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Tesla Takes Inspiration from Ford and General Motors for Affordable Car Strategy
Tesla announces plan to develop affordable vehicles using existing product lines. Strategy mirrors traditional approach of legacy automakers in Detroit. Speculation that stripped-down versions of Model 3 and Model Y will be offered as lower-cost options.
This strategy, which deviates from Tesla's usual approach of creating entirely new models, mirrors the playbook of traditional automakers in Detroit. Some investors and analysts see this as a shift towards incremental improvement and a departure from Musk's promise to disrupt the car-making industry.
The decision to use current platforms and production lines comes after Tesla reportedly shelved plans to release a highly anticipated new model, known as the Model 2, which was expected to cost around $25,000. Instead, Tesla will focus on producing "more affordable" models using its existing infrastructure. While specific details and pricing have not been provided, the announcement has already generated positive reactions from investors, leading to a significant increase in Tesla's stock price.
Analysts speculate that Tesla may offer stripped-down versions of its popular Model 3 and Model Y vehicles as lower-cost options. This approach aligns with the traditional strategy employed by legacy automakers like Ford and General Motors, who offer both basic and premium versions of their vehicles. Sandeep Rao, a senior researcher at Leverage Shares, describes Tesla's new strategy as a "traditional automaker strategy" and believes that it could be a popular move among consumers.
However, some investors remain cautious about Tesla's ability to execute this plan effectively and on time. Tesla has faced challenges in meeting its own timing predictions in the past, such as the delayed launch of the Cybertruck. James Womack, a former research director at MIT, suggests that Tesla should adopt a more disciplined approach to launching new vehicles, similar to legacy car manufacturers.
Despite the shift in strategy, Tesla's decision to focus on affordable models is seen as a response to the growing threat from Chinese automakers. By streamlining production and responding quickly to market demands, Tesla aims to maintain its competitive edge in the industry. K. Venkatesh Prasad, a former Ford engineer and chief innovation officer at the Center for Automotive Research, emphasises the importance of speed in the rapidly evolving automotive market.
The change in Tesla's approach has prompted some investors to reevaluate the company's valuation. While Tesla was once viewed primarily as a tech stock, the shift towards becoming a more traditional automaker has led to a shift in perception. Don Nesbitt, senior portfolio manager at ZCM, suggests that Tesla needs to focus on making lower-cost models in the current market landscape.
As Tesla embarks on this new strategy, the industry will be closely watching its ability to deliver on its promises. While the move may temper manufacturing innovation, it allows Tesla to respond swiftly to market demands and maintain its position as a leader in the electric vehicle market. Only time will tell if this shift towards affordability will pay off for the pioneering automaker.
Tesla announces plan to develop affordable vehicles using existing product lines
Strategy mirrors traditional approach of legacy automakers in Detroit
Speculation that stripped-down versions of Model 3 and Model Y will be offered as lower-cost options
Source: REUTERS