A More Affordable EV Won't Save Tesla

Core Business Performance - Tesla reported a decline in revenue by 12% to $22.5 billion and adjusted net income decreased by 23% to $1.39 billion, or $0.40 per share [1][2] - Automotive revenue fell by 16%, with significant sales drops in Europe and increased competition from affordable Chinese EVs [3] New Initiatives - CEO Elon Musk announced the production ramp-up of a more affordable model, referred to as the Tesla Model 2, which began in June [5][6] - The introduction of a lower-priced model may cannibalize sales of Tesla's more expensive vehicles, as customers might choose between the two rather than opting for competitors [7] Robotaxi Network - The robotaxi initiative is seen as a key factor for maintaining Tesla's premium valuation, despite current sales and profit declines [8] - Management reported that robotaxis in Austin have accumulated over 7,000 miles with no significant safety interventions, with plans to launch in the San Francisco Bay Area next [8] Future Growth Challenges - Tesla needs to return to growth in EV sales for long-term stock success, as current investor optimism is largely based on future initiatives rather than present performance [9] - The decline in EV sales is attributed to a backlash against Tesla's brand, compounded by the elimination of the EV tax credit and changes in federal policies [10] - The company faces a $300 million impact from tariffs, which may further hinder growth [10] Valuation Concerns - Current stock valuation leaves little room for upside, especially given ongoing challenges in EV sales [11] - While the introduction of a more affordable vehicle is a positive step, it may primarily undercut demand for Tesla's higher-priced models rather than effectively competing with other brands [11]