AUSTIN, TX—Tesla Inc. claims that it has developed a new assembly process that can reduce EV production costs by 50 percent, while reducing factory space by 40 percent.

The “unboxed” system was outlined during the automaker’s recent Investor Day when executives talked about next-generation vehicles and manufacturing improvements. A new low-cost vehicle that's expected to cost around $25,000 will be assembled at a new factory in Monterrey, Mexico.