Investors flocked back to Tesla following CEO Elon Musk’s announcement of plans to expedite the release of more affordable electric vehicles in a bid to bolster dwindling profits. The company’s shares surged by 12% on Wednesday, marking a significant rebound from a year-long decline that saw the stock price plummet by over 40%.
Musk’s statement appeared to reassure jittery investors on Wall Street, who were still grappling with the company’s recent earnings report released on Tuesday. The report revealed a decline in profits to their lowest level in any quarter since 2021.
Dan Ives, a senior analyst at Wedbush Securities, remarked that Tesla and Musk were confronting a “Category 5 storm” following a remarkable journey over the past few years.
However, Ives maintained his optimistic investment outlook, citing what he envisions as a “Model 2.5” — a lower-priced Tesla hinted at by Musk during a call with analysts, expected to potentially debut by early next year. Ives emphasized that this affordable electric vehicle (EV) will play a pivotal role in Tesla’s volume resurgence by 2025.
While Musk refrained from divulging specifics about the forthcoming budget-friendly models, he devoted a significant portion of the earnings call to Tesla’s endeavors in diversifying its business, delving into AI, humanoid robots, and the operation of an autonomous vehicle fleet — all based on software and hardware products that are still in development stages.
Several analysts interpreted Musk’s comments about utilizing existing platforms and production lines for the cheaper models as a signal of a departure from earlier, more ambitious plans for an entirely new model expected to carry a $25,000 price tag.
“We read ‘more affordable’ as potentially de-contented Model Y/Model 3 versions with improvements in software and AI/hardware capability, but at lower prices,” Morgan Stanley analyst Adam Jonas said.
Tesla’s recently unveiled strategies enabled Wall Street to overlook the company’s lackluster first-quarter performance. Despite Wednesday’s surge, the stock has tumbled by 35% since January 1, influenced by elevated borrowing expenses dampening electric vehicle (EV) demand and an escalating price competition in China, a key market. Shares concluded Wednesday’s trading session at $162.13. The company reiterated its forecast this week, indicating that it expects growth in 2024 to be “significantly lower” than the preceding year.
