Tesla Stock Drops After Investor Day
Tesla’s Investor Day presentation left investors disappointed as the automaker did not reveal any concrete details about its upcoming “generation 3” car design, which is expected to be Tesla’s cheapest offering at around $25K – $35K MSRP. While Tesla addressed various topics, such as Musk’s “Master Plan 3”, vehicle design, AI, charging infrastructure, and supply chain improvements, the lack of specifics on the generation 3 car is likely the cause of the sharp decline in Tesla shares.
Investors were hoping for more clarity on Tesla’s concrete plans to remain competitive in an increasingly crowded and price-sensitive EV market.
Citigroup’s Itay Michaeli noted that while Tesla’s plan to launch a $25K EV isn’t new, mass-market competitors will need their own roadmaps to profitably compete at those price-points in the coming few years. Tesla did reveal that its generation 3 platform will likely cost half as much as its other vehicle platforms from a production point of view, use around 40% less factory space to produce, and use electric motors that won’t require expensive rare-earth metals. These factors could be seen as a long-term bullish production factor, as it demonstrates Tesla’s ability to operate at a different level than its competitors in terms of factory utilization efficiency, vertical supply chain depth, and deep integration of its software services and its products.
Wedbush analyst Dan Ives believes that although there were no specific details for the lowered price next generation Tesla in the sub $30K range as the Street had been anticipating, the stage is set for this car to be produced and scaled globally. Tesla’s broad-ranging presentation lays out a vision for a company operating at a different level than competitors. The announcement of Tesla’s next gigafactory in Monterey, Mexico, is expected to build the next generation vehicle and others on that platform, leveraging cheaper labor costs to build an affordable Tesla that Ives believes we will likely see on the roads in 2024.
In the long-term, Tesla appears to be in a strong position as it showcased its strength in its wide-ranging Master Plan 3 strategy and deep executive bench. However, for investors feeling short-term pain, it will be little solace. It remains to be seen how Tesla will remain competitive in an increasingly crowded and price-sensitive EV market without revealing concrete details about its next generation 3 car design.