After a tremendous year of sales driven by rapid-fire price cuts to the best-selling Model 3 and Model Y, Tesla is warning investors to expect “notably lower” sales growth in 2024 as the company works on developing its next-generation vehicle platform. It’s that platform that will fuel Tesla’s future more than the audacious Cybertruck ever will, no matter how many heads that vehicle turns.

That’s because this new platform could underpin a much more affordable electric car—even more so than the company’s current offerings.  

“Our company is currently between two major growth waves: the first one began with the global expansion of the Model 3/Y platform and the next one we believe will be initiated by the global expansion of the next-generation vehicle platform,” the electric automaker said in its fourth-quarter earnings report, issued on Wednesday. 

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Tesla’s Long-Promised Next-Gen Car

Tesla has been talking a big game about producing a cheaper vehicle for years. Now it’s next-generation platform appears close to production. 

Tesla’s long-overdue next-generation electric car—one that could cost as little as $25,000, if you believe CEO Elon Musk—is coming in 2025 in the form of a compact crossover codenamed “Redwood,” Reuters reported on Wednesday. And it’s about time.

Though it has defined the modern EV market, pushed other automakers in that direction and leads the way in electric sales in most places, Tesla still faces stiffer competition than ever. That includes companies like China’s BYD and South Korea’s Hyundai Motor Group, both of which are planning huge lineup expansions in the next few years. For Tesla, staying ahead of the game means broadening its relatively skimpy, aging lineup.

Keep in mind that although Tesla has pulled off an unprecedented amount of accomplishments in just a few short years, like becoming the world’s most valuable carmaker, it only sold some 1.8 million vehicles in 2023. Toyota likely moved more than five times that much metal; in 2022, it sold more than 10.5 million cars.

A new, cheaper model is key to Tesla’s ambitions to become the world’s biggest car manufacturer. For one, a lower price point translates to a larger addressable market and greater potential volume. Just look at Toyota as an example: It sells several models in the $20,000-$30,000 range. Tesla’s cheapest Model 3 will run you $38,990 before any tax incentives.

Affordability is a particularly critical missing piece in the EV world, where high prices have kept willing buyers on the sidelines. Musk has acknowledged that’s a problem for Tesla in particular many times over. 

Tesla also badly needs some more options in its portfolio to snag more buyers. Just two of Tesla’s five models—the Model 3 sedan and Model Y SUV—make up the vast majority of its sales. Just as EV competition is more intense than ever, those “workhorse models” are getting stale and the market for them is on its way to becoming saturated, said Jeff Schuster, Global Vice President of Automotive Research at GlobalData. 

A lower-priced car also has powerful potential to get people hooked on the Tesla brand, Schuster said. Buyers might start with a $30,000 Tesla, then move up the model line as their needs and budget change. That’s a strategy straight out of the legacy automakers’ playbook, Schuster said. 

“Tesla has a strong loyalty, so it seems like a natural progression that they would want that entry point a little lower than where they’re at now,” he said. 

The move doesn’t come without risks, though. A cheaper vehicle will yield lower profit margins, Schuster said. And Tesla’s margins have already been under the microscope since it started slashing prices about a year ago. Depending on the vehicle’s execution, it could hurt Tesla’s reputation as a premium brand, he added. 

Tesla hasn’t officially let much slip about its upcoming platform, other than that it will be cheaper to produce and be made in Texas to start. The company is working on a next-generation vehicle with futuristic, Cybertruck-like styling cues, according to Musk biographer Walter Isaacson. Isaacson has also detailed a plan to produce both a mass-market vehicle and a robotaxi using that next-generation platform. 

Hopefully Musk will share a bit more about Tesla’s plans on the company’s earnings call and through the rest of this year. But in the meantime, what do you think? Any hopes and dreams for what Tesla’s new crossover will be—or won’t be? Drop your thoughts and burning questions in the comments below. 

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