Tesla’s stock experienced a surge of 12% post-earnings announcement, marking the largest spike in over 24 months. This occurred notwithstanding the fact that Tesla had fallen short of its reduced profit projections. This upswing, however, requires some clarification. It was followed by a heavy sell-off, spurred by rumours that Tesla was phasing out the budget-friendly Model 2 in favour of developing “robotaxis”.
Barclays had forecasted that this strategy shift could accentuate the division between the ‘rational’ and ‘exuberant’ Tesla bulls. Unlike their ‘enthusiastic’ counterparts, the ‘logical’ bulls see robotaxis as a more improbable goal compared to seizing market share through a more affordable vehicle. Needless to say, Elon Musk’s commitment to producing an inexpensive EV by early 2025 or sooner was met with investor relief.
Yet, a lot of specifics are yet to be revealed. Tesla hasn’t provided a price point and conceded that the cost reduction might not be as significant as initially projected. This hints at the possibility of a $25,000 EV not materialising. With competitors such as BYD producing cars that are priced under $10,000 in China, the competition will continue to be fierce.
Progressively, Musk is continuously making ambitious assertions about autonomous vehicles, but his record of over-committing and not delivering is notorious. His 2015 announcement that Tesla cars would reach “complete autonomy” within three years did not materialise. Also his 2019 prediction of having autonomous robotaxis on the road by 2020 has not yet come to fruition. Seeing the trends, Bernstein analysts are sceptical and predict that mainstream self-driving might take another five to ten years.
The recent upswing in Tesla’s stock could be a short-term recovery from a sharp decline, rather than an indication of regrowth. Tesla continues to exist in a precarious stock market position faced with rising competition and the weight of undelivered promises.