years behind schedule. Years after they were announced, the Roadster sports car and Cybertruck pickup are nowhere to be found.

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