Tesla unveils 2025 plans for affordable EVs, autonomous service

January 30, 2025 (MLN): Tesla said it was on track to roll out new, cheaper electric vehicle models in the first half of 2025 and would start testing a paid autonomous car service in June, enthusing investors and overshadowing quarterly results that fell short of Wall Street expectations on Wednesday.

Tesla's market value has soared with the election of U.S. President Donald Trump, who is a close ally of CEO Elon Musk.

But the electric car company posted a dip in deliveries last year, raising pressure for it to roll out lower-priced models as well as the autonomous vehicles and software that Musk says underpin its financial future.

Shares rose 4% as Tesla said it was cutting costs and working on the new vehicles, as Reuters reported.

"Teslas will be in the wild, with no one in them, in June, in Austin," Musk said on a call with analysts and investors, adding that it would proceed cautiously to ensure the safety of passengers and the general public.

He did not provide details on how the paid service would work.

Tesla's driver assistance software, known as full self-driving, or FSD, will see unsupervised tests in other states, including California, this year as well, he said.

Musk also did not give new details on his affordable vehicle plans, including their pricing, size and specifications.

Tesla is trying to make cars for less, and it said the average cost of materials and labor for building its cars had hit its lowest level ever in the fourth quarter, driven by lower raw material costs.

Reuters calculations showed the cost of making Teslas had fallen to about $33,000 from nearly $39,000 two years earlier.

Tesla has a history of delivering products late, but the company's recommitment to delivering new vehicles in the first half of the year is seen as positive.

Thomas Martin, senior portfolio manager at Tesla shareholder Globalt Investments, was also encouraged by the company's reduced costs.

"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 added.

Tesla last year abandoned plans to build a cheaper vehicle platform for the mass market, often called the Model 2, Reuters exclusively reported in April.

Instead, Musk said the company will use its current electric vehicle platform and production lines to produce more affordable models this year.

Commercial-scale production of a robotaxi was planned for 2026 at its Texas factory, Tesla said.

"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.

Musk, however, said that computers in some older Teslas would have to be upgraded for full self-driving.

Tesla has used cheap financing to pump up EV demand, a strategy analysts had predicted would erode automotive profit margins in future quarters as the company absorbs the impact of high interest rates.

Tesla's fourth-quarter profit margin from vehicle sales, excluding regulatory credits, fell to 13.59% from 17.05% in the prior three-month period, according to Reuters calculations.

 Wall Street had expected the figure to be 16.2%, according to 23 analysts polled by Visible Alpha.

Revenue was $25.71 billion for the October-December quarter, compared with estimates of $27.27bn, according to estimates compiled by LSEG.

Adjusted earnings per share stood at 73 cents, below the 76 cents analysts had estimated.

The EV pioneer's annual deliveries dropped for the first time last year, due to higher borrowing costs and intense competition.

Rivals such as China's BYD, as well as European manufacturers BMW and Volkswagen have launched new cheaper models to capture market share.

Tesla said it expected the vehicle business to return to growth this year, after a small drop in 2024.

Musk had said late last year he expected vehicle sales to grow 20% to 30% in 2025, a forecast the company did not repeat in its results announcement.

Trump has vowed to impose this year a range of tariffs on imports from Mexico, Canada, Europe, and other U.S. trading partners a move that could disrupt supply chains and raise costs for automakers such as Tesla.

Tesla CFO Vaibhav Taneja said tariffs if imposed, would affect Tesla's business and profitability as it still relies on overseas suppliers.

Garrett Nelson, an analyst at CFRA Research, said prospects of self-driving were encouraging investors.

A forecast for a 50% jump in deployments at the energy storage unit, which builds systems to make the electricity grid more resilient, was positive, too, he said.

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