Tesla shares rose in early premarket trading Wednesday after CEO Elon Musk said he would accelerate the rollout of more affordable electric vehicles in hopes of boosting sluggish profits. It soared more than 11%.
Musk’s announcement was aimed at calming jittery investors on Wall Street who were still digesting the company’s latest earnings report, released on Tuesday, where profits were the lowest in three months since 2021. It was shown that he was depressed.
Dan Ives, senior analyst at Wedbush Securities, said Tesla and Musk “are facing a Category 5 storm after a Cinderella ride over the last few years.”
But Ives said he has a “bullish investment theory,” thanks to what Musk expects to be a low-cost Tesla Model 2.5, which he suggested on a conference call with analysts could be released by early next year. ” is maintained, he added.
Ives said low-cost EVs “will be the key to Tesla’s sales recovery in 2025.”
Musk declined to provide details about the more affordable model, instead spending much of the earnings call talking about Tesla’s diversification into AI, humanoid robots and self-driving car operations. spent on efforts. All of these are based on software and hardware products that are not yet fully developed. developed.
Several other analysts echoed Musk’s remarks that the cheaper model would be built using current platforms and production lines, rather than more ambitious plans for a new model that was expected to cost $25,000. I took this as a sign that they were retreating.
Morgan Stanley analyst Adam Jonas said, “‘More affordable’ means less content in the Model Y/Model 3 versions with improved software and AI/hardware capabilities and a lower price. I’ve read that there is a possibility.”
Tesla’s new plan helped Wall Street ignore the company’s weak first-quarter results. Shares have plunged 42% since Jan. 1 as high borrowing costs dampened demand for EVs and intensified price competition in China, its major market.
The company reiterated this week that it expects growth in 2024 to be “significantly lower” than in the previous year.
The EV pioneer announced first-quarter sales fell 9% to $21.3 billion from $23.33 billion last year, the largest decline since 2012. Analysts had expected the company’s sales to be $22.15.
In the fourth quarter of last year, Tesla reported revenue of $25.17 billion.
Tesla’s operating margin also contracted significantly in the first quarter, falling from 11.4% last year to just 5.5% in the first three months of this year.
Tesla reported net income of $1.1 billion from January to March, a 55% decline from the same period a year ago.
Tesla reported earlier this month that its first-quarter deliveries plunged 8.5%.
“Our first impression is that CEO Elon Musk is trying to appease the market by accelerating new product launches,” Jefferies analysts led by Philippe Huchois said in a note. That’s true.”
Tesla’s growth strategy could strengthen support for a shareholder vote in May on Musk’s $56 billion compensation package, which was invalidated by a Delaware court in January.
Some Tesla investors, including Ross Gerber, president and CEO of Gerber Kawasaki Wealth and Investment Management, have criticized the company in recent days, citing a decline in Tesla’s stock price and compromises by the company’s board of directors. He said he planned to oppose the package.
Musk has previously said he aims to introduce a lower-cost model, the Model 2, which would cost about $25,000.
Reuters reported last month that Musk ordered the company’s aides to abandon plans for affordable options and focus instead on developing autonomous robotaxis. However, the CEO denied the report, claiming that Reuters was “lying”.
In response, the news agency said it supported the report.
Neither Tesla nor Musk directly addressed the Reuters report on Tuesday.
Instead, they discussed unidentified new models that appear to be separate products, but did not say how many or what type they would be, nor did they provide a target price.
Tesla says the new model will be built on Tesla’s current production lines and will use “aspects” of its current and next-generation platforms.
The company warned that the plan “may result in lower cost savings than previously anticipated” and could result in higher prices for consumers than the Model 2’s expected $25,000 price. suggested.
Tesla has been in turmoil over the past year as profits have been squeezed by declining demand for electric vehicles, in addition to fierce competition from Chinese companies such as Warren Buffett-backed BYD.
Two executives at the company announced their retirement earlier this month.
Another Tesla investor relations director, Martin Bieca, also said at the end of Tuesday’s earnings call that he would be resigning from his position.
Last week, the company announced it was suspending deliveries of all Cybertrucks after drivers complained of a fatal flaw in the gas pedal.
The company also announced price reductions in a number of key markets, including China and Germany.
Over the weekend, Tesla lowered the price of its fully self-driving driver assistant software in the U.S. from $12,000 to $8,000.
