Apr 22, 2024 - Energy & Environment

Tesla's moment of truth

Illustration of a question mark made with a car tire

Illustration: Annelise Capossela/Axios

Tuesday is the equivalent of must-see TV in the EV world.

What's happening: Tesla CEO Elon Musk and other company executives will face questions from analysts on an evening call after Tesla reports Q1 earnings.

Why it matters: Recent developments have created new doubts about the world's largest EV seller's strategy and execution.

  • Tesla's stock is down 41% on the year.

What we're watching: The biggest question is whether Tesla — as Reuters recently reported — has indeed shelved plans for a mass-market ($25k) car.

  • A cheaper product, the long-promised Model 2, is viewed as key to continued growth and competing with low-cost Chinese models.

The intrigue: The drama runs deeper, however, and comes amid headwinds hitting the entire EV market.

  • Tesla deliveries — a proxy for sales — fell significantly in Q1, and the company is cutting headcount by 10%.
  • It's recalling Cybertrucks over a problem with the accelerator pedal.
  • Management is asking shareholders to bless a huge pay package for Musk.
  • Fresh price cuts will fuel more questions about Tesla's margins.

There's also some evidence that Musk's politically rightward shift is turning off Democratic EV shoppers.

What they're saying: A Deutsche Bank Research note on Friday downgraded Tesla from "buy" to "hold."

  • They cite the "high likelihood of Model 2 push-out" and the strategic focus on robotaxis.
  • Delaying a cheaper car creates "significant" pressure on earnings and cash flow from 2026 onward.
  • Tesla is tying its future to "cracking the code on full driverless autonomy, which represents a significant technological, regulatory and operational challenge."

The bottom line: Tesla still trades at a large premium to other automakers. But analysts and investors are looking for reassurance about its future.

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