Tesla stock fell as much as 6% on Friday, some $32 billion, after Reuters reported that Elon Musk’s EV maker was shelving a yearslong plan to produce an affordable electric car.
Citing three anonymous insiders and internal company messages, the outlet reported that Tesla was abandoning production of a planned $25,000 EV and focusing on robo-taxis. Musk had said in January that Tesla would start production on the affordable electric vehicle at its plant in Texas in late 2025.
Musk was quick to refute the Reuters report with a post on X, but the stock was still down 3.5% at press time, or some $19 billion, as investors digest the company’s efforts to compete with increasingly competitive Chinese carmakers.
Reuters is lying (again)
— Elon Musk (@elonmusk) April 5, 2024
The news comes just days after Tesla reported its first year-over-year decrease in vehicle deliveries since the pandemic. The company blamed the lackluster numbers on external factors, but many prominent Tesla investors have put the blame on Musk as CEO.
As of Friday, the company’s stock has fallen about 33% since the start of the year, and at least one Tesla bear has predicted the stock could “go bust.” Even notable Tesla bull Wedbush analyst Dan Ives called the company’s recent miss on vehicle deliveries an “unmitigated disaster.”
Chinese EV makers have increasingly penetrated foreign markets, posing a risk to Tesla and other established car companies. Meanwhile, the market for electric vehicles continues to shrink.
Sales of electric vehicles grew just 2.7% during the first quarter, far below the 47% growth seen in the EV sector during the same period last year. Some analysts have surmised that the eco-conscious target market for EVs is tapped out, and now EV makers must persuade skeptical gas-powered-car owners to make the switch in order to grow.
Already, established car companies have scaled back their plans to produce electric vehicles, with Ford announcing Thursday it would delay the launch of two high-end EVs as it focuses instead on plug-in hybrid vehicles, which are less costly.
As for Tesla, Musk had previously warned investors that sales growth in 2024 would be “notably slower,” because it was caught between two growth waves: the global expansion of its Models 3 and Y and the launch of its more affordable car.
With the future of the affordable EV in doubt, it’s unclear how future sales, and the company’s competitiveness, will be affected.