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Elon Musk’s decision to slow down new Tesla models risks holding back growth

Elon Musk is betting he can transform Tesla Inc. TSLA 2.08% to one of the world's largest automakers, while selling only a handful of models, challenging a long-standing belief in the automotive industry that it requires a diverse stable of updated models to attract buyers.

This is another example of Mr Musk's defiance of industry orthodoxy - at a time when competition for electric cars has never been tougher.

Tesla, which aims to increase vehicle deliveries by an average of 50% per year, does not plan to bring any new models to market in 2022, said Mr. Musk this week. The company has put production of its long-awaited Cybertruck pickup by 2023, he said, and is not working on the $ 25,000 car he previously teased.

Such delays are likely to make it difficult for Tesla to maintain its rapid growth pace, said Bernstein analyst Toni Sacconaghi, who questioned whether demand for Model 3 and Model Y would be sufficient in 2024 for the company to reach its growth targets.

If Tesla were to increase the supply of vehicles with its target of 50% per year, it would probably have to supply more than three million vehicles by 2024. Its Model 3 sedan and Model Y compact sports cars accounted for 97% of Tesla's approx. 936,000 deliveries last year.

"There is really no precedent for a single-model car to sell 1.5 million units a year, let alone two of them from the same company," said Mr. Sacconaghi.

Toyota Motor Corp.'s TM 1.67% The Corolla was the most popular vehicle in the world by 2020, with sales of more than 1.1 million vehicles, according to a Bernstein analysis.

Mr. Musk dismissed such concerns, telling analysts that Tesla's advanced driver assistance technology would make its vehicles more useful and therefore valuable.

"It is clear from the questions that the seriousness of full self-driving is not fully appreciated," he said. "If the price of our cars did not change at all, we would still sell as many as we could possibly make." Full Self-Driving is a suite of advanced driver assistance features that Tesla sells for $ 12,000. It does not yet make vehicles autonomous.

Tesla's production delays were met with skepticism on Wall Street, where the stock plunged more than 11% on Thursday, the day after Tesla reported a record annual profit of $ 5.5 billion for 2021. The stock recovered some of this decline Friday and rose 2 , 1%.

"It's clear ... that the seriousness of full self-driving is not fully appreciated."

- Elon Musk

Tesla's focus on increasing production of existing models is likely to help the company level its bottom line this year, but delaying the release of new models could ultimately make it more vulnerable to competition, analysts said. Car companies typically aim for 10% to 15% of their models in a given year to have recently undergone a major update, said Barclays analyst Brian Johnson.

Mr. Musk has previously made buyers wait for new models. The company's Model X sports utility vehicle, for example, was originally scheduled for production in late 2013. About two years later, Tesla had delivered only a handful of the SUVs.

This time, buyers have a wealth of alternative electric cars to choose from. General Motors Co. GM -2.35% has said it aims to introduce 30 new electric vehicles globally by 2025. This year alone, automakers are expected to launch more than two dozen battery-powered vehicles in the United States, according to Bank of America. Among them is an electric version of the Ford Motor Co. F 0.46% 's F-150 pickup truck. Rivian Automotive Inc., which went public in November, was the first to market in the lucrative pickup truck segment, launching its R1T last year.

Ford and GM recently introduced their first electric pickup trucks. WSJ car reporter Mike Colias breaks down the various strategies that the two old car manufacturers follow to bring their electric cars to market. Photo illustration: Alexander Hotz / WSJ

"Every day Tesla waits, there will be a new record," said Tyson Jominy, head of research and analysis practices at research firm JD Power.

Ford's experience about a century ago could be a warning to Tesla, Mr Johnson, a Barclays analyst, said in a recent note to investors. Ford controlled about 60% of the U.S. car market in 1921 thanks to the success of the Model T, he wrote. Ford focused on the Model T for years to come, but while doing so, rivals including General Motors released a wider range of cars that disappeared to Ford's market share, which in 1927 had fallen to 16%.

"With few further details about future physical products, we see the risk of Tesla repeating the 1920s Ford Model T story," Mr Johnson wrote.

Tesla did not immediately respond to a request for comment.

Mr. Musk has distinguished himself by leading an independent course in the automotive industry and defying doubters. He invested in all-electric vehicles as many industrialists questioned their viability, eventually turning Tesla into the world's most valuable automaker and himself the world's richest person.

Tesla's ability to achieve its production goals with its existing line of vehicles is likely to depend heavily on the company's success in China, the world's largest automotive market, said Mark Wakefield, CEO of consulting firm AlixPartners LLP.

Last year, Tesla's Shanghai plant became the company's largest after production, but Tesla is facing a more difficult business environment in China, where it has been caught by the government's crackdown on large-scale technology.

In Tesla's analyst calls, Musk focused on the promise of the company's efforts to develop fully autonomous vehicles.

"Over time, we believe full self-driving will become the main source of profitability for Tesla," Mr Musk said, adding Thursday that it is likely to take rivals at least five years to emulate Tesla's technology.

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Write to Rebecca Elliott at

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