Investors of Tesla are preparing for potentially the firm’s most challenging quarterly results in nearly seven years arising from falling demand and fierce price competition. Beyond this immediate concern, they are also curious about whether the company, led by Elon Musk, is undergoing significant directional changes. This curiosity is fuelled by speculations of reduced focus on an affordable $25,000 electric vehicle, unofficially dubbed the Model 2, and renewed emphasis on self-driving “robotaxis”.
Musk refutes allegations of any deviation from the Model 2 plans, and he asserts that autonomy is an “inherently clear strategy”. In a recent declaration, he stated that a Tesla robotaxi would become operational from August 8.
Consequently, investors are not only grappling with a persistent fall in share prices, underwhelming sales, and controversial relocation plans from Delaware to Texas, but also trying to understand whether Tesla will be primarily a mass-market manufacturer or a niche autonomous technology supplier.
“It’s essentially a debate about profitability versus production volume for them, with this being the latest development,” commented James Anderson from Lingotto Investment Management, a Tesla stakeholder. “The prudence of this change chiefly depends on what the transition to autonomous delivers,” he mentioned to the Financial Times.
Anderson believes the August public launch of the robotaxi could significantly shape the fortunes of Tesla’s much-awaited self-driving technology.
Baillie Gifford’s Tom Slater — a leading Tesla shareholder — predicted a ‘calmer’ year for Tesla sales, though he also expressed optimism about Tesla’s autonomous vehicle prospects. “The majority of reviews regarding the newest iteration of their comprehensive autonomous driving software denote significant advancements,” he remarked during a recent seminar.
Tesla’s “comprehensive self-driving” feature, which is available for $99 monthly, allows the vehicle to control steering, acceleration, and braking actions without the need for a human driver. However, it falls short of complete autonomy since the driver must still be alert while driving.
Christopher Tsai of Tsai Capital, a Tesla investor, states that despite the surging competition in the electric vehicle market which might erode Tesla’s market share, he is optimistic about the company ramping up its production and delivery in the coming years. Moreover, Tsai highlights Tesla’s potential to strengthen its lead in self-driving technology.
Gary Black from The Future Fund, another shareholder, indicated investor concerns regarding the company’s next move, particularly concerning the timeline of Tesla’s proposed $25,000 car, with production projected to commence in 2026, notwithstanding Tesla’s focus on robotaxis.
Barclays analyst, Dan Levy expressed likely investor dissatisfaction regarding the clarity of Tesla’s approach. He highlighted that whilst Tesla’s plans for the Model 2 are of significant interest, he predicts no conclusive response from the company.
Analysts anticipate Tesla’s forthcoming quarterly results to exemplify the lowest gross margin since early 2017, concurrently with the start of mass production of the Model 3. They also forecast a slight downturn on the company’s free cash flow, marking the first negative quarterly cash balance since 2020.
Tesla’s first quarter sales of the year are already down 8% compared to the same time period from 2023. The continued stream of unsavoury news and uncertainty concerning Tesla’s future direction may provoke a reconsideration amongst some dedicated followers.
Deutsche Bank analyst Emmanuel Rosner, has downgraded the company’s standing from ‘buy’ to ‘hold,’ stating a potential realignment of investor bases in light of the company’s strategic changes from EV production to AI investment. Rosner further cautions the increased risk associated with prioritising the autonomous driving sector. Copyright The Financial Times Limited 2024.