Tesla plans to build a €25 000 (R490 000) car at its factory near Berlin, a source with knowledge of the matter said on Monday, in a long-awaited development for the electric vehicle maker which is aiming for mass uptake of its cars.

The source, who declined to be named, did not say when production would begin. Tesla declined to comment. Its shares were up 3% in pre-market trading in the US.

The steep price tag of electric cars — compounded by high interest rates — is one of several factors holding back uptake of the technology in Europe and the US, consumer surveys show.

The average retail price of an EV in Europe in the first half of 2023 was more than €65 000 (R1.3-million), according to motoring research firm Jato Dynamics, compared to just over €31 000 in China.

Musk had long planned to make a more affordable electric car but said in 2022 he had not yet mastered the technology and shelved the plan.

Still, sources said in September that the car maker was closing in on an innovation that would allow it to die-cast nearly all of the underbody of the EV in one piece, a breakthrough that would speed up production and lower costs.

Expanding into the mass market is critical to meeting Tesla’s aim of increasing vehicle deliveries to 20 million by 2030, setting it apart from competitors like Volkswagen, which have shied away from setting delivery targets and instead focused their strategies on protecting profit margins in the transition to EVs.

€25 000 EV

CEO Elon Musk visited the plant in Gruenheide on Friday and thanked staff for their hard work, a video showed on Musk’s social media platform X. At the same meeting, he informed staff of plans to build the €25 000 vehicle there, the source said.

The German plant currently produces the Model Y, Europe’s best-selling EV.

Read: Tesla’s new AI supercomputer changes the game: Morgan Stanley

The car maker plans to double the German plant’s capacity to a million vehicles a year but has not provided an update on how many cars it produces there since March, when it said it had produced 5 000 vehicles in a week — equivalent to around 250 000 annually.

Local authorities said in October they had asked the car maker to submit further information on how its expansion plans would adhere to nature conservation laws and would then make a decision on whether to approve them, without providing a timeframe.

Tesla aims to make 200 000 Cybertrucks a year

Tesla also informed workers on Friday that all staff would receive a 4% pay rise from November onwards, with production workers receiving an additional €2 500/year from February 2024 — equivalent to an 18% pay rise in 18 months.