The electric-vehicle maker aims to start production of new models as soon as this year, well ahead of the late-2025 timing it had previously pledged. The decision sent shares soaring 13% late on Tuesday, stemming what has been the worst rout among stocks in the S&P 500 Index this year.

The news overshadowed a big shortfall in Tesla’s first-quarter earnings, sales and margins. CEO Elon Musk is betting that lower-priced models will drive up demand for EVs, which has slowed globally and forced other automakers to rethink their electrification plans. It’ll also help sustain the company as it works to bring some of Musk’s lofty ideas into reality, including a fleet of autonomous robotaxis, a ride-hailing service and humanoid robots.

“What matters is investors have some spark of hope that growth will re-accelerate next year,” said Gene Munster, managing partner at Deepwater Asset Management. “For the believers, he gave them enough to continue to stay the course.”

In a call with analysts, Musk also took a dig at rivals like General Motors Co. and Ford Motor Co., which have paced EV production and moved to reboot their offerings of gas-electric hybrids.

“The EV adoption rate globally is under pressure and a lot of other auto manufacturers are pulling back on EVs and pursuing plug-in hybrids instead,” he said. “This is not the right strategy.” 

Tesla’s own strategy has been muddled for much of 2024. It spent the last year slashing prices across its lineup in an effort to boost sales volume, only to find demand for its vehicles slowed. 

Investors have been worried that Tesla had killed plans for a long-promised, $25,000 car as Musk pursued his robotaxi vision. Now Tesla says it’s accelerating low cost plans — and can build the new cars at existing factories.

It wasn’t immediately clear if Tesla’s “more affordable models” pledge on Tuesday was a reference to the long-discussed low-cost car, or if it refers to efforts to drive down costs of the existing Model 3 and Y.

“I think we have said all that we will on that front,” Musk said when asked for more details about the cheaper models.

Tesla gave no timeline, but said it’s continuing to pursue a new module-based “unboxed” manufacturing process for its promised robotaxi model. In a reflection of leaner times, Tesla noted those new models will be built on existing manufacturing lines at current factories to maximize capacity and grow “prudently.”

The company has said it will unveil its robotaxi, which Musk referred to as the Cybercab, on 8 August.

The carmaker remains the dominant EV maker in the US market, but its earnings have been under pressure for several quarters. Tesla’s automotive gross margin — a key measure of profitability — was 16.4% in the first quarter, smaller than the 17.6% Wall Street expected. That’s far from the 30% peak margin it reported at the start of 2022.

Tesla’s adjusted earnings per share came to 45 cents in the first three months of the year, compared with Wall Street’s expectation of 52 cents a share. Revenue fell 9% to $21.3-billion, in line with its first year-over-year drop in deliveries since 2020. That was short of the $22.3-billion analysts expected.

Meanwhile, Tesla’s global vehicle inventory rose to 28 days, nearly double the 15 days at the end of the last quarter. The metric captures how long it takes for a car company to move vehicles off its lots. The company’s chief financial officer Vaibhav Taneja told investors on the call that the growth in inventories is a temporary setback.

“We expect the inventory build to reverse in the second quarter and free cash flow to return to positive” territory, Taneja said.

The Austin-based EV maker kept its near-term growth expectations in check, saying deliveries may be lower than last year. 

Earlier this month, Tesla initiated its largest-ever round of layoffs, cutting more than 10% of positions — though Bloomberg has reported the company may ultimately let go some 20% of its staff. At the same time, two senior executives quit, raising questions about who is in charge of key initiatives. Another executive, Tesla’s head of investor relations, Martin Viecha, said on Tuesday’s that call he was resigning.