Tesla is reportedly gearing up to launch a new mass-market electric vehicle, codenamed "Redwood," by mid-2025. Described as a compact crossover, this move aligns with Tesla CEO Elon Musk's persistent commitment to developing affordable electric vehicles (EVs) and self-driving capabilities. Musk has previously teased the idea of a $25,000 entry-level car, targeting a broader consumer base and rivalling the increasing number of cost-effective EVs like those manufactured by China's BYD.

Surpassing Tesla in the final quarter of 2023, BYD claimed the title of the world's leading EV maker. As of now, Tesla's most affordable option is the Model 3 sedan, starting at $38,990 in the United States.

Concerned about the impact of high-interest rates on consumer demand, Musk has expressed reservations about big-ticket purchases such as cars. In the pursuit of its new compact crossover model, Tesla sent out "requests for quotes" to suppliers last year, envisioning a weekly production volume of 10,000 vehicles.

Investors have been keenly interested in the timing of Tesla's next-generation compact vehicles, a question that gained traction ahead of the quarterly results report. It is anticipated that the report will project a 21% increase in deliveries for 2024, falling short of Musk's earlier ambitious target of 50% annual growth set three years ago.

In a bid to reduce costs, Tesla executives announced plans in March to halve the expenses associated with their next-generation vehicles. However, they refrained from specifying the timeline for these launches. Tesla, known for its optimistic projections, has a history of missing launch and pricing targets. For example, the production of the Cybertruck has faced delays and sluggish acceleration, with its starting price in the US reaching $60,990 – a 50% increase from Musk's 2019 estimate.

Despite Musk's assertion that the affordable model would initially be manufactured at Tesla's Texas factory, turning a profit from cheaper EVs remains a challenge due to battery costs and the inherent difficulties in producing quality inexpensive vehicles. In an effort to understand cost-effective manufacturing, Tesla reportedly dissected a Honda Civic, priced at $23,950 in the US, in recent years.

The forthcoming Tesla architecture, internally referred to as "NV9X," is expected to encompass two or more models. Additionally, Tesla's plans include the production of low-cost cars at its Berlin factory, and the company is reportedly exploring the possibility of establishing a factory in India to manufacture more affordable electric vehicles. Tesla already operates factories in Shanghai and Fremont, California.