Is Tesla's New 'Affordable' EV In 2025 Gonna Be The Boost Its Stock Needs?
3min read The global leader in electric vehicles, Tesla has informed numerous suppliers of its plan to mass-produce a new, affordable electric vehicle targeting the general market.
This model is Codenamed Redwood, and described by insiders as a compact crossover, the vehicle is aimed to start production by mid-2025.
This recent news might provide a much-needed boost for Tesla's stock, which has been experiencing weakness since 2024. Under the pressure of soft global demand for electric vehicles, Tesla's shares have fallen more than 15% to date, in stark contrast to general US market benchmarks, such as the S&P 500 index, which keep hitting all-time highs and have risen over 2% this year.
Elon Musk, CEO of Tesla, has long been generating interest among Tesla fans and investors towards affordable EVs and self-driving taxis. These vehicles are anticipated to be manufactured on Tesla's future, cheaper electric vehicle platform.
According to media reports, these models include entry-level ones priced at $25,000, which will allow them to compete with cheaper gasoline-powered vehicles and increasingly affordable electric vehicles, such as those produced by BYD, which has surpassed Tesla as the world's largest electric vehicle manufacturer in the last quarter of 2023.
Musk initially pledged in 2020 to produce an electric vehicle valued at around $25,000. This plan was shelved for a while but was recently revived. Presently, the starting price of Tesla's least expensive model, the Model 3 sedan, is $38,990 in the US.
Will the rumor bolster Tesla's shares?
Under the pressure of a soft global demand for electric vehicles, Tesla shares have been consistently weak since the beginning of this year, and have dropped by more than 15% so far. This is in stark contrast with the stock trends of the other six members of the Mag 7.
In comparison, Nvidia, the leader in AI chips, saw a surge of up to 20% in its share price during the same period, while Microsoft shares rose by 6%. Even Apple, whose stock price had taken a beating at the beginning of the year, made a strong comeback and has grown by nearly 2% within the year.
Meanwhile, the benchmark of the US stock market, the S&P 500 index, hit a new high and rose by over 2%.
What's worse for the EV maker is analysts on Wall Street are also rapidly souring on Tesla's shares. The main reason for this change of sentiment is the increasingly apparent signs of a slowdown in sales growth for electric vehicles under the pressure of high-interest rates.
Additionally, incentive measures from governments worldwide are gradually drying up, and the low-cost models produced by Chinese rival BYD pose a serious threat to Tesla's dominant position in the electric vehicle field.
Compiled data from institutions show that over the past year, Wall Street analysts have collectively lowered their overall profit forecasts for Tesla over the next 12 months by more than 20%. In contrast, the overall profit predictions for the S&P 500 Index increased by 6% during the same period.
As a result, its consensus analyst rating score is nearing its lowest level in two years.
Statistical data from Seeking Alpha shows that Tesla's analyst rating score has been continuously falling, which largely reflects Wall Street's anxiety about the future earnings outlook for this leading electric vehicle company. Currently, Tesla's Analyst Ratings are only 3.42 (out of a full score of 5, while Nvidia and Microsoft score nearly 5), reflecting an increasing number of analysts downgrading Tesla from buy to hold with caution or even sell.
Is Ultra-cheap EVs A Gamble For Tesla?
In fact, despite its plans, ambitions, and all that, Tesla has a record of not meeting targets when it comes to launching products and pricing.
For instance, the production plan of Tesla's Cybertruck has been continually postponed and progress is slow. When it was launched last year, the starting price of $60,990 was 50% higher than what Musk promoted back in 2019
One insider even said since Tesla has been overly optimistic about the launch timeline for most new products, the mass production for chip EV is more likely to start in 2026.
In addition, given the cost of electric vehicle batteries and traditional difficulties encountered in producing high-quality low-cost cars, achieving substantial profit from inexpensive electric vehicles will be challenging.
According to media reports, two insiders revealed that Tesla's car-making team even went as far as to dismantle a model from Honda, the well-known Honda Civic, in recent years to study how to produce cheaper cars. The Civic starts at $23,950 in the United States.