Apr 5, 2024 - Business

Tesla stock seesaws as Musk denies report cheap EV will be scrapped

Elon Musk

Photo: Alain Jocard/AFP via Getty Images

Tesla's stock partially recovered from a sharp drop in midday trading Friday after CEO Elon Musk refuted a report that the company is killing off a long-planned affordable electric car.

Why it matters: Tesla and other automakers need to make affordable, mass-market electric cars in order to stay competitive — especially with cheaper Chinese EVs knocking on America's doorstep.

Driving the news: Tesla is canceling its plans to build a Model 2 sedan, Reuters reported, which many believed would start around $25,000, compared to around $40,000 for today's Model 3.

  • Instead, Tesla CEO Elon Musk reportedly wants to go all-in on robotaxis, which he has long seen as one of Tesla's ultimate goals.
  • The Reuters report was based on "three sources familiar with the matter and company messages" seen by the news agency.
  • Musk responded to the report on X by claiming Reuters was "lying."

By the numbers: Tesla's stock plunged by around 6% when the Reuters report dropped, recovered most of those losses after Musk's denial, then slid again to finish the day down 3.6%.

Context: The Reuters story was the latest in Tesla's no good, very bad week, coming after disastrous first-quarter vehicle delivery numbers.

Between the lines: The entire American automotive industry is freaked out about cheap Chinese EVs, Axios' Joann Muller has reported.

  • They're not yet for sale in the U.S., but that appears inevitable — despite Washington's efforts to keep them at bay.

Reality check: Tesla's current driver-assist technology is far from perfect, with some users reporting erratic and sometimes dangerous behavior.

  • Other robotaxi companies have been finding the road harder than envisioned.
  • GM-owned Cruise, for example, is undergoing a painful retrenchment after one of its vehicles was involved in an incident that left a pedestrian badly wounded.
  • Some local officials, meanwhile, have turned skeptical of robotaxis, though others are still rolling out the welcome mat.

💬 Our thought bubble: Whether or not the Reuters story is true, imagine where Tesla would be today if it had prioritized cheaper EVs rather than the Cybertruck — which seems destined for the "ambitious failure" wing of the proverbial automotive history museum, along with the likes of the DMC DeLorean.

The bottom line: Cheap EVs are hard for American companies to make, especially with China still controlling so much of the supply chain. But they're simply table stakes these days.

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