Tesla's market cap dropped $US20 billion ($A28 billion) in just two hours after trading closed on Tuesday, as Musk and other Tesla executives presented their new battery and manufacturing strategies. Shares closed down 5.6 per cent and dropped another 6.9 per cent after hours.

Investors had expected two significant announcements at Musk's oft-touted "Battery Day": The development of a "million mile" battery good for 10 years or more, and a specific cost reduction target - expressed in dollars per kilowatt-hour - that would finally drop the price of an electric vehicle below that of a petrol car.

Musk offered neither. Instead, he promised over the next several years to slash battery costs in half with new technology and processes and deliver an "affordable" electric car.

"In three years . . . we can do a $US25,000 ($A34,588) car that will be basically on par (with), maybe slightly better than, a comparable gasoline car," Musk said.

Musk acknowledged that Tesla does not have its ambitious new vehicle and battery designs and manufacturing processes fully complete. Tesla has frequently missed production targets set by Musk.

Tesla expects to eventually be able to build as many as 20 million electric vehicles a year. This year, the entire auto industry expects to deliver 80 million cars globally.

Building an affordable electric car "has always been our dream from the beginning of the company," Musk told an online audience of more than 270,000.

At the opening of the event, Musk walked on stage in a black t-shirt and jeans as about 240 shareholders - each sitting in a Tesla Model 3 in the company parking lot - honked their car horns in approval.

To help drive down vehicle cost, Musk described a new generation of batteries that will be more powerful, longer lasting and half as expensive than the company's current cells.

Tesla's new larger cylindrical cells will provide five times more energy, six times more power and far greater driving range, Musk said, adding that full production is about three years away.

To help reduce cost, Musk said Tesla planned to recycle battery cells at its Nevada "gigafactory," while reducing cobalt - one of the most expensive battery materials - to virtually zero. It also plans to manufacture its own battery cells at several highly automated factories around the world.

Tesla aims to rapidly ramp up battery production over the next years, to three terawatt-hours a year, or 3000 gigawatt-hours - about 85 times greater than the capacity of the Nevada plant. Musk said Tesla could supply batteries to other companies.

Australian Associated Press