Despite the tough times the auto industry is currently enduring, Tesla CEO Elon Musk is ready to move ahead, starting with picking a location for a new Gigafactory in the U.S.
The location for the new plant, which is expected to be somewhere in the Midwest or Southwest, could be settled in as little as a month, Musk revealed during the EV maker’s earnings call Wednesday. He said an announcement would come for certain within the next three months.
The plant is expected to build the Cybertruck, which is expected to be ready for delivery next year. Given that the Fremont plant is bursting at the seams with Model S, X, 3 and now Y production, it may not be outside the realm of possibility that this new plant, which company officials allowed could be bigger than the existing U.S. Gigafactory in outside Reno, Nevada, will build the new Model Y as well.
While you’re at it, add the Tesla Semi, which the company said would be coming next year as well. Musk noted that more Gigafactories would be coming, joining the existing sites in the U.S., China and Germany. “I don’t know right now what that number will be. I guess several more than there are today, but I’m not sure,” he said
Those additional plants are going to be needed if Musk plans to meet his previously stated goal of 50% compound growth annually, which would result in 4 million Tesla vehicles being built in 2025 with an escalating number from there. Musk admitted it’s a lofty goal, but he wouldn’t back down from it under just about any circumstance.
“It’s difficult to predict what an accurate situation’s going to be,” he said. “I think in the absence of some massive force majeure event, I think 50% is the likely number. It’s possible it’s 40%. I think I would be very shocked if it’s less than 40% even with a force majeure short of World War III.”
Musk is used to dealing with obstacles, the startup of the Fremont plant perhaps being the biggest example. He’s going to make another problem disappear in China. The central government’s newest subsidies for New Energy Vehicles, or NEVs, has a pricing component tied to them — the vehicle cannot cost more than $30,000.
The Model 3 standard range edition in China starts at nearly $32,000. However, Musk – in a shock to almost no one – announced that starting Friday (in China) the company’s cutting the price to make it compliant with the new rules. “We’re confident that that’s still a vehicle that can deliver good gross margin,” he said.
That drop is doable because it’s already cheaper to build the Model 3 at Shanghai than Fremont — and more efficiencies are coming that will further improve margins. Musk didn’t mention if those future improvements will result in lower prices. He added that the company is always looking to take more costs out of its vehicles – it’s why the Model Y was profitable almost immediately, he noted.
“We’re always looking to take cost out and make the car better,” he said, adding that was one of the reasons why Model Y was profitable right away — it cost the same amount to build as the Model 3, but the price is higher.
Musk also noted that the company’s full-service driving feature will be ready to go this year. In fact, he said it would be available on a subscription basis for owners who elected not to added it to their vehicles when they bought them. It was also suggested that it’s going to be cheaper to buy the feature at the time of the initial purchase. Musk has been saying FSD would be ready for at least the last two years, but with the early arrival of the Model Y, he may be correct this time.