Tesla shares soared 12 per cent after earnings, their biggest jump in over two years, despite missing already lowered earnings estimates.
The rally, however, needs context. The surge came after a brutal sell-off fuelled by reports Tesla was scrapping the affordable Model 2 in favour of “robotaxis”.
Barclays had warned such a shift would “further drive a wedge between the ‘rational’ and ‘exuberant’ Tesla bulls”. Unlike their “exuberant” counterparts, “rational” bulls see robotaxis as a long shot compared to capturing market share with a cheaper car. Investors were relieved, then, when Elon Musk promised an affordable EV in “early 2025″ or earlier.
Nevertheless, details remain scarce. Tesla offered no price tag and acknowledged there may be “less cost reduction than previously expected”.
That suggests a $25,000 EV isn’t coming. With competitors such as BYD offering cars for less than $10,000 in China, competitive pressures will remain acute.
[ Stella Li of Chinese car maker BYD: ‘We don’t want to engage in a price war’Opens in new window ]
Meanwhile, Musk continues to talk big about self-driving cars, but he has a well-deserved reputation for over-promising and under-delivering here. In 2015, he said Tesla cars would achieve “full autonomy” within three years. In 2019, he was “very confident” in predicting autonomous robotaxis in 2020. It hasn’t happened. Sceptical Bernstein analysts warn full self-driving could take another five to 10 years before it becomes commonplace.
[ ‘More affordable’ Tesla plan boosts car maker's stockOpens in new window ]
Tesla’s bounce may be a snapback rally after a steep decline, not a sign of renewed growth. It remains in a precarious position, squeezed by an increasingly competitive landscape and the burden of unfulfilled promises.
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