During Investor Day, Elon Musk said something that made people smile, although it's true: demand for Tesla cars is infinite. It's just that not everyone is willing to pay the price. Tesla has shown it is willing to lower prices to accelerate sales and will do it again if necessary. Tesla is also poised to add new models to its lineup. Most people watch the Cybertruck production closely, but the most important move will happen elsewhere.
The upcoming Mexican gigafactory will employ a revolutionary "Unboxed Vehicle" manufacturing process to produce a truly affordable compact car using Tesla's third-generation platform. This is the one Tesla bets its future on, not the Cybertruck everyone is talking about. According to Sina Finance, Tesla is planning an ambitious production capacity for the next-gen model, at over four million units. Half of them would come from Giga Mexico, with Giga Berlin and Giga Shanghai contributing one million each.
Giga Mexico will be Tesla's biggest gigafactory based on annual production, explaining why the next-gen EV will mainly come from here. Sina Finance sources claim the new model will be a shrunk Model Y, and Tesla aims to sell it for around $25,000. Tesla hasn't offered a price estimate yet, but said the new model would have half the production costs of the current Model 3 and Model Y. If Tesla offers a compact EV at that price point, it will transform the automotive industry. It would also make it the main growth factor for Tesla.
Tesla would need to leverage its entire arsenal to achieve such a conservative cost structure. Starting with the economy of scale, new manufacturing processes, production line automation, and whatnot. The megacastings and the unboxed vehicle process would make this possible, increasing factory space utilization efficiency by 30% and shrinking the required production area by more than 40%.
The next-generation model is still more than a year away, although this could prove an understatement considering Tesla's past records. Giga Mexico still needs to be built, and, considering it will be a very different factory from the existing ones, it would take time to set up and optimize. Remember, the factory hasn't yet broken ground and will likely take a whole year before starting production.