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What Do Changes at Tesla Mean for the EV Transition?

By
Laurance Yap
May 22, 2024
5
min
Tesla’s had a bumpy ride over the past few months; new and improved products have generated buzz and positive reviews, while softening demand has also pushed the company to downsize staff and reduce support for its Supercharger network. What does all this mean if you’re thinking of going electric?
red Tesla EV parked in a dark room, with break lights glowing off the wall behind the vehicle
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A Rough Ride for Tesla

The last few months have been a bit of a roller-coaster for Tesla, the Texas-based EV maker and the biggest-selling brand of electric cars in North America (and sometimes the world). The launch of the angular Cybertruck generated huge online buzz, and its distinctive design and specs continue to polarize pundits, even as buyers line up to buy it. The refreshed Model 3 launched in the U.S., building on an already strong package with numerous meaningful upgrades – and an impressive Model 3 Performance version that offers supercar-baiting specs.

But Tesla the company has been going through a bit of a rough patch. As the dominant player in EV sales, it was affected more than most by softening demand for electric cars at the end of 2023 and the beginning of 2024, despite cutting prices numerous times to shore up sales. As such, sales and earnings were off, which in April led to the company cutting over 10,000 jobs, or about a tenth of its workforce. Questions arose about the company’s strategy, its planned product, and because it’s the biggest player, the EV market in general.

Here’s what we know – and what we’re thinking about.

Giving up on Gigacasting

One reason that Tesla has been so successful as an EV manufacturer is its continued innovation in manufacturing techniques. A process called “gigacasting” was one of its greatest innovations. While the under-body structure of most cars consists of dozens of metal stampings and castings that are welded or bonded together, Tesla did things differently.

Giant presses and molding machines could make the entire under-body of a Model 3 or Model Y in just three pieces instead of 60 or more – radically increasing simplicity and reducing manufacturing costs. This allowed Tesla to earn greater profit margins on each electric car than automakers using more conventional techniques, and allowed the company to reduce prices on its vehicles numerous times in the last 12 months, while still remaining profitable.

However, as demand for electric cars slowed at the end of 2023 and into the first quarter of 2024, Tesla was under pressure to reduce costs even further. The next big step in gigacasting was going to be the creation of the entire vehicle under-body in one piece – a move that would even further reduce vehicle cost and complexity, but one that would require a massive up-front investment in new casting machines.

Instead, Tesla will continue with its current method of making under-bodies in three sections: large gigacastings for the front and rear subframes, and a center section made of aluminum and steel frames that hold the batteries and other components. This technique is already used successfully on the Model 3, Model Y, and new Cybertruck.

Will There Be a Tesla Model 2?

Tesla’s pull-back from gigacasting might, however, mean that the long-promised “entry level” Tesla, often referred to colloquially as the Model 2, might be delayed, or might not happen at all. The smaller, more affordable Tesla model, which company CEO Elon Musk has promised for years, was anticipated to have a starting MSRP of around $25,000 – less than many mainstream gasoline cars. At that price point, it would have been an almost unbeatable financial proposition, with an affordable entry price, and super-low running costs.

But, gigacasting the entire under-body of the Model 2 was going to be key to its affordability, and with Tesla pulling back from the technology, the Model 2’s future is in question. On Tesla’s most recent earnings call, Musk indicated the company would pivot to self-driving “robotaxis” instead of focusing on the low-cost car. Reuters reported that the Model 2 was dead; Musk tweeted that Reuters was “lying.” Other EV pundits have speculated that the robotaxis and Model 2 would share an architecture, and that the robotaxi would just be a Model 2 without a steering wheel.

At this point, given the continuously shifting currents at Tesla, only time will tell whether the Model 2, which was originally slated for 2025, will ever come to market. If it does, it will face increasingly stiff competition from legacy car brands’ more affordable EVs, and likely new brands from China.

Supercharger Job Cuts

Among the over 10,000 jobs that Tesla cut in April were 500 employees of its Supercharging division. Widely recognized as the industry benchmark for charging station experience and uptime, Tesla’s Superchargers represent close to half of the current high-speed EV charging infrastructure in North America. Now, the team that was supporting their maintenance, and the roll-out of new Superchargers, is no more, prompting many questions about the implications for Tesla drivers – and indeed all EV owners.

Of the 30,000 or so high-speed chargers in the U.S., more than 13,000 are Superchargers – and just in the first quarter of 2024, Tesla opened over 3,500 new ports, more than any other company. Plus, Tesla had just started opening up its Supercharger network to drivers of non-Tesla EVs: Ford and Rivian, among others, have been shipping plug adapters that allow its EVs to work on Tesla chargers, and almost every automaker selling EVs in North America have committed to switching to Tesla’s NACS charging port from 2025 onward.

The timing of Tesla’s elimination of the Supercharging team, including Rebecca Tinucci, its senior director of EV charging, couldn’t come at a worse time. Automakers who have done deals with Tesla don’t have contacts to turn to, and how quickly Supercharger access becomes available to other brands is now in question.

While the NACS port is now an SAE (Society of Automotive Engineers) industry standard, making it easy for other carmakers to adopt, the standard could mean less if the reliability and uptime of Tesla’s charging network, the biggest out there, could potentially deteriorate without the support it used to have.

EV Infrastructure and Choice Continues to Expand

While Tesla’s recent troubles cast a cloud over the state of the transition to electric driving, it’s not all doom and gloom for drivers that want to make the switch to an EV.

In reality, one of the reasons Tesla’s had such a tough time is that a rapidly increasing number of competitors have brought increasingly-appealing, increasingly-affordable new EVs to market, which challenge Tesla’s best-sellers on all fronts. Tesla’s share of the EV market share pie has been declining for years as other brands have ramped up their offerings – many of which offer comparable range, technology, performance, and charging speed to Tesla models with the reassurance of a conventional dealer network and more familiar controls in the cabin.

Non-Tesla charging is also moving ahead rapidly. Electrify America, which owns and operates some of the fastest EV chargers in the land, opened a record number of stations in 2023 and continues to rapidly grow its network. Seven automakers have banded together to form Ionna, a new EV charging network that promises to add 30,000 350-kW high-speed chargers between now and 2030.

Individual automakers like Mercedes-Benz have formed partnerships with companies like Buc-ee’s to start their own charging networks. Big-box chains like Wal-Mart, convenience stores like 7-Eleven, and other brands with a national footprint along well-travelled roads are all making major charging investments, too, all with the support of billions of dollars of federal and regional infrastructure dollars.

So, while Tesla – and the larger EV industry – have encountered some curves in the road, the company’s challenges in no way signal a U-turn. Over the next few years, as more manufacturers offer more product, and as EV charging continues to improve, going electric will get easier and easier.

Front view of a Tesla Model 3 driving through canyon roads

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