The explosive report detailing plans within Tesla to cancel its ‘Model 2’ low-cost electric car to focus on a robotaxi has blown a hole in the investment case for the firm, as analysts scramble to assess what it means long-term.
Much of the case for investing in Tesla – the world’s most valuable car maker, based on its share price – has come from CEO Elon Musk’s stratospheric growth projections for the firm: as much as 20 million cars by 2030, up from 1.81m last year.
The lower-cost Model 2, a crossover codenamed Redwood, was intended to drive much of that growth in the mid-term, with production initially coming from Tesla’s factory in Austin, Texas and then in Berlin, Germany.
A subsequent second model would generate combined sales of 5m per year, Tesla has said.
But with that now on ice in favour of an autonomous car, according to the well-sourced Reuters report, analysts are now left wondering exactly how to value Tesla.
“If Tesla were to confirm that its renewed robotaxi focus comes at the expense of [the] Model 2, we believe this would introduce a considerably higher risk profile for the stock,” Emmanuel Rosner, chief analyst at Deutsche Bank, wrote in a report.
Musk denied the Reuters reporting, accusing the well-regarded news agency of "lying", without being specific on which part was wrong.
However, he did seemingly confirm one element by following up his accusation on X (formerly Twitter) with an announcement that Tesla would reveal a robotaxi on 8 August.
Musk has a long history of promising self-driving vehicles without delivering, starting in 2015, when he announced that all Teslas would be autonomous-capable by 2018. They weren’t. In 2016 he promised one of his electric cars would drive across the US without human intervention. It never happened.
The boldest claim came in 2019, when Musk claimed all Teslas could be operated as robotaxis the following year, earning owners $30,000 a year while their car went to work for them. Predictably, Teslas have remained resolutely driver-monitored.
Claims such as this sent the company’s stock soaring, valuing the company from a high of $76 billion in 2019 to $668bn in 2020 and over $1 trillion in 2021.
However, the harsh realities of both autonomous driving and Tesla’s weaker-than-expected first-quarter sales have pushed the stock down 31% this year to $547bn – albeit still at a height far above second-placed Toyota ($332bn), despite the latter’s recent climb.
The business case for robotaxis remains deeply uncertain, worrying analysts. “This change in strategy would also make any upside from here tied to Tesla cracking the code on full driverless autonomy, which represents a significant technological and regulatory challenge,” Rosner wrote.
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