Tesla (TSLA) shares are trading higher on Monday after a report the car company is developing a lower-cost €25,000 ($27,000) electric vehicle at its Berlin, Germany factory.
Yahoo Finance's Seana Smith and Brad Smith analyze the affordability of EVs, delving into Tesla's pricing strategy amid current economic conditions.
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Video Transcript
BRAD SMITH: We're also watching shares of Tesla today popping in premarket trading as we are getting reports out of its operations in Germany. According to a Reuters report, the EV maker is working on a more affordable vehicle in its Berlin factory that would cost about 25,000 euro, which is well below the average price of an EV in Europe, which autos research firm JATO Dynamics has found to be over 65,000 euros in the first half of 2023 here.
You think about where the pricing strategy has continued to either come into question or just be more made known at Tesla, especially given around the world where they're looking at different regions and figuring out exactly at what price point they're not only able to perhaps catch the eye or catch the mindshare of potential buyers out there.
But then also at the same time, where they can set the base price so that they can also see some upgrade because the packages as well that they're laying on top That's where some of those margins really come into play.
SEANA SMITH: Yeah, exactly. And I think obviously getting a more affordable EV is huge when we talk about EV mass adoption, what exactly is needed to really get those numbers significantly higher from where they are today. Many analysts that we have talked to and even auto executives here over the last several months going back several years, they talk about the fact that they need to make EVs a bit more affordable in order to really increase adoption numbers.
So you take into account this potential price tag, if this report is correct here about Tesla developing a cheaper EV, would equate to just about $27,000 here in US dollars. That's considerably cheaper than what is on the market right now from Tesla, taking a look at the Model 3 right now, and that starts just around just below 39,000.
So obviously, many of their cars and that's the lowest end of their cars, right? So many of them are much more expensive. People certainly cannot afford it in this environment right now. And also coupling that with the higher rate environment obviously makes more expensive cars less affordable to more and more people.
When you talk about exactly what needs to happen to get to that mass adoption, we know Tesla is time and time again laid out the fact that they are aiming to increase vehicle deliveries to 20 million by 2030. They need a cheaper vehicle, you would think in order for that number to be attainable. So if this, in fact, is true, they are building a cheaper EV. This could be a huge opportunity for Tesla. And then we'll also see what that means for some of their competitors out there too.
BRAD SMITH: And this particular factory, this Gigafactory Berlin-Brandenburg, particularly it is known for making the Model Y. However, you think about the overlap and the synergies that they have in production between the mass market model 3 and the Model Y, 75% of the Model Y is actually the Model 3.
And so all of that considered, that production kind of manufacturing ability and the overlaps there, perhaps that gives them a little bit more of that ability to crank out more vehicles within this Berlin Gigafactory as well over the future to hit some of those goals you mentioned.
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November 06, 2023 at 09:53PM
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Tesla's Berlin factory to produce cheaper vehicle: Report - Yahoo Finance
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