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Tesla to Launch Budget-Friendly Electric Vehicles and Test Paid Autonomous Service in 2025

Tesla has announced plans to launch affordable EVs in 2025 and test a paid autonomous car service, boosting investor confidence.

Tesla has announced plans to launch more affordable electric vehicles in the first half of 2025 and will begin testing a paid autonomous car service in June, boosting investor confidence despite posting weaker-than-expected quarterly results on Wednesday.

Shares of the electric vehicle maker rose 4% following the announcement, as Tesla also emphasised cost-cutting efforts and production efficiencies.

“Teslas will be in the wild, with no one in them, in June, in Austin,” CEO Elon Musk told analysts and investors on a conference call.

He added that the company would proceed cautiously to ensure passenger and public safety.

Musk did not provide details on how the paid autonomous service would operate but said the company’s driver-assistance software, Full Self-Driving (FSD), would undergo unsupervised tests in states such as California later this year.

Tesla is under pressure to deliver lower-priced models and accelerate its self-driving initiatives after a decline in deliveries last year. Musk did not disclose specifics on the pricing, size, or specifications of the upcoming budget-friendly EVs but reiterated that Tesla was working to reduce production costs.

The company said the average cost of materials and labor per vehicle reached its lowest level ever in the fourth quarter, falling to around $33,000 from nearly $39,000 two years ago.

Tesla shareholder and Globalt Investments senior portfolio manager Thomas Martin viewed the cost reductions as a positive development.

“They’ve been able to execute on the cost side and get that down. Their ability to do that in the fourth quarter definitely cushioned the blow,” he said.

Despite previously scrapping plans for a cheaper, mass-market vehicle platform—often referred to as the Model 2—Tesla now intends to produce more affordable models using its current electric vehicle platform and manufacturing lines.

The company also reaffirmed its goal of beginning commercial-scale production of a robotaxi in 2026 at its Texas factory.

“People are reading into the results that FSD and robotaxi are potentially on the cards in the next couple of years,” said Will Rhind, CEO of global ETF issuer GraniteShares.

However, Musk cautioned that some older Tesla models would require hardware upgrades to support full self-driving capabilities.

Tesla’s fourth-quarter earnings fell short of analyst expectations, reflecting a challenging market environment.

Revenue for the October-December period came in at $25.71 billion, below the estimated $27.27 billion, according to LSEG data. Adjusted earnings per share stood at 73 cents, missing the forecasted 76 cents.

The company’s automotive profit margin, excluding regulatory credits, dropped to 13.59% from 17.05% in the previous quarter, below Wall Street’s expected 16.2%.

Tesla has relied on aggressive financing incentives to sustain EV demand, but analysts warn this strategy could further erode margins amid high interest rates.

Tesla’s annual vehicle deliveries declined for the first time last year due to increased competition and rising borrowing costs. Chinese automaker BYD (002594.SZ) and European rivals BMW (BMWG.DE) and Volkswagen (VOWG_p.DE) have ramped up production of lower-cost EVs, intensifying market pressure.

Still, Tesla remains optimistic. The company expects its vehicle business to return to growth in 2025, despite a small drop projected for 2024.

While Musk had previously forecasted a 20% to 30% increase in vehicle sales for 2025, Tesla did not reiterate that projection in its latest earnings statement.

Political and economic factors could further impact Tesla’s operations. U.S. President Donald Trump, a close ally of Musk, has pledged to impose tariffs on imports from Mexico, Canada, Europe, and other trading partners—a move that could disrupt supply chains and raise costs for automakers. Tesla CFO Vaibhav Taneja acknowledged that potential tariffs would affect the company’s business and profitability, as it still depends on overseas suppliers.

Despite the financial pressures, some investors remain bullish on Tesla’s long-term prospects. CFRA Research analyst Garrett Nelson noted that the company’s self-driving initiatives and a forecasted 50% increase in deployments for its energy storage unit were encouraging signs for investors.

Boluwatife Enome

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