Tesla stock higher on report Musk will make a €25,000 EV at its Berlin factory

Updated at 8:20 am EST

Tesla TSLA shares jumped higher in pre-market trading Monday following a report that suggested the carmaker is close to unveiling plans to build the cheapest version of its electrified vehicles at a plant near Berlin.

Reuters reported Monday that Tesla, which has been keen to develop the production technology required to build a low-cost EV, would use the existing Berlin gigafactory to produce a car that would sell for as little as €25,000 ($26,872), a level that's around half of the region's average price of €65,000 and well south of the cheapest Model 3 at €43,000.

Tesla CEO Elon Musk hinted at the plans during a Friday visit to the group's factory in Gruenheide, around 15 miles southeast of Berlin, Reuters reported. 

Tesla has been keen to win market share in the fast-developing, but increasingly competitive global EV market, with Musk warning investors earlier this year that he is prepared to put the carmaker's reach ahead of near-term profits in order to do so.

Since then, Tesla's overall profit margins have narrowed considerably, and were last pegged at 16.1% for the three months ending in September, well south of the 18.7% figure recorded over the first quarter and last year's second quarter tally of 23.2%.

Gross margins were 17.9%, down from 25.1% over the same period last year and the 18.2% figure recorded over the second quarter. Wall Street forecasts hovered between 17.8% and 18.2%.

Musk has also lamented the high levels of interest rates in key markets, particularly in the United States, as holding back potential sales. A lower-priced car, in that respect, could neutralize the impact of higher rates and affordability while simultaneously adding the group's market share pursuit.

Still, Tesla is not immune to pressures on input costs, especially with respect to labor, which could also challenge its efforts to ramp-up production in the coming years.

Musk unveiled a 4% pay rise for Berlin workers on Friday, which with bonuses takes the increase to around 18% over the past year and a half, but continues to face pressure from union leaders in both Germany and the broader European Union. 

Tesla pay also sits well below competitors such as Ford F and General Motors GM, both of which inked big pay deals with the United Autoworkers Union late last month. 

UAW president Shawn Fain, in fact, told Bloomberg News last week that putting together a collective of Tesla workers in the United States, even with Musk's vocal anti-union stance, was "doable".

“Hopefully we get down there, we organize them and they become UAW members  ... and they can realize the full power of membership and get an even better contract," Fain said.

Tesla share were marked 1.6% higher in pre-market trading to indicate an opening bell price of $223.53 each. 

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