Tesla’s change in focus on affordable vehicles puts Mexico and India factory plans in uncertain territory

Tesla’s decision to focus on utilizing its existing factories to build new and more affordable vehicles has sent shockwaves through the electric vehicle industry. The company announced on Tuesday that it will not be investing in new factories in Mexico and India in the near future, opting instead to raise production by 50% from 2023 to its current capacity of close to 3 million vehicles.

Investors reacted positively to the news, with Tesla shares jumping 12% in after-hour trading despite the company’s quarterly results missing financial targets. Elliot Johnson, chief investment officer at Evolve ETFs, praised CEO Elon Musk for his prudent approach in growing vehicle volumes in a more cost-efficient manner during uncertain times.

This decision comes after Tesla scrapped plans to launch its cheap vehicle, known as Model 2, which was expected to cost $25,000 and drive the company’s growth into a mass-market automaker. Musk had previously stated that Tesla aimed to deliver the cheaper new model in the second half of 2025 with revolutionary manufacturing technology.

However, Tesla’s head of engineering, Lars Moravy, highlighted the risks associated with new manufacturing processes and production lines, leading to the company’s shift towards utilizing its existing facilities for now. Musk’s canceled meeting with Indian Prime Minister Narendra Modi and the delay in announcing major investments in an auto factory further underscored Tesla’s focus on maximizing efficiency and growth within its current infrastructure.

As Tesla navigates the challenges of slowing sales and evolving market conditions, analysts believe that the company’s decision to prioritize existing production capacity could set a new trend in the electric vehicle industry. With smaller peer Rivian also opting to produce its smaller, less expensive electric SUVs at its existing U.S. factory, the shift towards maximizing efficiency and delivery speed could reshape the future of electric vehicle manufacturing.