Last updated on December 8th, 2022 at 02:28 pm
Tesla expects to increase production of electric vehicles to 20 million units per year by 2027
Tesla founder Elon Musk explained last week that the company will be more closely engaged in the production of traction batteries, primarily in order to increase the volume of production of electric vehicles. She has Napoleonic plans in this regard: if this year she expects to produce 500 thousand cars, then in seven years – already 20 million electric vehicles.
To reach this level, as Barron’s resource explains, the company will have to annually increase the production of electric vehicles by 70% on average. This growth rate is not unprecedented for Tesla, as it increased its car production by 100% annually between 2012 and 2019. It should be borne in mind, however, that it started from a low base – the initial production volumes did not exceed 3000 electric vehicles. Over these seven years, the company had to invest at least $ 11 billion in production expansion. In order to produce 20 million electric vehicles a year, it will need, according to preliminary estimates, to invest about $ 100 billion.
These costs are not prohibitive for the industry. One of the largest automakers, Toyota Motor, sold 9 million cars last year, spending the same $ 100 billion in manufacturing over the previous decade. Given Tesla’s need for a significant increase in battery production and the company’s general propensity to strengthen vertical integration, the $ 100 billion estimates can still be called conservative.
Most interestingly, Musk sees Tesla as the market leader when talking about the period after 2027. If the company produces 20 million electric vehicles a year, then the total capacity of the global electric vehicle market will reach 30 million units by that time. In other words, Tesla will control two-thirds of the segment. These plans, too, cannot be called overly ambitious, because in the previous two years the company has already managed to occupy 55% of the American electric vehicle market. This period saw a phase of active growth in Tesla Model 3 sales, but the average cost of an electric car sold at that time was $ 75,000.
According to experts, in order to produce 20 million electric vehicles annually, Tesla will have to generate up to $ 800 billion in revenue and at least $ 100 billion in revenue using the EBITDA method. This year, Tesla’s stock price has risen almost fivefold, in May Elon Musk said that the rate was overvalued, but this week in an interview with The New York Times, he expressed confidence that in five years Tesla shares will be worth more than now. Along the way, the head of the company called Tesla’s break-even operation a serious achievement.
