The Affordable Tesla Is Back On, and Joined By Tesla Robots, Too

Tesla will start production of affordable next-gen vehicles next year; capacity is in place to make 250,000 Cybertrucks a year; shipments of Optimus robots could begin; and the competition is expected to license Tesla's Full Self Driving technology. Oh yeah, and CEO Elon Musk admits all of these—well, his—claims should be taken with a grain of salt.

These are some of the highlights from Tesla's fourth-quarter earnings call with analysts where a somewhat-subdued Musk once again provided a laundry list of accomplishments to come, enough that "I do see a path where Tesla can one day be the most valuable company in the world." That despite reporting an operating margin of 8.2 percent in the fourth-quarter, half what it was a year ago before Tesla started its series of price cuts that ate into profits.

Tesla's Elusive $25,000 Vehicle

Tesla is working on a more affordable, next-generation vehicle, likely starting with a compact crossover. Musk said he is confident production can begin at the plant in Austin, Texas in the second half of 2025. But he adds, "certainly I say things that should be taken with grain of salt because I am optimistic."

The new models boast "profound design" and a revolutionary manufacturing system, he says, with machines that do not exist in today's world. He needs specialized machines to make the specialized machines required. And he needs engineers to live on the assembly line to get it operational as they continue the validation process.

Revamping manufacturing will significantly reduce cost, key to a financially viable $25,000 vehicle—electric or otherwise. This is not the first time Musk has promised a $25,000 car. He first teased us with the idea in 2020 but it never came to fruition.

Musk has previously said the $25,000 vehicle won't be called Model 2. The rumor mill has offered up Model C and Model Q. After launching in Texas, production will be added at a new plant in Mexico and by this time next year he will identify a third location outside North America.

GM is launching the next generation of the Chevrolet Bolt, its most affordable EV, in 2025, as well. If Musk follows past practices and pushes back the timeline for the $25,000 Tesla, the Bolt could scoop up sales first. Already the Bolt is enjoyed a late-life jolt of popularity thanks to recent price cuts by GM, along with the model qualifying for EV tax credits that further lower its price.

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Cybertruck Capacity

Once again Musk said the production ramp-up of the Tesla Cybertruck will be longer than other models due to the manufacturing complexity. The truck's assembly is not limited by production of 4680 battery cells; there are weeks of finished cells in inventory and four more production lines will be added later this year. The Texas plant currently has the capacity to make 125,000 trucks a year. "I see us ultimately delivering a quarter million trucks a year," Musk said.

Musk has previously said Tesla has 1 million reservations. Executives declined to say how many orders there are today but said the conversion rate of reservations to orders is encouraging and if it continues, Tesla will soon sell out all it can build in 2024—whatever that number is.

Given demand, Musk said they could dramatically raise the price but he would not feel right gouging customers. The truck already is priced significantly higher than promised four years ago when the concept was revealed. Building it has proven complicated and costly. "We dug our own grave with Cybertruck,"Musk said in October.

Come Get Our FSD

Musk also confirmed that Tesla has released a new version 12 of its Full Self Driving Beta driver assistance software. Version 12 is an architectural rewrite that is "end to end artificial intelligence" to improve path finding and vehicle controls. The result: a "profound difference."

It is being tested now by employees and a few customers. In the weeks to come, it will be offered to any of the 400,000 owners of properly equipped Teslas who request it.

Despite its name, Full Self Driving does not provide Level 3 autonomous driving, which means there must be a driver who is paying attention at the wheel. Mercedes-Benz does offer Level 3 autonomy, authorized for use in select areas in the U.S. and Europe. But Musk sees his tech as unrivaled. "If I were the CEO of another car company, I would definitely be calling Tesla and asking to license Tesla's FSD technology." So far, that has not been the case, but he thinks those calls will be coming this year. He thinks the reticence to date is because they don't think it is real; to be clear, it isn't fully finished—and customers using it essentially sign up as "beta testers" who develop the technology through their use of it. Paying for the option on a new Tesla means you can beta test it, with the promise that someday, if or when FSD is finally complete, your car will have it.

Optimus for the Rest of Us

Musk is bullish on the robotics side of the company and describes Optimus as revolutionary, with the potential to exceed the value of everything else at Tesla combined. Cars are just four-wheeled robots and all that tech can go into his humanoid robot, or so he figures.

There is a "good chance" Tesla could start shipping some robots next year, Musk says. Insert salt shaker again here, as he described the uncertainty that comes with being in uncharted waters. Musk said he spends a lot of time in the Optimus lab and has invited his friends from the TV seriesWestworld,which features robotic hosts, to come see the lab.

Dual-Class Shares Please

Musk has demanded 25 percent control of Tesla, roughly doubling his current stake, to have more control over the company's direction. Without it, he has threatened to pursue his AI and robotic initiatives as outside projects, separate from Tesla.

"I see a path to creating an AI and robotics juggernaut of truly immense capability; I want to have enough to be influential. If we could do a dual-class stock that would be ideal. I'm not looking for additional economics. I just want to be an effective steward," he said, and not be voted out by some random shareholder advisory firm. Musk said he chose 25 percent because "it is not so much that I can control the company even if I go bonkers and I'm mad and they throw me out, but it is enough that I have a strong influence."

EV Demand Waning?

Tesla is the EV demand bellwether, being the world leader in sales, and top seller in the U.S. Global sales were a record 1.8 million in 2023 but the volume was achieved by a series of price cuts, which sparked an EV price war.

While 2023 saw a jump in EV sales in the U.S., and battery electric vehicles hit a record 8.1 percent market share on the fourth quarter, consumers seem to be balking more, put off by concerns about range and issues with the charging infrastructure.

Musk has always said demand is not a problem for Tesla but its 38 percent sales growth in 2023 falls short of the 50 percent Musk forecast and he told shareholders that the sales growth this year will be notably lower as Tesla works to launch the next-generation vehicle.

China is also an issue, where there is excess capacity and security concerns. Tesla drivers are being banned from parking at, or driving near, sensitive areas such as government facilities and military bases, airports, and sports venues for fear the car's Sentry Mode will record sensitive information. Tesla responded by ensuring data is stored locally at a new center that opened in August. Another concern is increased competition and the hometown advantage of BYD which had more global EV sales than Tesla in the fourth quarter of 2023.