The demand for electric cars is falling and a price war is raging on the market. Right in the middle: Tesla. Shareholders are likely to be in a bad mood tomorrow.
Things are not going well at Tesla. On Tuesday, Elon Musk – boss and major shareholder – is likely to be responsible for the worst quarterly result that the electric car pioneer has achieved in many years. The main reasons: demand is falling sharply and a fierce price war is raging in the industry. Since the beginning of the year, the share price has fallen by around 40 percent and is miles away from the record levels reached in autumn 2021.
At the beginning of April, Tesla published weak sales figures. In the first three months of the year, deliveries fell by 8.5 percent to just under 387,000 cars compared to the previous quarter. Tesla has to fend off growing competition. In addition, demand for electric cars is weakening worldwide due to high interest rates.
After years of rapid sales growth that made Tesla the most valuable car company in the world, the electric car pioneer is also struggling with headwinds. The effect of price cuts and discounts is now waning as Americans are only slowly refreshing their aging model range.
Despite all the problems, Tesla sold more electric cars in the first quarter than any competitor. The company is still worth almost $460 billion on the stock market. In second place, Toyota follows a long way behind with $308 billion. The German manufacturers Volkswagen, BMW, Mercedes-Benz and Porsche are far behind.
“Wall Street needs answers”
For months, Musk has left shareholders in the dark about how exactly Tesla plans to grow strongly again in the future. The focus is on two topics: the small car, unofficially called “Model 2,” and autonomous robotaxis.
The Model 2 is scheduled to come onto the market at a price of $25,000 and is therefore an important source of hope for a new growth spurt for the electric car manufacturer. According to reports, Musk is slowing down the development of the Model 2 and is increasingly relying on self-driving cars. According to the Reuters news agency, the small car project has even been put on hold completely.
“Reuters is lying,” Musk wrote only at “X,” leaving room for speculation, according to many stock market traders. He doesn’t think Musk rejected the report, said Gene Munster, partner at asset manager Deepwater Asset Management. “He didn’t mention the Model 2. He just said Reuters is lying. But he calls everyone a liar.”
“Wall Street wants and needs answers,” wrote analysts at financial services provider Wedbush Securities. The “horror show” of bad Tesla news has been going on for months, including the recent reduction of thousands of jobs. What is now needed is a clear strategic vision “in which the Model 2 is an important part.” Ross Gerber, head of the asset manager Gerber Kawasaki Wealth & Investment and a Tesla shareholder, said it even more clearly: “There is no reason to invest in Tesla invest if they don’t come with a car.” And Emmanuel Rosner, an analyst at Deutsche Bank, said the Model 2 delay means Tesla won’t have a cheap car in its lineup for the foreseeable future, which will likely weigh on sales and profits for years .
Is the robotaxi coming in August?
Other investors, on the other hand, think it is a good idea to forego the Model 2 for the time being and instead develop robotaxis. This could be a big leap for Tesla, according to asset manager Munster. Autonomous vehicles promise significantly higher returns. Tesla investor Jake Bleicher, portfolio manager at Carson Wealth Management, also believes it is possible that Tesla could set itself apart from Chinese rivals with a fully autonomous vehicle.
Musk had announced that he would present the long-promised robotaxi on August 8th. The autonomous vehicle will be based on a new technical platform that will make production more efficient and cost-effective. Musk has been promising for years that Teslas will drive autonomously – and that this will radically change the value of the cars and the business model.
So far, the “autopilot” technology in Tesla’s electric cars is simply a driving assistance system that requires control and intervention by a human behind the wheel. Unlike already active robotaxi providers such as Google’s sister company Waymo, Musk always maintained that he only wanted to use cameras and forego the more expensive laser radars that scan the surroundings of vehicles. This approach is controversial among experts. In the past, accidents have occurred after “autopilot” cameras were blinded by the sun – while drivers relied too heavily on the technology. In the US, Tesla drivers can currently test an advanced version of “Autopilot” called “Full Self-Driving.” So far, despite the name, the cars do not become autonomous cars.
“If August 8th comes and Tesla says we will put robotaxis on the streets in five or six cities, that will be enough to drive the price up,” said investor Bleicher. However, Musk has been talking for years about autonomous cars coming soon. If there is no progress, this will scare off investors. “Especially when you look at the fact that profit margins on Tesla vehicles have been falling dramatically for two years. It will be less about cars and more about the promises Musk is making.”