Tesla’s New Car, Redwood, to Compete in the Budget Vehicle Category

Tesla has informed its suppliers that it intends to commence production on a new electric car for the mass market, codenamed “Redwood”, by mid-2025, according to four individuals familiar with the matter, two of whom described the model as a “compact crossover”.

For a long time, the CEO of Tesla, Elon Musk, has sparked the enthusiasm of fans and investors for affordable electric cars and self-driving taxis that are expected to be manufactured on the cheaper electric car platforms of the next generation.

These models, including a low-cost car worth $25,000, will enable it to compete with cheaper gasoline-powered cars and an increasing number of affordable electric cars, such as those manufactured by the Chinese company BYD.

In the last quarter of 2023, “BY Dubai” company outperformed Tesla as the largest electric car manufacturer in the world.

Initially, Musk had promised to build a car worth $25,000 in 2020, but he later postponed this plan and then revived it. Currently, the cheapest Tesla offer, the Model 3 sedan, is priced at $39,000 in the United States.

Last year, Musk expressed concerns about the impact of high interest rates on consumer demand for expensive goods, such as cars.

Two sources said that Tesla sent “requests for quotations” or invitations to tender for the “Redwood” model to suppliers last year, expecting a weekly production volume of 10,000 cars.

According to three sources, production will commence in June 2025. Everyone spoke on the condition of anonymity because the matter is confidential.

The timing of the next generation of compact vehicles was one of the most pressing questions for investors in Tesla before the company’s quarterly earnings report on Wednesday afternoon. It is expected to forecast a 21% increase in deliveries in 2024, which is significantly lower than the long-term annual target of 50% set by Musk about three years ago.

In May, Musk stated that Tesla is working on two new products, with the potential for combined sales of up to 5 million cars annually. He mentioned during the company’s annual shareholder meeting that “the product design and manufacturing technologies surpass anything else in the industry.”

Tesla is planning to manufacture an affordable robotic taxi and an electric car worth $25,000 based on the same vehicle structure, according to Walter Isaacson’s biography about Elon Musk, which was released in September and includes interviews with the CEO and executives.

In 2022, Musk stated that Tesla will manufacture a self-driving taxi with a futuristic appearance by 2024, following several setbacks in achieving its goal of full autonomous driving ability.

He and other executives at Tesla developed plans in March of last year to cut the cost of next-generation cars in half, but they did not provide a timeline for the rollout.

Tesla has a notable history of failing to achieve its launch and pricing objectives, and it will take time to build momentum.

For instance, the production of the Cybertruck has been delayed and it has become slow in acceleration, furthermore its initial price of $61,000 in the United States is 50% higher than what Musk announced in 2019.

One source said, “They were overly optimistic about most of their new product launches. It is likely that production volume will begin in 2026.”

Last year, Musk stated that the affordable model would initially be manufactured at Tesla’s factory in Texas.

Achieving profitability from cheaper electric cars will be challenging due to battery costs, as well as traditional difficulties in producing high-quality and affordable vehicles.

According to separate sources, it is said that Tesla has recently dismantled a Honda Civic, a car with a starting price of $24,000 in the United States, to study how to manufacture cheaper cars.

The two individuals and one primary source stated that the next generation structure of Tesla, internally referred to as “NV9X”, will include two or more models.

Earlier sources said that Tesla also plans to build cheaper cars in its factory near Berlin, and it is interested in building a factory in India to produce lower-cost electric cars.

The electric vehicle manufacturer also owns factories in Shanghai and Fremont, California, according to Reuters.