US electric vehicle maker Tesla says it is on track to launch a more affordable model in the first half of 2025 after automotive revenues dipped last year.

The planned affordable models will use aspects of both next- and current-generation platforms, and will be produced on the same manufacturing lines as Tesla’s current vehicle line-up. This approach will slow down the previously expected cost reduction but allows production growth “in a more capex efficient manner during uncertain times,” the company says.

The Texas-based company is also betting on AI and its full self-driving (FSD) technology as it prepares for what ceo Elon Musk defines as “an epic 2026 and a ridiculous ‘27 and ‘28.” In 2024, Tesla increased AI training compute by over 400% and, as of January, recorded over three billion miles cumulatively driven on FSD, supervised.

Paid FSD services will be launched in the city of Austin in June, as Tesla continues to work to set up supervised FSD in Europe and China this year. Unsupervised FSD vehicles are already operating at its factory in Fremont, California, and are soon being rolled out at its site in Austin, Texas. 

The Cybercab model is scheduled to start volume production in 2026. According to analysts at Jefferies, these elements are “sufficient to de-stress a downbeat soft 2025 guide.” 

Automotive is expected to return to revenue growth in 2025, although a planned changeover to enable all factories to produce the new Model Y next month is expected to cause several weeks of lost production in Q1, impacting margins. Still, production is forecast to grow by 60% compared to last year’s levels, as Tesla seeks to achieve its maximum capacity of 3 million vehicles.

Tesla’s energy storage deployments are estimated to increase by at least 50% year-over-year in 2025, Kallanish understands. 

In 2024, group revenue rose by 1% to $97.7 billion compared to 2023, with lower automotive revenues offset by higher energy storage – which achieved a record Q4 – and services revenues. Net income halved to $7 billion due to higher operating expenses and lower margins.

In Q4, deliveries reached a record annualised rate of nearly 2m a year, and the overall cost per car hit its lowest-ever level at $35,000. Across the year, the Model Y was the best-selling vehicle in its portfolio.

Shares rose by 2% in premarket trading on Thursday.