Apr 9, 2024 - Technology

Tesla scrambles to avoid EV market "rabbit hole" as problems mount

Photo illustration of Elon Musk with a car shaped thought bubble.

Photo illustration: Shoshana Gordon/Axios. Photo: Hannibal Hanschke-Pool/Getty Images

The dust is still settling on Tesla's wild and confusing Friday, so here's a little more chatter rolling in while everyone waits for more clarity.

Why it matters: Tesla is still the world's leading EV seller, albeit one that's facing multiple challenges.

  • Plus, its decisions are a rough guide on how the firm sees competition from Chinese low-cost EV makers.

What they're saying: Deutsche Bank analysts outlined the pros and cons involved if CEO Elon Musk is indeed shelving plans for a cheap (around $25,000 or so) electric vehicle model.

  • While Musk has vaguely denied Reuters' bombshell, Deutsche calls it plausible the "Model 2" is pushed to the back burner, given the challenges of ramping up battery capacity and competition from China at even lower prices.
  • The bull case for Tesla reportedly putting its eggs in the robotaxi basket is its AI and software advantages. That "would avoid going down the rabbit hole of bruising global competition for the cheapest EV."
  • (Sorry for the mixed metaphors here.)

Reality check: Bloomberg's Liam Denning took a skeptical view about the latest Tesla drama and Musk's pledge to unveil a robotaxi on Aug. 8.

  • Pointing to a new shiny thing may be a way to divert attention from Tesla's recent rough patch, Denning argues.
  • Remember that Tesla began last week by reporting a sharp decline in sales that were lower than even Wall Street's downgraded guesses.

Meanwhile, Deutsche Bank's Emmanuel Rosner and colleagues suggest that a focus on the robotaxi, at the expense of a Model 2, makes Tesla a riskier bet.

  • Leaving the company with no new consumer models in the foreseeable future would put continued downward pressure on its volume and pricing for many more years.
  • Plus, they and others like Ross Gerber, the investment adviser and Tesla shareholder, note regulatory and tech risks with autonomy.

The intrigue: Tesla's share price is way down this year but has more than recovered from Friday's swoon on the Model 2 report.

The bottom line: When it comes to the house that Elon built, there's never a dull moment.

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