Investors hoping for Tesla's future affordable electric car might need to wait a bit longer.
Evercore analysts released a report on Monday stating that having visited Tesla's Texas factory, they believe it will take Tesla a few more years to fully promote this low-cost electric car. This means the formal unveiling of the car, currently rumored to be Model 2, will be later than Wall Street's expectation.
Tesla increasingly is a '2027 story,' wrote Evercore analyst Chris McNally in a report. In his view, the best sales scenario for this so-called Model 2 affordable car in 2026 will only be 500,000 units, not the current consensus of over 1 million units.
While McNally's report confirmed that Tesla has indeed made significant improvements in the cost of this car model—material cost will decrease from $28,000 to $20,000—and still has a range of about 250 miles, he thinks the configuration of its driving assistance hardware by Tesla will be a major controversy for this model, and will be one of the important factors deciding its future sales.
For Tesla's competitors, driver assistance related functions are basically standard configuration for their models, but McNally pointed out that if Tesla chooses to equip Model 2 with the relevant hardware, the cost of each car will increase by $2,000 to $3,000. Conversely, if not added, it will clearly reduce its market competitiveness and appeal to consumers.
Given the current competitive situation in the entire electric car industry, Tesla's decision about assisted driving hardware will likely determine the final fate of this product line.
However, even though Musk has stated that this affordable electric car will become the main force propelling Tesla's next wave of growth after Model 3 and Model Y, McNally doesn't necessarily agree.
According to this analyst, even if Model 2 is launched as expected, Tesla will only deliver about 2.7 million cars in 2026. This means that, in that year, both McNally and Evercore behind him believe that Tesla's earnings per share estimate will be 18% to 20% lower than predicted. For Tesla, which is already facing scrutiny about its profit margins, this situation could put more external pressure on the company.
Notably, this analyst's attitude towards Tesla has always been conservative: since covering the company in January 2020, he has never rated Tesla's stock as buy, even though the stock of this electric car manufacturer has risen by 310% during this period.
In addition to the affordable electric car that has attracted much market attention, Evercore also researched Tesla's other products during the visit: for Tesla's energy department, especially the Megapack product, the bank stated that Musk's company is successfully transforming from 15GWh to a predicted 40GWh by 2026. Moreover, the analysts observed that the profit margin is increasing at a faster rate as prices in this sector decrease.
Also, the Cybertruck test drive was described as impressive. In the eyes of Evercore's visitors, due to its torque, the driving experience of this electric pickup, which officially went on sale last year and caused a lot of buzz, met expectations and exceeded expectations.
Evercore also pointed out that although the Cybertruck has received many celebrity endorsements, its mass appeal and practicality could still be a topic for discussion among traditional pickup enthusiasts.