His projection followed a Reuters story earlier in the day saying Tesla had told suppliers to prepare for a June 2025 startup of a smaller crossover vehicle, critical for the automaker as it loses share to inexpensive EVs such as those made by China's BYD (002594.SZ).
"I'm often optimistic regarding time. But our current schedule shows that we will start production towards the end of 2025, sometime in the second half," Musk told analysts on a post-earnings call.
"We'll be sleeping on the line practically," he said, referring to Tesla's factory in Texas, where the new model will be first produced. That will be followed by Mexico and another factory outside North America to be decided later this year, he said.
The EV maker also warned of "notably lower" sales growth this year as it focuses on the new vehicle after it reported shrinking fourth-quarter gross margin.
Tesla said it was in between two growth waves: one driven by the release of Models 3 and Y in 2017 and 2020, respectively, and a second wave that would start with the next-generation vehicle platform.
Wall Street expects Tesla to sell 2.2 million vehicles this year, according to Visible Alpha. That would be up about 21% from 2023 but well below the long-term target of 50% that Musk set about three years ago. Tesla, however, did not reiterate that target on Wednesday.
After years of breakneck growth, Tesla is bracing for slowing growth and margins as EV demand softens and competition intensifies.
"If volume's going to be lower, then my guess is, Musk will probably cut prices and take share. Margins may continue to struggle for a while," said Gary Bradshaw, portfolio manager at shareholder Hodges Capital Management.
Cost of goods sold per vehicle declined sequentially in the fourth quarter, but Tesla cautioned it was approaching the "natural limit" of cost reductions on its existing vehicle lineup, underscoring the pressure on the company to launch its new lower-cost vehicles. BYD sold more EVs globally than Tesla in the fourth quarter.
Musk said Chinese automakers will have significant success outside of China. "If there are no trade barriers established, they will pretty much demolish most other car companies in the world."
Tesla reported a gross margin of 17.6% for the three months ended December, compared with 23.8% a year earlier, and analysts' average estimate of 18.3%, according to LSEG data.
Automotive gross margin, excluding regulatory credits - a closely watched figure - dropped to 17.2% from 24.3% a year earlier, although it improved from 16.3% in the third quarter.
"Today's flat sales and substantially reduced margin results are further evidence that Tesla is losing its leadership advantage and its brand leadership has weakened," said Greg Silverman, global director of brand economics at Interbrand.
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