Tesla Delays A Cheaper Car — And Faces A Flood Of Investor Anger And Worry

Yesterday, the news agency Reuters reported that a bare-bones, cheaper Tesla Model Y that had supposedly been planned for release this year has now been shelved until at least early next year. The cheaper Model Y was the latest hope to boost Tesla’s fading star. The carmaker’s sales are flagging worldwide. On April 2, Tesla reported they’d sold 336,681 vehicles worldwide, vs. 386,810 vehicles in the first quarter of 2024. Analysts had predicted at least 40,000 more sales, and this fall is off 13 percent for the quarter and puts Tesla way off its pace from 2023, when its U.S. sales peaked at 672,000. There’s more anxiety in the investor community than usual, too, ahead of Tesla’s first-quarter earnings call, which is scheduled for April 22. What investors want to know about the future of the carmaker says a great deal about not just investor sentiment, but consumer sentiment. Here’s the breakdown of how that overlaps.

No Low-Cost Tesla on the Way

In an online poll of investors ahead of Tesla’s April 22 earnings call, the biggest question on investors’ minds was about how Tesla was going to sell cheaper cars:

But that wasn’t the only question focusing on Tesla’s increasingly weak market position. Here was another:

Tesla did have such a plan, according to Reuters’ reporting, which said that Tesla wants to make as many as 250,000 cheaper Model Y-platform vehicles. The goal is to undercut coming cheaper EVs in the U.S., where the new Nissan Leaf, Kia EV4 and Chevy Bolt are all expected to hit by year’s end. The Model Y sells for about $49,000 right now, but the cheaper version should be closer to $40,000.

Tesla has even bigger problems in China, where BYD is crushing Tesla, and also in Europe, where, likewise, Tesla is falling behind. Delaying that new car isn’t going to please investors here, where Tesla sales are down 5.6 percent, and globally they’re far worse, off by double digits.

Major Investors, Major Anger

Over the weekend, Bloomberg reported that Wedbush Securities analyst Dan Ives, one of Tesla’s most ardent proponents, wants Elon Musk to quit his role in the Department of Government Efficiency and focus solely on saving the carmaker. Ives told clients that Tesla faces a “code red,” and that Musk’s moves as part of the federal government have done lasting damage, particularly by offending more liberal EV aspirants. “Anyone that thinks the brand damage Musk has inflicted is not a real thing, spend some time speaking to car buyers in the U.S., Europe, and Asia. You will think differently after those discussions,” Ives told investors.

He also called Tesla now synonymous with the Trump administration, and with global economic fallout, and Ives sees “potentially 15-20 percent permanent demand destruction for future Tesla buyers due to the brand damage Musk has created with DOGE.”

More Teslas MIA

Tesla also needs to either refresh or cheapen the Model 3, which is their entry-level car. Investors via the internal poll want to know when Tesla will drop a cheaper version of that car. But six times as many voters (representing 4 million shares) want to know when the Robotaxi will finally get here, whether Tesla can scale sales, how they can compete with Waymo, and what the risks are if the Robotaxi doesn’t significantly make inroads.

They’re also deeply concerned about regulatory hurdles. Remember: Tesla might more easily grease regulatory barriers for Robotaxis at the federal level, thanks to Musk’s chumminess with Trump, but states are another matter altogether. Waymo is now testing in far more states, but each state has to be approached separately, and cities, which is where Robotaxis will have the most success at least in theory, can represent even further hurdles. It just so happens that most large American metros trend blue, and as Wedbush’s Ives points out, Musk has done damage among a constituency he needs to appeal to, not offend. If you’re upset about DOGE, are you hailing a Cybercab, or a yellow cab?

TopSpeed’s Take

At the end of March, Cox Automotive analyst Stephanie Valdez Streaty issued a dark-cloud warning on the future of Tesla:

Just a few weeks later Cox noted a significant uptick in used Teslas entering the market, combined with the fact that Tesla continues to discount its cars as a way to goose demand. The latter is one way to raise sales, but Cox noted that it also tends to decrease brand equity and as Tesla becomes bargain basement rather than aspirational, and when resale value falls through the floor, even absent Musk’s government role, buyers are going to seek perhaps less sheen and more safety. It’s a rational response to uncertainty.